New construction has been in the news and is a big part of the housing recovery. In North Texas, we are seeing growth and a revival of new construction. Overall, Texas has been showing steady increases as many companies are relocating to Texas bringing jobs and driving demand for housing.
Appraising New Construction
Have you ever wondered how appraisers can perform an appraisal on new construction? Appraisers can appraiser homes that are not yet built. This is done by using what is called a "Hypothetical Condition" in appraising. A hypothetical condition is defined as - that which is contrary to what exists but is supposed for the purpose of analysis- per The Dictionary of Real Estate Appraisal. When we appraise new construction, we are appraising a property that is not yet in existence. We are provided the builders plans and specifications which we use to identify what the property will be once constructed. We will then find similar sales of properties to determine the value opinion of the proposed new construction. The appraisal is performed subject to completion of the proposed plans.
New Construction Data
Here is a look at new construction sales within our main counties in North Texas.
This chart shows the number of builder sales within Denton and Collin Counties from the North Texas Real Estate Information Systems, (NTREIS) MLS database. Note that not all new construction sales are listed in the MLS database. There are more sales in Collin than Denton County, but both show the same trends and a slight slow down in 2015.
Here is a look at the number of builder sales within Cooke and Grayson Counties from the North Texas Real Estate Information Systems, (NTREIS) MLS database. Again, not all builder sales are listed in the MLS. There are more builder sales in Grayson County than Cooke County. There has been very little deviation in the number of builder sales in Cooke County in the past 10 years.
It is very evident that new construction dropped off considerably in 2008 as the housing crisis hit. Here is a look at the Denton and Collin counties and the inventory of new construction sales per NTREIS MLS.
Another source of data for new construction is the number of building permits per US Census Bureau. Here are the results for building permits for Single Family Homes for the past 10 years:
As you can see for all four counties, the number of building permits for single family homes has been increasing but has not reached the levels prior to 2006. There was a dramatic drop in the number of permits in 2007 for Collin County.
Construction Draw Inspections
Not only do we provide appraisal services for new construction, we also perform construction draw inspections. The DW Slater Company has been providing construction draw inspection services to lenders for over 20 years. Construction draw inspections are performed for the lender to ensure that work requested by the builder has been performed. Draw inspections are usually performed on a monthly basis during the construction of a home.
Here are a few resources that you might also find helpful:
New Construction Home Buying Tips: How To Buy a New House -- Ryan Fitzgerald with Raleigh Realty
What is a Draw Inspection -- Lyndsey with WWCI Appraisals
Texas Housing Insight -- Real Estate Center- Texas A&M University
New Residential Construction -- US Census Bureau
The 5 Definitive Elements of New Home Construction Cost -- Kyle Foley with Foley Homes
What’s Different About Buying New Construction -- Michael Roberts with Michael Roberts Custom Homes
Why it’s important to think of new homes just like new cars -- Ryan Lundquist-Sacramento Appraisal Blog
Do you have any questions about new construction? Is there anything that you would add? As always, you can contact us at www.dwslaterco.com.
Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use. This information is NOT intended to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or other potential real estate or non-real estate purpose. If you’d like to obtain additional information or order an appraisal for your specific needs, please contact us at www.dwslaterco.com.