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Overall Construction Levels

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tanzoak
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Overall Construction Levels

Postby tanzoak » 28 Jan 2017 13:51

Cities and counties report the number of building permits they issue each month to the Census Bureau, which you can check out here: https://socds.huduser.gov/permits/

Here's total permits issued for metro and city over the trailing 18 months, which should roughly correlate with the number of units under construction:
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Stark difference between this boom and last with how concentrated it is in the city:
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The metro-wide multifamily boom is something to behold:
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Dallas has basically stopped building single-fam, especially when you consider most of that remaining 10% is probably fairly dense townhouse construction:
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The_Overdog
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Re: Overall Construction Levels

Postby The_Overdog » 30 Jan 2017 09:50

The total permits vs multifamily really tell the story of DFW.
In the early years, 80,000ish units under construction with about 20,000 being multifamily. The past few years have had 80,000 total permits with 45,000 being multifamily. Think about the difference in space required for 60,000 single family homes vs 35,000 homes.

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rantanamo
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Re: Overall Construction Levels

Postby rantanamo » 30 Jan 2017 19:08

single family home lots seem to be shrinking as well

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tanzoak
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Re: Overall Construction Levels

Postby tanzoak » 10 Feb 2017 13:47

Data for December 2016 is in, and ouch. Building permits issued for only 220 total units (only 96 multi-fam) in Dallas for the month. That's the lowest number in over 2 years (Nov 2014). The 5-month total of 3547 for Aug-Dec'16 is the lowest since Sep'14-Jan'15.

On the other hand, overall metro-wide permitting is continuing at the same pace as it has been.

We're still doing fine, of course, but pretty clear that developers are taking a bit of a breather to see how all these upcoming in-city completions are absorbed.

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tanzoak
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Re: Overall Construction Levels

Postby tanzoak » 28 Feb 2017 20:06

Mixed-to-positive news for January.

On the one hand, DFW just had its biggest month of permitting of the entire cycle, with 6,054 units total (including another high of 3,514 multifam). While the 12-month multifam total remains below peak due to a (relatively) slow past couple of months, it's still in the ballpark. Multifam is up to 50% of the total units permitted over the past 18 months (i.e. under construction, roughly).

On the other hand, Dallas, while not as abysmal as last month, still wasn't great. 649 units total (491 multifam). 12-month multi-family permitting continues to fall, now 29% below peak. While that measure is still high on a historical basis, its at its lowest point since July 2015, and it does seem that developers are taking a bit of a breather on in-town development.

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joshua.dodd
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Re: Overall Construction Levels

Postby joshua.dodd » 01 Mar 2017 05:52

tanzoak wrote:Data for December 2016 is in, and ouch. Building permits issued for only 220 total units (only 96 multi-fam) in Dallas for the month. That's the lowest number in over 2 years (Nov 2014). The 5-month total of 3547 for Aug-Dec'16 is the lowest since Sep'14-Jan'15.

On the other hand, overall metro-wide permitting is continuing at the same pace as it has been.

We're still doing fine, of course, but pretty clear that developers are taking a bit of a breather to see how all these upcoming in-city completions are absorbed.


It's literally nothing to worry about.

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Cbdallas
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Re: Overall Construction Levels

Postby Cbdallas » 01 Mar 2017 13:46

A glass of water in between cocktails would not hurt.

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tamtagon
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Re: Overall Construction Levels

Postby tamtagon » 01 Mar 2017 19:09

Cbdallas wrote:A glass of water in between cocktails would not hurt.


:lol:

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willyk
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Re: Overall Construction Levels

Postby willyk » 21 Mar 2017 22:07

It's been a great two weeks for major starts--

1 Fountain Place
2 TCC
3 AMLI
4 Old Parkland
5 Epic

Office, hotel, retail and residential are all represented. This is real vote of confidence for the downtown neighborhoods. Might there be a couple more about to pop?
Last edited by willyk on 21 Mar 2017 22:10, edited 1 time in total.

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tanzoak
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Re: Overall Construction Levels

Postby tanzoak » 26 Jun 2017 23:24

City of Dallas construction is dropping through the floor. We've gotten 7,762 units (5,938 multifam) issued permits over the past 12 months. Compare that to a year ago, when we had issued permits for 13,525 units (12,091 multifam) over the previous 12 months. We haven't had as slow of a year since 2014.

On the other hand, metro-wide construction continues to boom, achieving a cycle high of 60,051 units permitted over the past 12 months. Especially impressive considering the contraction in Dallas city construction.

