Homes within the city of McKinney are in high demand, but the low supply is creating a shift in housing prices that is leaving some residents out in the cold.
As the average home price climbs beyond the $270,000 mark, developers are scrambling to keep up with the demand, city officials are trying to break ground in undeveloped areas of the city and homebuyers are quickly buying up what is left of the housing stock.
Supply and demand
Steve Haid, chief operating officer for the Collin County Association of Realtors, said McKinney is a high-growth area with a strong seller’s market, and buyers are seeing firsthand the effects of supply and demand.
Haid said so far this year, McKinney has had less than two months of inventory across all price ranges. The inventory supply is the time it would take for homes currently on the market to sell without any new homes listed. In a balanced market there is six months of inventory.
“Often homes are selling within days of being placed on the market,” he said. “Buyers should be prepared to write an offer on a home they really want, and they should understand that there just aren’t a lot of ‘deals’ in this market. Most homes are selling within 1 or 2 percent of the list price—often above list price. In June the average home in McKinney sold for 99.9 percent of list price.”
The hottest market segment, Haid said, includes homes priced between $150,000-$200,000, which on average spend less than a month on the market.
“In addition to this being an attractive price range for anyone looking for an affordable home, a lot of first-time homebuyers are looking in this range, and many empty nesters are probably also looking at these homes,” Haid said. “Demand is consistently very high, and supply is consistently low.”
Haid said homes previously priced in the $150,000 range are now in the $200,000-$250,000 price range. This can be seen across McKinney as the median home price, which was closer to $190,000 in 2010, is now inching past $271,000 as of June.
“Although [the average] is higher than it has ever been, homes in McKinney are still more affordable than other nearby surrounding cities of similar size,” Haid said. “The median sales prices of homes in Allen, Frisco and Plano are all over $300,000.”
Prices across the spectrum
Miles Prestemon, of Craig Ranch, one of the largest residential developments under construction in McKinney, said the development’s market is robust, with average home prices reaching above $400,000.
Craig Ranch is a 2,200-acre master-planned development near the southwest corner of the city, bordered by SH 121 to the south and Custer Road to the west. There are currently 2,900 houses in the development and 4,500 homes are anticipated at build-out.
“We have housing across the spectrum in many different price ranges, including homes starting at $300,000 and topping out at $2 million,” Prestemon said. “The sales across all of those spectrums have been extremely hot.”
Prestemon said the area’s market is fueled by residents selling existing homes and investing in new homes as well as the recent announcements of headquarter relocations made by Toyota North America, Liberty Mutual, State Farm Insurance and FedEx, which are all moving to the Dallas-Fort Worth area and are expected to bring thousands of employees with them.
“We have had one builder that had to put a [limit] on the number of home sales per month because they can’t build that many houses,” he said. “It does them no good to sell 15 homes per month when they can only build six. They have even raised prices incrementally to slow the sales down to that six, but demand has not changed.”
Although rising demand and sinking supply are driving home prices higher, Prestemon said lot prices and the cost of material and labor is making building less expensive houses increasingly difficult.
“It really starts with the markup in land prices, which have gotten extremely high,” he said. “The land price has nearly doubled in the past five years. The price of construction has gone up as well. The lot prices have gone up, and all of the framers, concrete, electricians, plumbers, roofing material—all of that has gone up an exorbitant amount.”
Changing the market
Although it is not the city’s responsibility to meet housing market demands, Mayor Brian Loughmiller said the city is experiencing the effect of supply and demand. He said it is common for developers to have a plan to offer homes in a specific price range only to start construction and be forced to raise the price.
Loughmiller said he thinks the city’s housing market will soon see a change as developments approved by council in 2007, such as Trinity Falls just outside the city limits in north McKinney, are just beginning to thrive.
“I think once we start developing the northwest sector we will have a lot of available land, a lot more choices, and the demand will change,” he said. That’s where you will get the supply. We approved 4,000 lots for Trinity Falls and another development in the northwest sector that will bring another 1,600 homes that hasn’t even started to develop yet.”
Officials from Trinity Falls said they are hoping to provide respite for weary homebuyers finding little within their price range.
Trinity Falls developer Leisha Ehlert said there was an obvious gap in supply and demand for homes starting in the $200,000 price range when the municipal utility district began developing in 2014.
“If you look at any of the market studies, it’s really hard to develop that price point,” Ehlert said. “It doesn’t mean that the buyers have gone away. People still want to buy [these] homes, but the market can’t meet that right now. So we are just trying to bridge that gap.”
Ehlert said the development is striving to provide new homes in a reasonable price range with as many amenities as possible. Gehan Homes offers eight base plans, Beazer Homes offers four and Ashton Woods Homes offers seven in the $200,000 price range.
The majority of homes sold at Trinity Falls are in the low- to mid-$300,000 price range, Ehlert said.
Coming market velocity
Bob Templeton, owner of Templeton Demographics and demographer used by McKinney ISD, said builders are rushing to wrap construction of new homes this summer as heavy spring rains delayed estimated completion dates. Once those homes are complete, he said, the market will see many new homes.
Older developments are seeing new construction, including Timber Creek, Waterstone and Hardin Lakes, which Templeton said will bring hundreds of new lots to the city next spring.
“McKinney is ranked 12th in the Dallas/Fort Worth region for new home [construction] starts,” he said. “We had 481 starts, and sold 551. We have 1,343 vacant lots on the ground right now ready for builders.”
However Templeton said, Trinity Falls will soon become a top-producing subdivision based on annual sales. He said there were 90 homes under construction during this year’s second quarter, which points to the coming velocity.
