As the Dallas-Fort Worth region grows, housing prices have escalated with Case-Shiller reporting Tuesday prices increased 9 percent year-over-year in North Texas, but the cumulative effect is stacking up against buyers seeking affordable homes, writes Candace Carlisle.
In the past five years, North Texas home prices increased 43.3 percent, which has never happened before in Dallas-Fort Worth history.
“It is stunning to see that kind of growth,” Ted Wilson, principal at Dallas-based Residential Strategies Inc., told the Dallas Business Journal.“Obviously, the shortage of housing is causing this and builders, even being as busy as they can be, are not alleviating the demand or taking care of the shortage of homes.
“The more listings on the market, the faster they are absorbed, which is a challenge for consumers,” Wilson added. “It’s coming to a point where affordability is becoming a big concern and builders are facing steep price increases from trades and home lot price increases.”
Homebuilders are focused on lowering price points, but it remains a challenge to develop a single-family, detached home for under $200,000 unless it’s by a mass production builder, he said. The median home price in Dallas-Fort Worth sits at $340,000.
Meanwhile, Wilson said he’s hearing from builders the higher price points are slowing this summer as they pass through costs to maintain their profit margins. Buyers are helped by the favorable mortgage rate, which dropped 20 basis points after Brexit. But even with the favorable rates, homebuyers are still experiencing sticker shock, he said.
“There’s been some wishful thinking that prices will subside a little bit, but, even with incentives and discounts from builders, there is nothing that is going to allow prices to slip,” Wilson told me. “We still have huge shortages of existing home inventory and there are constraints on new construction.”
With apartment rental rates also climbing, Wilson said he doesn’t expect an oversupply of new homes or that the supply of inventory will increase dramatically in the short term, which points to home prices continuing to climb in North Texas.
“Everyone understands there’s an affordability issue, but there’s no big solution for it,” he said.
The affordability issue will be highlighted in Residential Strategies’ overview next week looking at the North Texas housing market.
Earlier this month, Wilson released the second quarter results of North Texas’ market, which showed builders started 7,601 homes during the quarter. During that time, builders sold 7,289 homes.