The Dallas-Fort Worth metropolitan area's already-soft homebuilding market is facing even more weakness as lukewarm job creation and elevated mortgage rates curtail buyer demand, according to a new report.
Housing starts and sales declined in the third quarter from the same period a year earlier, according to the Residential Strategies consulting firm. Most builders reported a 20% to 30% drop in traffic and sales and had to lower prices and offer incentives, such as mortgage-rate buydowns, to boost demand, the firm said.
The slowdown is also occurring in the Texas markets of Austin and Houston, as well as across the country in Phoenix, Denver, and parts of Florida, noted Ted Wilson, principal at Residential Strategies. Still, Dallas is a bellwether market that is the third-fastest-growing region in the nation, having added nearly 178,000 new residents between 2023 and 2024, according to the latest figures from the U.S. Census Bureau.
Wilson sees the current climate as a short-term issue.
"As market conditions improve after this lull, I fully expect to see DFW back as a national housing start leader," Wilson told Homes.com in an email.
Dallas-area builders started 9,153 homes in new developments during the July-through-September period, down about 20% from the third quarter of 2024, the firm said. The decline lowered the annualized start rate for the 12-month period to 43,260 starts, off more than 9% from a year earlier.
'Lock-in effect' slows migration
Meanwhile, builders sold 11,045 new development homes in the third quarter, a 6% drop from the prior year, according to Residential Strategies. The annualized closings fell 3.6%, to 45,733 units.
The Residential Strategies report cited data from the Texas Workforce Commission that shows Dallas-Fort Worth added only 27,300 net new jobs for the 12 months ending in August, leading to a meager 0.6% growth rate. From 2010 to 2024, the Dallas area averaged more than 94,000 new jobs annually, the firm said.
“DFW’s core job creation has slowed dramatically, and migration-driven employment gains have weakened as well,” said Ned Wilson, senior vice president at Residential Strategies, in a statement.
He noted that the “mortgage lock-in effect" has hurt domestic migration as U.S. homeowners with historically low mortgage rates obtained during the pandemic are reluctant to move and take on higher mortgage rates.
Layoffs in the tech sector have affected international migration, he noted. Foreign buyers accounted for more than 60% of builder sales in many northern Dallas-Fort Worth communities, but that figure plunged to below 30% in 2025.
While mortgage rates have trended lower in recent months, borrowing costs remain well above 6%, keeping some consumers from tapping the market.
Looking ahead, the Federal Reserve is expected to further cut its benchmark interest rate. While that may lead to further mortgage rate reductions, other factors are also at play, according to an analysis this week from Bright MLS Chief Economist Lisa Sturtevant.
"Mortgage rates could go up if inflation comes in higher-than-expected this month," she said in a statement. "In addition, economic uncertainty, rising consumer debt and persistent housing affordability challenges are headwinds to the housing market this fall."