Headlines talk about rising home prices and the decreasing supply of homes, but is this something we need to worry about? In short – there is really no need for alarm. The job market is thriving, and our economy is booming.
Aaron Duca, North Texas District Manager at Academy Mortgage, isn’t worried. “Considering the median sales price year-over-year for homes across the Metroplex is increasing, the ‘cost’ of owning is higher today than it was last year. However, I still don’t feel as though it’s an issue,” said Duca. “There are thousands of jobs coming into the Metroplex, which can help those that have been in a stagnant work environment find opportunities to increase their income at the same (if not greater) rate than the increases in home costs.”
Looking at the latest monthly indicators provided by NTREIS, home prices have risen 9.7% year over year to $215,000. At the same time, inventory of homes on the market has dropped 2% and the month’s supply of homes for sale has dropped 11% to 2.4 months. For reference, the Texas A&M Real Estate Center cites 6.5 months as a balanced market.
“The local EDC’s are doing a fantastic job of bringing in large companies (such as Nebraska Furniture Mart, Toyota, Liberty Mutual, State Farm, 7-11, FedEx, etc.) from outside of the Metroplex. This will help create more local jobs,” observed Duca, who doesn’t think rising prices should scare potential buyers. For example, “Using stats from Plano in 2016 Q1: the median sales price increased from $279,500 (2015) to $286,250 (2016). [If a buyer qualifies for] a 3.75% interest rate on a 30 year fixed loan and plans to put down a 5% down payment, it increases the borrower’s down payment requirement by $337 and monthly payment by $29.70/month. With the DFW area’s job growth, finding an opportunity that pays $.18 more per hour will cover this increased home cost.”
Even so, the area’s housing affordability index dropped 7.8% to 152. Due to the lack of inventory, though, we are still in a very competitive seller’s market. Sellers still received on average 96.9% of their original list price, which is .1% less than the same time last year. Days on market until sale dropped, somewhat dramatically, 14.8% to 46 days.
New listings actually rose 11.9% to 12,764 in March 2016. Still, many people are moving to the area each day keeping supply low and demand high. “With the increase in jobs and employees relocating to DFW, it creates a shortage in available homes for purchase; this in turn increases the price of the homes that are for sale (high demand / low supply = higher prices),” explains Duca. “Builders have taken advantage of this opportunity, and we’re seeing many people sell their current home to ‘cash out’ the equity; using some of these funds to buy a new home and use the excess to either pay off debt and/or invest in long-term income strategies.” Of course, always consult with a financial planner before choosing this option.
People looking to buy in the DFW area would be wise to consult a real estate professional before beginning their search. They are familiar with the skills and tactics that will increase your chances of finding that home that perfectly suits you. “When trying to buy an existing house many borrowers are offering a fair price,” suggests Duca. “Including letters to the seller explaining [a buyer’s] current family situation and the ‘why’ behind the offer to buy this home [can increase your chances of winning a multiple offer situation.] Although it doesn’t always work, creating an emotional response on your offer can differentiate it from the other suitors.”