Can we afford this hot market?

It’s no secret that sales prices have been rising at a healthy clip in North Texas since 2012. When you realize that the average sales price of a home has increased more than $83,000 since 2011, it’s astonishing. In fact, while the 25-year average increase is about 4 percent, most of the past five years average prices rose at double that rate.

As Realtors, we’ve seen the excitement and the challenges of a red-hot housing market first hand. We know that a good listing will get a lot of offers quickly. We know that buyers will often have to be prepared to be patient. We know that even though we’re very busy, inventory is low and sometimes it’s hard getting deals all the way to the closing table.

We’re also getting a lot of questions. People are asking things like, “are we in a bubble?” and “this market can’t last much longer, can it?” Whenever possible, we like to answer these questions with data. We point to census data and population studies that indicate a very strong growth trend in population in DFW for the next 20 years or more. We look at the businesses relocating here, and the strength of the industry mix that we have. We also compare how low are our price levels are when you look at similarly-sized cities in the US. In these ways we can say that yes, we could see this kind of market becoming the new reality for Dallas-Fort Worth.

But we worry, too.

We worry because we see how year after year, average prices have been increasing by 8 percent, and we know that most people don’t have incomes rising at that level. We worry because the number of new listings isn’t keeping up with demand. For the second year running, December inventory levels languished at 1.9 months. That certainly won’t help keep prices in check! We worry because we have 36,000 agents in our MLS and only some 8,500 sales every month, or about 17,000 sides. There’s some pressure for you.

So again, we look to the numbers for reassurance. This time, the facts were troubling. Throughout Texas, we have both census data and MLS sales data for 318 towns. We compared the median household income in those towns and to the median sales price of single family homes. Of the towns we studied, one-third of them had sales prices higher than what HUD considers affordable in relation to income.* Almost all of those towns (100 of the 105) were within the NTREIS market area, and 25 of them were within the Greater DFW area, in places like Dallas, Denton, Lewisville, Euless, Grapevine and Irving.

In a nutshell, that means that a family living in North Texas earning the median income is finding it harder and harder to buy a typical home where they live. They’re going to have to find someplace more affordable to live or find a way to increase their income.

Now that we’ve raised the alarm, what can you do to make a difference? As a Realtor, you can help your clients by educating them on the importance of credit, savings and ways to fund a down payment. You can support our legislative priorities by watching for news from TAR and TREPAC and joining us when we storm the Capitol in April. You can register and vote in your local elections. North Texas is a great place to live, in part because Realtors like you keep it that way.

*105 (33%) fell within the margin of error of having a median sales prices higher what would be considered affordable assuming the following criteria: 30 year conventional mortgage at 5% annual interest rate, with 20% down payment , 1.93% annual property tax rate (statewide average) and $1600 annual homeowners’ insurance (statewide average) with the total cost of housing reaching no more than 30% of income, not including utilities or maintenance costs. Areas of concern within DFW: Addison, Bartonville, Cockrell Hill, Copper Canyon, Cross Roads, Dallas, Denton, Euless, Fairview, Ferris, Grapevine, Haslet, Hebron, Highland Park, Irving, Lewisville, Lucas, Northlake, Princeton, Prosper, Roanoke, Shady Shores, University Park, Westlake, Wilmer.