DPatel304
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Re: Overall Construction Levels

Postby DPatel304 » 26 Jun 2017 23:40

Thanks for providing the numbers! It has certainly felt like a slow year, but I wasn't sure if that was just my imagination.

I'm totally okay with the slowdown. The market has been a bit wild the past few years, and I would hate to get into a situation where we end up building too much too fast. I'd much rather have the current wave of construction wrap up in the next year or so, see how the market absorbs all these extra units first. Those 13,525 units from last year are mostly all going to be wrapping up in the next year, which is a pretty large number, and, from what I've seen, a lot of the apartments are trying to charge top dollar for their units, so it'll be interesting to see what occupancy rates are like.

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willyk
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Re: Overall Construction Levels

Postby willyk » 27 Jun 2017 02:54

tanzoak wrote:City of Dallas construction is dropping through the floor. We've gotten 7,762 units (5,938 multifam) issued permits over the past 12 months. Compare that to a year ago, when we had issued permits for 13,525 units (12,091 multifam) over the previous 12 months. We haven't had as slow of a year since 2014.

On the other hand, metro-wide construction continues to boom, achieving a cycle high of 60,051 units permitted over the past 12 months. Especially impressive considering the contraction in Dallas city construction.


I wonder why? My WAG is that capital is flowing hard to Frisco and McKinney right now where demand is high and doing deals is cheaper and easier than Dallas.

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tamtagon
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Re: Overall Construction Levels

Postby tamtagon » 27 Jun 2017 08:43

Is it the labor shortage that's slowing construction levels?

Tnexster
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Re: Overall Construction Levels

Postby Tnexster » 27 Jun 2017 09:48

They have completed a ton of residential in the city with a lot of that still to come online. Maybe they just need to let it absorb a bit. There is also an uptick in multifam construction along the I-20 corridor, especially in Grand Prairie.

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tamtagon
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Re: Overall Construction Levels

Postby tamtagon » 27 Jun 2017 11:09

Taking a break during a build up like this would normally be good thing, but maybe not so much if that pause forces prices higher than the normally would be, especially since the labor shortage has already been identified as part of the unusual run up in home prices.

Less expensive land extending beyond the horizon AND less expensive labor are two of the primary factors making North Texas a favorable region across all channels of construction. Discussing the impact of politics on the marketplace sure can be touchy, but if immigrants are too worried to be available and strip the construction labor force of it's relative affordability, then we have to prepare for the inevitable housing price crash.

Since generally North Texas has been undervalued since the 1990s, it's kinda like whatever, house prices are finally catching up and moving to the lists of well above US average price. This is a natural occurrence since North Texas is actually a great place to live (despite it all! haha). But the longer immigrants are worried about ICE raids, the sooner prices will become unnaturally elevated with damaging rebound.

-----OR----- the discomfort could manifest simply as construction workers make more, and there's nothing wrong with that as long as the work force profits from the shift of labor rather than stock holders. If labor cost are passed on to the purchaser with interest added and a processing service charge, the gains only end up in the hands of few, and that is bad for the economy.

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muncien
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Re: Overall Construction Levels

Postby muncien » 27 Jun 2017 11:55

I still can't believe we haven't seen rental to owner conversions to make up for the overwhelming addition of rentals the last few years. Typically, heavy rental construction and spiking home prices lead to such conversions, but this one is a bit different in that the cost of rentals seems to be keeping pace with home value appreciation. Curious how long that will hold out, or which will waver first.

One a related note... While new condo construction is always welcome, it is a bit harder to sell out a building prior to construction. I would love to see some rental conversions come on line first to fill that ownership need, and thus open the door to more rental construction, which tends to be easier to get off the ground.
"He doesn't know how to use the three seashells..."

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Waldozer
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Re: Overall Construction Levels

Postby Waldozer » 27 Jun 2017 16:25


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tanzoak
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Re: Overall Construction Levels

Postby tanzoak » 27 Sep 2017 13:02

Well, the news keeps getting worse, at least for residential construction in Dallas.

We're now down to 6,419 units (4,503 multifam) permitted over the last 12 months ending Aug 2017.
Compare to high of 13,525 units (12,091 multifam) in the 12 months ending May 2016. That's quite the dropoff in a short period of time.

Dallas hasn't seen that slow of an overall year since the year ending Sep 2013. And it hasn't been that slow for multifamily construction since the year ending Apr 2012! :cry:

However, metro-wide construction continues to reach new highs in total units permitted, with 60,162 over the last 12 months. Likely due to the shift from city to suburb-oriented growth, metro-wide multifamily has dipped somewhat--despite the overall increases--to 26,727 over the past 12 months from a high of 29,240 over the 12 months ending Jul 2016.

