Today's real estate market remains hot, hot, hot, with sellers enjoying high prices, while buyers are facing a highly competitive market that has made it difficult for some to land the home they're longing for. This is especially true for those selling homes in Dallas/Fort Worth or shopping for Dallas homes for sale and Fort Worth homes for sale.
It's easy to get distracted during the buying or selling process by certain widespread real estate myths. Our real estate agents help many families in the area find their dream home and advise them to not fall for misconceptions they might hear from well-meaning friends and family members.
Read on about some common real estate myths you should not fall for.
Need more help navigating today's real estate market? Contact us today.
Dallas-Fort Worth new home sales and median prices are running at record levels, but a disrupted material supply chain and limited construction labor pool are causing it to take longer to get houses built and closed. North Texas homebuilders initiated housing starts on 14,216 units in the most recent quarter, eclipsing the third-quarter 2020 pace by 1,277 units and up 9.9% year over year, according to statistics released today by Dallas-based Residential Strategies Inc. The annual start rate, which includes the fourth quarter of 2020 through third-quarter 2021, has now climbed to 58,625 units — up 35% year over year, according to the housing market analyst.
"Even with higher prices there continues to be solid demand for new houses," said Ted Wilson, principal with Residential Strategies. "The biggest challenge for builders today is that, with limited construction labor and a disrupted material supply chain, it is taking much longer to get houses built and closed." Despite the delays, builders set a record for closings in the most recent quarter at 11,985 units, up 3.5% year-over-year. The annual closing rate stands at 45,574 units, up 13.7% year over year.
The cost and shortage of construction labor has been problematic for builders, said Cassie Gibson, Residential Strategies' senior vice president. Lumber future prices peaked in May 2021 and have subsided since, but supply chain issues persist for many other components used in housing construction, causing higher prices to persist for builders as they determine their true input costs, Gibson said.
New home demand in North Texas has soared over the last year and a half because of a shortage of existing homes and surplus of people moving to the area.
If you're waiting for Dallas-Fort Worth's rapid home price appreciation to cool before buying a house, you may have to sit it out for at least another year. Despite some indicators that the Dallas-Fort Worth housing market may be cooling, a new report projects that home prices will increase an eyebrow-raising 21.1% over the next year. The projected increase is the ninth highest in the nation, according to online home services portal Porch. Porch used national home sales data from Zillow, Redfin and the U.S. Census to make its home price predictions.
If DFW hits the 21.1% projection, it will exactly match the metro area's gain in home prices for the past year in the latest Case Schiller Index, which measured June 2020 through June 2021. The increase set a year-over-year record gain for the Dallas area.
Here is a summary of the data for the Dallas-Fort Worth metro area:
For reference, here are the statistics for the entire United States, according to Porch:
Dallas Business Journal, September 6, 2021
Paige Shipp, regional director with housing analyst MetroStudy Inc. fears home sales might slow next year in the ramp up to presidential and congressional elections. "We typically have much slower selling seasons right before an election," she said. "After that happens, the flood gates open and people come out. It's not a matter of who wins." Worries about a recession may also impact the home market. "We spent the better part of the last decade still looking over our shoulder," said George Ratiu, senior economist with Realtor.com. "The last recession was so bad that we are still carrying some of the scars from that." However, Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University states that Texas economy is still expanding. "And we are extremely unlikely to be in a recession by the end of this calendar year," he said. "We are probably pretty safe through the first six months of next year."
Local real estate agents sold 9 percent fewer homes in December than they did a year earlier — the fifth month in a row of year-over-year declines in home purchases. Last month 7,786 homes were sold through the agents' multiple listing service, according to data from the Real Estate Center at Texas A&M University and the North Texas Real Estate Information System. Last year's slight decline in home purchases in the area followed almost eight years of increases. "It's still the second-best year ever," said Dr. James Gaines, chief economist with the Real Estate Center. "The whole state is reverting to a more normal market. "We've been going really, really strong for years, and ultimately that slows down." Higher mortgage rates and record home prices in the Dallas-Fort Worth area have caused some prospective buyers to pull back from the market.
