High costs and the ‘hassle factor’ will eventually put the brakes on the area’s runaway real estate market, analysts predict.
You don’t have to tell house hunters that Dallas-area residential values are out of control.
Anyone who’s looked at a local property in the past year — if they can find one — has gotten sticker shock over North Texas home prices.
Single-family home sales prices in the area are up 18% through June.
And for the first time in memory, every one of the area residential districts The Dallas Morning News tracks each quarter is showing a year-over-year price gain for the first six months of 2021.
Some neighborhoods are seeing the kinds of price explosions that were unheard of in previous property cycles.
Home sales prices in Fairview are up 30% in the first half of the year, and prices rose 29% in Southlake. Prices soared more than 25% in Celina, southeast Dallas, Oak Cliff and the Park Cities, according to data from the Texas Real Estate Research Center and North Texas Real Estate Information Systems.
The dramatic home price increases are being fueled by a combination of low mortgage rates and a severe shortage of houses.
A migration of thousands of people to North Texas during the COVID-19 pandemic has just made the situation worse for buyers hunting an affordable Dallas-area home.
Only four of the almost 50 residential areas The News surveyed had more than a one-month supply of houses listed for sale with agents. That’s less than a fifth of what is considered a normal market.
For buyers, the shortage of homes for sale and the ever-rising prices present a growing challenge.
Tracy Jordan has been looking to buy her first home in the northern suburbs for about six months.
“It’s so frustrating,” said Jordan, who works in Plano for one of the country’s largest banks. “I had no idea it was going to be this difficult.
“I thought it would be similar to buying a car, but it doesn’t work like that.”
Jordan and her real estate agent, Blake Roberts with Coldwell Banker Apex, have looked at more than 50 houses and submitted multiple contracts without landing a buy. She’s already raised her top purchase price.
“My cap was $350,000 initially and now I’m up to $400,000,” Jordan said. “I’ve even put in some offers a little over $400,000, but I really don’t want to do that.”
Jordan, who is blind and uses a wheelchair, is looking for an open plan house with room for her and her son.
“It seems ludicrous to pay $390,000 for a three-bedroom and two-and-a-half-bath,” she said.
The median North Texas single-family home price in June hit $350,000 for the first time. In Collin County, the median sales price at midyear was $440,000.
Home sales prices in the region have increased more than 50% in the past five years — the greatest such gain ever.
“In Texas over the last 40 years, a good year would be a 4% price bump — a normal year would be about 2%,” said longtime Texas real estate economist Mark Dotzour. “The worst-case scenario is at a certain point houses become unaffordable, even with mortgage rates where they are.
“At some point you will hear people say they are not going to buy. And the house price growth trend will flatten out.”
Dotzour thinks the boom in Dallas-area home prices will end without a bust.
“I don’t think there is a bubble,” he said. “Bubbles happen when you get unsustainable financing.
“People are saying they know they are overpaying, but they want a house.”
A growing number of potential buyers who are discouraged or priced out of the market may also lower the temperature of the local housing sector, said James Gaines, who just retired as chief economist with the Texas Real Estate Research Center.
“There is the hassle factor,” Gaines said. “A lot of buyers are going to say, ‘The heck with that.’
“There is price fatigue,” he said. “We do anticipate the market is going to level out a little bit and the demand we have seen is going to have to balance itself out.”
But even if the Dallas-area home market cools, don’t expect a price retreat, analysts say.
“I don’t think that we are going to see dramatic drops in prices in the next year,” said Eric Fox, chief economist for California-based housing analyst Veros Real Estate Solutions. “We said that coming out of the pandemic, we thought real estate prices would take off, and they did.”
Veros is forecasting a 9.6% home price increase in the Dallas-Fort Worth area over the next 12 months. That would be about half of the current appreciation rate but still one of largest annual price increases the area has seen in decades.
“I like to say it’s like a car accelerator and all we have been doing over the last year is pressing down on the accelerator harder,” Fox said. “I don’t think we’re going to keep punching the accelerator.”