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tanzoak
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Re: Overall Construction Levels

Postby tanzoak » 28 Nov 2017 11:11

Dallas finally had a good month of permitting last month, the highest in a little over a year. Unfortunately, the previous 10 months were so bad that that only staunched the bleeding somewhat. Permitting over the last 12 months was 6,879 units, compared to the cycle high of 13,525 (the year ending May '16).

In terms of a time frame that more or less represents units under construction or still to-be-absorbed, over the last 24 months we've permitted 17,320 units, compared to the cycle high of 24,201 (the two years ending Nov '16).

The metro as a whole continues to crush it, though, reaching a new yearly high of 62,682 units for the past 12 months. Two-year permitting is also near the cycle high.

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homeworld1031tx
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Re: Overall Construction Levels

Postby homeworld1031tx » 28 Nov 2017 17:59

Thanks for the good updates tanzoak. Interesting and important stuff for sure.

DPatel304
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Re: Overall Construction Levels

Postby DPatel304 » 28 Nov 2017 19:32

Yes, thanks for the updates as always!

Is it really fair to compare the entire metro to Dallas? The metroplex is huge with several areas that are booming, so those numbers don't concern me too much.

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willyk
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Re: Overall Construction Levels

Postby willyk » 27 Apr 2018 03:07

6 Projects That Transformed Dallas Into A Global Powerhouse Over The Last 10 Years

The 2007 ULI/PwC Emerging Trends in Real Estate report said of Dallas: "Wide-open Texas markets favor developers, but ‘they are never good places to invest.'" Ten years later, the groups are singing a different tune. Dallas Fort-Worth "is rapidly approaching the level where it is considered as a core primary market," the emerging trends report of 2017 stated, putting Dallas near the top of its ranking of best markets for investment.

Dallas-Fort Worth is now the No. 2 target in the U.S. for real estate investment dollars, right behind Los Angeles, CBRE’s 2017 Global Investor Intentions Survey indicates. ULI/PwC’s Emerging Trends in Real Estate report has placed Dallas in the top five most promising real estate markets in the United States for the last four years. The report highlights massive job and population growth, relatively low cost of living/business, access to space and access to talent as the big drivers for Dallas’ rise. A business-friendly environment, stable fundamentals and the gradual emergence of meaningful barriers to entry have driven Dallas through the longest economic boom in recent memory.

https://www.bisnow.com/dallas-ft-worth/news/state-of-market/dallas-transformed-into-a-global-powerhouse-over-the-last-10-years-87451

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tanzoak
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Re: Overall Construction Levels

Postby tanzoak » 27 Apr 2018 10:12

willyk wrote:ULI/PwC’s Emerging Trends in Real Estate report has placed Dallas in the top five most promising real estate markets in the United States for the last four years. The report highlights massive job and population growth, relatively low cost of living/business, access to space and access to talent as the big drivers for Dallas’ rise. A business-friendly environment, stable fundamentals and the gradual emergence of meaningful barriers to entry have driven Dallas through the longest economic boom in recent memory.


These two things are in conflict.

It's a great thing to be an awesome place for developers but not for investors. That means you're constantly building what the market demands and prices should track the cost of construction. The converse of that is California, where restrictive development means a huge percentage of the wealth their world-beating companies generate just gets sunk into the ground and into rents, into the pockets of real estate investors instead of to the companies and their workers.

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willyk
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Re: Overall Construction Levels

Postby willyk » 27 Apr 2018 22:24

I thought that was a very interesting observation in the article. What I think they mean is that there are a limited number of development sites remaining in Uptown. As a result demand is driving prices upwards (i.e. “appreciation”). Good news if you are an owner. It’s a new phenomenon for Dallas.

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Cbdallas
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Re: Overall Construction Levels

Postby Cbdallas » 06 Jun 2018 11:28

Without an Amazon coming to town I think we have seen most of the big projects take off and the ones not out of the ground are probably dead on most accounts. Too bad as I still was hoping to see some of the apartment towers still go up downtown on Ross etc. Most forecasters are also predicting a global downturn financially on or before 2020. Its been a great ride for Dallas maybe now we can figure out how to settle in with what we have and connect up all the dots between the various development zones around the urban core and DART.

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Re: Overall Construction Levels

Postby itsjrd1964 » 14 Aug 2018 08:31

(A "general" article, but about the Dallas-area hotel construction pattern specifically...)

