Houses on market, lot supply can't keep up with demand
Clients of Ashley House, a Frisco real estate broker, don't believe her when she tells them a homeowner might not accept an offer made above list price and only days after the house has gone on the market—until they are turned down for the third or fourth time.
For houses less than $200,000, competition is even more fierce. She tells her clients they should be prepared to go see a house the day it goes on the market and to make an offer on the spot—or it will undoubtedly be gone.
"We are in an area where everyone is wanting to move," she said. "They want the school district; they want the development."
House said the Frisco real estate market is forcing her clients to be creative when it comes to buying a home. Buyers must be extremely flexible on move-in dates and in many cases offer extra earnest money. Some go so far as to submit personal letters—including family pictures—to the seller about how much they want the house.
"It's frustrating, but it's a huge victory when they actually win the house," House said. "It's an interesting market, for sure, and we're not seeing that change. There will be more houses for sale in the spring, but there are more buyers as well."
Although there were nearly 2,000 homes constructed in Frisco in 2003, House and other market experts say the supply is short.
Short supply
As of January, the number of houses on the market is down to slightly more than a two-month inventory, and lots ready for home construction are down to an 11-month inventory—both significantly lower than market ideal. A real estate market is considered balanced when there is a six-month supply of houses and a lot inventory of 24 months, according to Jeff Cheney, who is the head of local real estate group The Cheney Group and also a Frisco City Council member.
"Back when the market slowed, obviously inventory was stacking, but now, inventory is so low it's tough to find [homes]" Cheney said.
Ted Wilson with Residential Strategies, a home market research and data company based in Frisco, said the trend extends to the Dallas/Fort Worth area.
"It's as low as I've ever seen it in my career," he said. "There's an incredible shortage of houses on the market."
Rising prices
In 2009, Wilson said lot prices allowed for developers to build houses in the $250,000–$300,000 range.
"There has been a lot of inflation in the new home market," Wilson said. "Since the market bottomed in 2009, we've seen prices in that market about double."
Those climbing lot prices, combined with larger lot size requirements, have translated into most new homes beginning in higher price ranges.
Russ Parker, a broker, real estate agent, co-manager and inner-office instructor and mentor with CEDA Realty, said homes under $300,000 sell quickly.
"New construction is being built from $350,000 –$450,000 range but the inventory under $300,000 is dependent on homes that are already built," Parker said.
The prices are high, Parker said, because the market can bear it—most people moving to Frisco have higher incomes and education levels.
Parker and Cheney said buyers are willing to pay more to be in new neighborhoods with generous amenities.
Those higher prices benefit the Frisco economy. Higher home values mean higher property taxes. Increasing home values also give residents a reason to reinvest in their older homes, Cheney said.
Not having many starter homes available in the lower price point, however, does create problems, the councilman said.
"I would say from a city planning perspective, it's a fair concern regarding the availability of affordable housing for young families wanting to move to Frisco," he said. "Just knowing it's unlikely that more will be built, what we have is what we have."