The number of homes for sale in the almost two dozen North Texas counties included in the report was 22 percent higher than a year earlier, with more than 21,000 preowned single-family homes listed for sale with real estate agents. On average it took 57 days to sell a property -- 8 percent longer than a year earlier. Even with the increase in inventory, there was only about a 2.4-month supply of houses listed for sale in the area at the end of December.
It's no secret that Dallas' home market has a winter chill.Home sales have slowed, along with the rate of home price increase in North Texas.The market changes have put Dallas on Realtor.com's list of the 10 cities hit hardest by a housing slowdown."In the last few months, the real estate market has actually begun slowing down. including in some of the big cities that have been leading the go-go post-recession housing boom," according to a report on the website. "To be clear, prices aren't always dropping in these places, which are predominantly located on the West Coast."Mostly, they're decelerating, coming back down to earth."
Realtor.com based its rankings on a year-over-year rise in home price markdowns, increases in listings and changes in overall list prices."There's a rebalancing that needs to happen," Len Kiefer, deputy chief economist at Freddie Mac, told Realtor.com. "Prices have risen so high in some of these markets that it's very tough from an affordability perspective [for buyers]. ... It's not surprising to me that we're seeing a little bit of a leveling off."
Median home prices in North Texas are still up about 5 percent compared with 2017 levels. But that's a much smaller number than the double-digit annual gains seen in recent years. Home list prices in the Dallas area are down 1.4 percent from a year ago, and the number of listings has grown 15 percent year over year, according to Realtor.com
Not so fast with the gloomy forecasts for Dallas' housing economy. Yes, the local home market appears to be cooling after years of scorching hot sales. And some analysts have suggested there's a Dallas home price bubble getting ready to burst. But a new forecast by Zillow says the market is likely to outperform the rest of the country in 2019 when it comes to home price gains and housing market health.
Zillow surveyed more than 100 real estate economists and investment experts for their take on the U.S. housing market and future home value growth. According to Zillow's research, markets in Denver; Washington, D.C.; Atlanta; Dallas; Las Vegas; Phoenix; and San Jose, Calif., are likely to outperform the rest of America in 2019. The economists on Zillow's panel said they expected U.S. home value to grow an average of 3.8 percent in 2019.
North Texas home prices are about 5 percent higher in 2018 after several years of double-digit annual appreciation. D-FW home prices were forecast to grow 4.3 percent next year in a recent Realtor.com report. Local analysts don't expect declines in home values in 2019. Instead, they say the rate of home price gains and overall home sales are likely to moderate.
Home prices are out of reach relative to incomes and mortgage rates. The big question for the economy is how the imbalance adjusts.
These should be happy times for the housing sector. The economy is booming, with more people working at higher pay, and with the sizable millennial generation reaching prime home buying age. Instead, the housing market has gone soft, acting as a drag on the overall economy rather than as a force propelling it forward.
Sales of new single-family homes were down 22 percent in September from their recent high in November 2017, and existing home sales in September were down 10 percent. This tepid residential investment subtracted from G.D.P. growth in each of the first three quarters of 2018.
Home prices have not declined nationally, at least according to the most widely followed indexes. But their rate of increase has declined, and more and more home sellers are finding they must reduce asking prices to find a buyer. Given how central housing is to the broader economy — it is the biggest driver of both wealth and indebtedness for most families, and its fluctuations have frequently been major factors in past booms and busts — this slump isn't something to be taken lightly for anyone hoping the good times will last.
So what's going on?
When you look closely at the data, it appears this paradox of a strong economy and a weak housing market is, at its core, an illustration of a fundamental rule in economics: If something can't go on forever, it won't. Home prices in a given location are ultimately tethered to the incomes of the people who either live there or want to. But for much of the last six years, that relationship has come undone. Nationally, personal income per capita has risen 25 percent since the end of 2011, while the S&P/Case-Shiller national home price index is up 48 percent (neither figure is adjusted for inflation).
