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Single-family building permits are still trending up in this North Texas city

In Denton, there are several reasons why building permits are trending above other parts of DFW -- among them are a couple new communities.

DENTON, Texas — This story originally appeared in the Dallas Business Journal, a WFAA news partner. 

New single-family building permits have continued to slide for several parts of North Texas, but Denton is bucking the trend.

Building permits were up 46% year-over-year for the 10 month period ending in October, according to data compiled by Addison-based Tomlin Investments, which tracks new home construction north of Dallas-Fort Worth. The city has posted 1097 single-family building permits so far this year, compared to 753 during the same period last year. 

In most northern municipalities, new building permits are down compared to last year

The main culprit behind the slowdown is rising mortgage rates, which have taken a significant bite out of buyer demand. Builders are responding to the decreased demand by cutting back on starts as they clear out existing inventories. 

In Denton, there are several reasons why building permits are trending above other parts of DFW. Among them are a couple new communities that have new product on the way. 

“There’s also a little bit of choppiness because there are some neighborhoods where builders haven’t started as much and they’ve worked their inventory down, and now it’s time to go out and to restart housing,” said Ted Wilson, principal with Dallas-based Residential Strategies Inc. “I think that’s part of the story as well.” 

One segment of the market that has been performing well has been build-for-rent. Those communities tend to result in a large number of building permits issued at the same time.

There’s a build-for-rent community in Denton called Perch Denton, which had 195 starts in the third quarter. There's a new community in western Denton called Cambridge Brook that has seen new housing development recently. 

Homebuilders like Meritage Homes and Lennar Homes have been active in a community called Kings Ridge. 

Lot developers have been pushing to get new supply on the ground for the past couple years, which resulted in a record number of lots under development this year. Some of these lots are hitting the market in places like Denton. 

“That’s why you get these aberrations in the start rate,” he said. “Where everybody else is tapping the brakes, but you’ve got new communities that are hitting the market and so builders are putting starts out there.”  

Historically, activity in Denton has concentrated to the south of Interstate 35, but a lot of that area is built-out. New development has been focused on the western section of the city, Wilson said. 

There are two very large master-planned communities planned in Denton. These include Hillwood’s Hunter Ranch and the Cole family’s Cole Ranch, which is north of Hunter Ranch.

Across North Texas, housing starts are expected to ebb further, continuing the downward trend seen over the last several months. There were about 16,000 starts in the first quarter of this year, 15,000 in Q2 and only about 9,600 in Q3. Early estimates place the number of housing starts in Q4 south of 9,000. 

Because the market is winding down from the frenzy seen last year, the inflationary pressures that drove home prices to record highs will likely slacken. As those prices come down, homebuilders should pass those cost savings onto consumers in an effort to make their homes more affordable, Wilson said. 

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