It’s a tough time to be a prospective homebuyer in Dallas-Fort Worth, as well as most of Texas and much of the U.S.
Soaring demand for new and existing homes and historically low interest rates have houses flying off the market. A COVID-related hesitancy to put existing homes on the market isn’t helping matters, either, and homebuilders are facing shortages of materials and vacant lots on which to build.
Put simply, the market is out of whack, said Mark Johnson, CEO of Frisco-based JP & Associates Realtors, which has over 3,500 agents across 22 states.
“The housing shortage is significantly impacting Dallas consumers,” Johnson said. “It’s nearly 46 percent less inventory than a year ago.”
That’s resulting in multiple offers at virtually every price point, from entry level to luxury homes, he said, and median sales prices have increased nearly 10 percent, not only in Dallas, but all major markets in Texas.
When Johnson says “multiple offers,” he’s not talking about two or three. “We’ve had some where there’s 25 or 30 offers,” he said.
“It’s an unhealthy market because it’s too unbalanced,” he said. “It’s very much in the seller’s favor. There are multiple offers, limited inventory. For those who have solid jobs and solid incomes, with the lowest mortgage rates in history, they’re able to afford more. That’s creating a demand, but it’s not a healthy market.”
The DFW existing home market has dramatically fewer homes available to buyers than it did a year ago. According to the Texas Real Estate Research Center at Texas A&M University, through the end of November, the supply of active listings in DFW fell to just 13,368 homes, an extremely tight 1.4-month supply. A 6-month supply is considered balanced. For comparison, in November 2019, there were 20,040 listings.
Meanwhile, for the 12-month period ending Nov. 30, 2020, DFW had 111,092 existing home sales, an 8.5-percent increase over the previous 12-month period, according to the A&M Real Estate Center.
“With the pandemic and low interest rates, mainly, causing a lot of buyers to get into the market, we’re experiencing historic low inventory right now,” said Elizabeth McCoy, sales leader for Williams Trew residential real estate brokerage and president of the Greater Fort Worth Association of Realtors. “We saw that trend coming at the end of 2019. We ended the year (2020) down almost 49 percent in Fort Worth (from a year ago), and that’s a trend all over the Metroplex. In the DFW area, we’re down 47.5 percent.”
The low inventory is driving up prices and contributing to an affordability problem, McCoy said. The median price in Fort Worth was up 10 percent year-over-year to $258,900, she said. Across DFW, the median price was up 8.3 percent to $301,900.
For 2021, the Texas Real Estate Research Center forecasts that DFW single-family home sales will increase by 7.3 percent over the number sold in 2020, according to the January edition of Texas Housing Insight.
Statewide single-family home sales are projected to increase 8.4 percent in 2021, said Luis Torres, research economist at the center.
“Home sales would be even stronger (statewide and in DFW) if not for persistently low inventories,” Torres said.
How much stronger?
Johnson thinks sales in DFW could have been twice what they were last year if not for the supply shortage, blowing away previous records.
“The Dallas-Fort Worth market is the fourth-largest real estate market in America,” Johnson said. “We’re in a significant market, and with 50 percent less inventory, I believe it could be double the number of homes that we would have sold without this inventory constraint. Certainly double is on the upper end of it, but somewhere near double.”
The dwindling supply of existing homes has propelled more buyers — especially first-time buyers — into the new home market, said Ted Wilson, principal of Dallas-based housing market research and consulting firm Residential Strategies Inc.
“With a lack of existing home listings, especially for housing priced under $350K, many would-be buyers have migrated to the new home market,” Wilson said.
Would-be sellers are leery of listing, he added. The imbalance in supply has created housing inflation, Wilson said.
“Because of the shelter-in-place mindset brought about by COVID, many households that normally would have listed their house for sale did not do so in 2020,” he said. “The drop in mortgage rates amped up housing demand and has reduced existing housing listings to record low levels.”
New home sales in Dallas-Fort Worth peaked in December, according to a report from HomesUSA.com, based on 12-month moving averages. New homes in DFW sat on the market for roughly two days fewer in December than they did in November as inventory continued to tighten.
“We are seeing the rapid sales pace continuing to cause inventory to tighten as active listings continue to decline,” said Ben Caballero, owner of HomesUSA.com. “Builders are trying to build homes fast enough to meet the phenomenal demand we continue to see locally and throughout Texas.”
In December in DFW, the average number of Days on Market, or DOM, dropped to 89.35 from 91.62 days in November, according to HomesUSA.com’s New Home Sales Index. New homes DOM averages 60 days higher than existing home sales because most new homes are listed in the Multiple Listing Service before construction is complete, Caballero added.
The housing shortage shows no signs of ending anytime soon, Johnson said. Declining home inventories in DFW and nationwide date back to 2016, he said.
“There are a couple of key trends that tell us that this is not a fad but it is a trend,” he said. “One of them is the baby boomers, like me, aren’t selling. The millennials and Gen X just became the biggest group in the U.S., There are nearly 72 million millennials across our great nation coming into home-buying age, and we see that for the next five-eight years as a tremendous pressure on housing stock.”
McCoy said she’s hopeful that inventory will improve “a little bit” in 2021.
“They are expecting interest rates to go up a little bit in 2021, so we do expect inventory to improve a little bit,” she said. “We do expect a little relief from our low inventory, especially after we get through the midpoint of 2021.”