The gap is even larger in the big coastal cities with high wages and booming job markets, but where legal and other barriers make it hard for builders to add to the supply of homes. In the San Francisco metro area, per capita personal income rose 40 percent from 2011 to 2017, while home prices rose 96 percent. Similar patterns are evident in Los Angeles, Seattle, Boston, New York and Washington. In less high-flying markets, there was still a disconnect. In the Minneapolis area, for example, incomes rose 22 percent while home prices rose 46 percent.
Those rising home prices got help from years of very low mortgage rates, which put more expensive homes within reach for people at a given income level. Activity was also probably boosted by some bounce-back effect after the housing market crash of 2007-09, a result of pent-up demand for homes that were not bought while the market was collapsing.
Rates bottomed out in late 2012 at 3.31 percent for a 30-year fixed-rate mortgage. They have been moving upward in fits and starts since, including a full percentage point in the last year alone to nearly 5 percent — still low by historical standards, but high compared with the ultralow levels that had enabled these huge price gains.
There's no doubt that demographics are favorable for housing demand. The peak birth year for millennials was 1990; it's a group that is turning 28 this year and thus entering prime years for home buying. As it happens, 28 is exactly the median response in a Bankrate survey that asked adults for the ideal age to buy a home.
But that doesn't matter if prices are out of reach relative to incomes. Moreover, lending standards have remained more rigorous than they were during the last housing boom, so it has been harder for people to stretch to buy a home. The inability of people to buy homes they can't really afford is great news in terms of avoiding another crisis, but not so great for the near-term outlook for housing.
"Buyers can only stomach so many price increases until it gets unsustainable," said Daryl Fairweather, the chief economist at the online brokerage Redfin. "Prices reached a breaking point where buyers were fed up and started to consider other options," she said, including renting and moving away from the expensive coastal markets where prices are most out of whack with incomes.
As Economics 101 teaches, price movements are the way that supply and demand match up with each other. But in the housing sector especially, that adjustment can take a while. In contrast with the stock market, where relatively unemotional traders are buying and selling shares every day and the market stays liquid, home purchase and sales decisions can take months and are deeply emotional for the participants.
What seems to be happening is that sellers are trying to cling to the spring 2018 prices that their neighbors received, while there aren't enough buyers in late 2018 willing or able to pay those prices. In a Fannie Mae survey of home purchase sentiment, the proportion of people who think it is a good time to buy a home has decreased significantly since the spring, to a net 21 percent from 29 percent. But so has the proportion who think it is a good time to sell, which has dropped to 35 percent from 45 percent.
You would expect, in a zero-sum transaction like a home sale, for those numbers to move in opposite directions. Instead, it seems that sellers are unhappily realizing that they aren't going to get what they thought their house was worth six months ago, and buyers still think homes are too expensive. That helps explain why transaction volume, especially for new houses, has fallen substantially while prices haven't (at least yet). It's a standoff. And the outcome of the standoff will, in the aggregate, play a role in shaping the future of the economy.
There is precedent for this, and it isn't a happy one. In the last housing boom, new home sales peaked in July 2005, and home prices didn't start declining until May 2006. It didn't start to hurt the overall economy until December 2007, when the damage had spread through an overleveraged global financial system.
But that doesn't mean this episode has to end in tears. Home prices are not nearly as out of line with incomes as they were then; speculative activity hasn't been nearly as frothy; and consumer debt levels are considerably more measured. "I think income growth will help us get out of this period," said Robert Dietz, the chief economist at the National Association of Home Builders. "We're probably looking at a period where existing home sales volume is flat to declining, and it now looks like 2017 was the peak year for transaction volume."
A strong (nonhousing) economy makes it more likely that this housing slump will end without a steep 2008-style downturn. So does the basic reality that young adults are forming families and need a place to house them.
But in the meantime, it could be a soft few months or even years of standoffs between buyers and sellers, with the big question of which comes first: sellers who settle for less after recognizing that the price they thought they would get is beyond the reach of buyers, or incomes that catch up with a housing market that got a little ahead of itself.