Dallas is *second* in the US in new hotel construction/projects announced/upcoming. In this year's 2nd quarter, the Dallas area has 156 hotels/18,908 rooms on the way (including 47/6350 being built, 73/8606 announced or planned).

The top-5:
1. New York City (169 hotel projects)
2. Dallas
3. Nashville
4. Houston
5. Atlanta

https://www.dallasnews.com/business/rea ... -york-city

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tanzoak
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Re: Overall Construction Levels

Postby tanzoak » 23 Dec 2018 11:07

I've seen some talk of a potential slowdown on this forum, so I thought that now would be a good time to give some data updates. The graphs below are the number of residential units given building permits over the prior 12-month period. So the start of the graph is for Feb 2009-Jan 2010, and the last entry is Nov 2017-Oct 2018.

First, the region as a whole is still going incredibly strong, with permitting rates basically still at the cycle high. If you squint, you can maybe make out a bit of recent slackening, but the past 3 months of permitting is still very high, just not quite as high as early 2018/late 2017.
Image

Dallas is a more interesting story. There was a massive spike in 2015/early 2016, followed by a significant slowdown and recovery to a more typical level for the cycle. The past three months have been terrible (worst 3 months since Sep-Nov 2014, and Nov 2012-Jan 2013 before that), but the annual numbers are still at basically the average over the past 6 years.
Image

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tamtagon
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Re: Overall Construction Levels

Postby tamtagon » 23 Dec 2018 12:11

When people stop moving to North Texas, construction will stop... obviously.

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Matt777
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Re: Overall Construction Levels

Postby Matt777 » 23 Dec 2018 18:11

In my opinion, any slowdown is because of pricing, not demand. More of a pricing correction than a slowdown in demand. People are still moving here in droves and will need housing. The problem is, supply has finally caught up with demand and will bring the market into a more reasonable/healthy supply/demand balance. The reason prices skyrocketed is because the 2008 recession caused construction to halt for a few years, then demand spiked, and prices had nowhere to go but up.

I feel bad for the people that are about to see a 10-15% correction in value on their newly purchased abodes, but that's what happens when you buy in a frothy market. I sold my last property for a nice profit because I saw this coming. I hope to buy again after the price correction happens.

My prediction: a 10-15% correction in pricing (in most big US markets. Some markets +/-). More unsubstantiated doomsday articles. Builders may slam on the brakes and regroup, but I think they'll adjust and find ways to develop lower priced properties.

If there's a steep national economic recession, all bets are off.


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CRE_Investor
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Re: Overall Construction Levels

Postby CRE_Investor » 27 Dec 2018 16:00

Matt777 wrote:In my opinion, any slowdown is because of pricing, not demand. More of a pricing correction than a slowdown in demand. People are still moving here in droves and will need housing. The problem is, supply has finally caught up with demand and will bring the market into a more reasonable/healthy supply/demand balance. The reason prices skyrocketed is because the 2008 recession caused construction to halt for a few years, then demand spiked, and prices had nowhere to go but up.

I feel bad for the people that are about to see a 10-15% correction in value on their newly purchased abodes, but that's what happens when you buy in a frothy market. I sold my last property for a nice profit because I saw this coming. I hope to buy again after the price correction happens.

My prediction: a 10-15% correction in pricing (in most big US markets. Some markets +/-). More unsubstantiated doomsday articles. Builders may slam on the brakes and regroup, but I think they'll adjust and find ways to develop lower priced properties.

If there's a steep national economic recession, all bets are off.


A 10-15% decrease in price for residential would be incredibly significant and create serious problems for people. A 10% price decline means a loss of 50% of equity if someone financed with a 20% down payment and financed 80%. Anyone who bought a house with 10% down would lose all of their equity at that level. That's a pretty draconian price decline short of a recession and would match or exceed the decline Dallas experienced from peak pricing in June 2007 through the trough of February 2009 (-11.2%).

Obviously we've had a much bigger run up in prices the last six years than we did 2001-2017 so I'm not saying it can't happen, but that would have major ripple effects on the overall Dallas economy. Thankfully the events that lead to major pricing declines (rampant speculation, flipping, non-real estate people making highly levered real estate investments on the side, etc.) don't appear to be a significant problem in Dallas. Our price appreciation has been driven by legitimate housing demand from in-migration combined with limited land supply in the desirable areas to live.

We've already seen the price of housing plateau to a degree and there will likely be some pull back in particular areas that may have gotten overheated, but I don't see a widespread 10-15% pullback in our market.


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