No place builds more new houses than Dallas-Fort Worth. As of the third quarter of this year, D-FW was the solid leader in U.S. homebuilding with almost 35,000 single-family annual home starts, according to a new report by housing market analysts at Metrostudy Inc. Houston was second nationally with 29,370 home starts in the 12-month period ending in September. D-FW and Houston have topped the country in home construction for several years. And the two Texas titan building markets show no sign of a slowdown. D-FW starts were up 8.7 percent and Houston starts were 6 percent higher than a year ago, Transwestern found.
While D-FW builders are still busy, what they are building has changed, according to Metrostudy's Paige Shipp. "Over the past 12 months, builders and developers have been addressing the need for affordable new homes by developing in previously overlooked submarkets and building smaller, less amenitized homes," said Shipp, regional director of Metrostudy's D-FW market. "As such, the median price has dropped since last year.The decrease in price is not devaluation, rather it's an indication that buyers are purchasing smaller, more affordable homes."
Shipp said that homebuyer traffic has slowed in North Texas in recent months. "While this cooling may worry some, it should be viewed as a positive stabilization of an overheated, frenzied market," she said. "Builders and developers should use this opportunity to catch their breaths and return to the fundamentals of homebuilding including land acquisition and selling." Shipp said the inventory of vacant new homes in the D-FW has increased to the highest level since 2012.
By Claire Ballor – Staff Writer, Dallas Business Journal, October 10, 2018
With a relatively low cost of living and population growth projections that outstrip other U.S. cities by two times, Dallas-Fort Worth has been named the top real estate market to watch in 2019.
The Emerging Trends in Real Estate for 2019 report from PricewaterhouseCoopers and the Urban Land Institute ranked the Metroplex as the number one market for overall real estate prospects in 2019 out of 78 other cities. Austin and San Antonio also made it into the top 20 for overall real estate prospects in the annual forecast report, which is compiled from thousands of interviews with real estate experts across a spectrum of industries.
Mitch Roschelle, a partner at PwC, said the economic data points analyzed for the report suggest the strength of the economy and the discipline being practiced in the real estate market. "If there is a downturn ahead of us, it won't be real estate that caused it," he said. "Right now there's way more discipline in all activities in real estate than there has been in any other time in the modern era. We haven't gotten ahead of ourselves in terms of real estate development. I hope that real estate folks remain as conservative as they have in creating new supply."
Roschelle said he's seeing that conservative behavior in Dallas-Fort Worth and it has kept the market from getting ahead of itself despite the ever-growing demand and push for growth.
As for what makes North Texas the one to watch next year, he said several factors come into play.
"The things that have been important in years past have been markets that have low cost of living and low, relative to the national average, cost of doing business. That's where companies want to be and that's where people want to be," Roschelle said.
The low cost of living, low cost of doing business and tax efficiency continue to draw people to Dallas-Fort Worth, he said. And so much so that the area's population growth rate is projected to be more than two times the national average in 2019.
"The growth in the population is skewed towards younger folks in Dallas," Roschelle said. "The growth in the 0 to 24 age category is high and in the 25 to 40 category. [The population] is becoming younger, and those people are all the workers for the future."
But as the population in the Metroplex grows, affordable housing is becoming more of an issue. Although affordable single-family homes are a contributor to Dallas-Fort Worth's success, there aren't enough of them, according to the report. The report says focus group respondents in the Dallas area pointed to an increasingly prevalent "not in my backyard" mentality as the reason for the slow down in available workforce housing.
"Dallas traditionally was a place where there was a piece of land, and if someone wanted to build on it, they just built on it," Roschelle said. Now, though, developers are often met with a "you're not building that thing near me" attitude, which tends to add hurdles like cost and time, he said. This contributes to the problem that Dallas-Fort Worth is facing with additions to housing supply not keeping pace with demand.
What the Dallas area has going for it, though, is a diverse and stable employment base thanks to the wide spectrum of industries represented in the area, Roschelle said. The report indicates that the market is expected to have high growth and low volatility when it comes to employment in 2019.
Here are a few things the report says to keep an eye on in 2019:
Issues on the horizon
North Texas home sales dropped in September by the largest percentage in more than seven years. Preowned home sales in the area fell by 7 percent from September 2017. That was the biggest year-over-year sales decline since early 2011, according to data from the Real Estate Center at Texas A&M University and North Texas Real Estate Information Systems. Home sales by real estate agents have been down in three of the last four months. Higher mortgage costs and years of rising home prices have caused some buyers to pull back from the market. Mortgage rates on average are currently about 4.7 percent — the highest level in seven years — and are expected to go higher in 2019. With September's sales decline, preowned home sales by real estate agents in North Texas are now flat with the same period of 2017. A record of more than 106,000 homes sold in the area last year. "We think things are going to be flat," said Dr James Gaines, chief economist for the Real Estate Center. The Dallas-Fort Worth housing market has cooled significantly since early in the year when sales were still up by double-digit percentage rates from 2017 levels.
Home price growth has also slowed. Median home sales prices rose by 4 percent in September from a year earlier to $251,000. For the first nine months of 2018, prices are up 5 percent from the sale period in 2017. With sales declining, the number of houses on the market in North Texas has growth to 25,895 preowned single-family homes listed with real estate agents at the end of last month. That's 16 percent more homes for sale in the area than a year ago. On average it took 44 days to sell the houses that trade in September — up 5 percent from a year earlier. Currently there is about a 3-month supply of homes available for purchase in the more than two dozen North Texas counties included in the survey.
Texas has been one of the fastest growing housing markets in the country in the last few years. The state has led the nation in homebuilding and Texas' major metros - Houston, Dallas-Fort Worth, San Antonio, Austin - have had big increases in the number of preowned home sales. But the latest snapshot of the Lone Star State's hot housing market is a mixed bag. While statewide home sales rose almost 3 percent in the second quarter from 2017 levels, sales in the D-FW area slowed for the first time in years. And sales barely rose in the Austin area, according to the latest data from the Texas Association of Realtors.
"The demand for housing remains at an all-time high, but statewide we're seeing a slower rate of increase in sales compared to previous quarters due to the lack of inventory of properties for sale," Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University said. Rising prices and higher mortgage rates have also dampened buying in some neighborhoods. Even with the dip in sales, the D-FW led the state in second quarter home sales by real estate agents with 28,934 properties changing hands.
D-FW home sales were 0.8 percent lower than in second quarter 2017. Statewide median home sales prices rose by 4.4 percent in the period ending with June. D-FW had the biggest jump in the number of homes for sale in the second quarter of any major Texas metro area. The number of homes on the market in North Texas grew by 14 percent, according to the Realtors.
Is the housing boom running out of gas? During the last few years, the home market has been on a tear in North Texas and in other parts of the country, with prices soaring and buyers lining up as soon as a sign hits the front yard. But there are growing signs that the fast-paced housing market is shifting gears, with a decline in sales in many markets and smaller price increases. In July, U.S. preowned home sales fell from a year ago for the fifth month in a row. And nationwide new home sales were down almost 2 percent in July, causing analysts at IHS Markit to question if the bull home market has turned bearish. "The economy is strong. Labor markets are solid. Yet, new home sales and single-family housing starts and permits have stalled. How can this be?" said Patrick Newport, executive director of the U.S. economics team at IHS.
Newport said rising home prices and higher mortgage rates have cooled the ardor for home buying. "This has choked off demand," he said. A slowdown in immigration and household formation could also be factors, Newport theorizes. In North Texas, year-over-year preowned home sales have fallen in many neighborhoods, and for the entire region, year-to-date sales were up a measly 2 percent as of July. At the same time, the double-digit percentage home price gains of the last few years have faded in Dallas-Fort Worth. Through the first seven months of 2018, median home sales prices were up only 6 percent from the same period last year, according to sales data from real estate agents.
Property agents say that some first-time buyers have given up after losing out to other buyers or all-cash investors who snapped up affordable homes. At midyear, the number of prospective U.S. homebuyers who said they planned to make a purchase in the next 12 months fell to just 14 percent — down from 24 percent in fourth quarter of 2017, according to the National Association of Home Builders. That's still another sign that the home market — while not in a traditional bubble — may be headed for slower sales in the year ahead. "It's clear that the winds that have boosted sellers over the past few years are ever-so-slightly starting to shift," said Zillow senior economist Aaron Terrazas.