Thursday, February 23, 2017

Home prices in DFW overheated by up to 14 percent

As home prices continue to climb in Dallas-Fort Worth, Fitch Ratings' latest quarterly sustainable home price report says North Texas homes are overvalued by 10 to 14 percent.

The rating comes after North Texas home prices rose 13.4 percent year-over-year, according to Case Shiller's latest home price report.
And North Texas homeowners aren't alone. Homes throughout the Lone Star state are also 10 to 14 percent overvalued, based on the Fitch Ratings report.

Texas, along with the western United States and Florida, is exceeding supporting economic fundamentals, researchers say, with a particular focus on major metro markets like Dallas, Las Vegas, Phoenix and Portland.

Each of these major U.S. markets are overpriced by 10-14 percent, according to the report.

Meanwhile, home prices in most of the United States is sustainable and supported by improving unemployment and inflation-adjusted income growth rates, researchers said.

Last year, a Fitch Ratings director told the Dallas Business Journal that home prices were rising at a much faster pace than the underlying economic 

fundamentals, such as income, unemployment and mortgages rates, can support.
The affordability issue is something builders and developers alike are trying to overcome, but there's no "bubble," in the North Texas housing market, said Ted Wilson, a principal at Dallas-based Residential Strategies, a firm that analyzes the local housing market.

"With all the job growth and in-migration of companies moving to Dallas-Fort Worth, we're going to continue to see a tremendous amount of activity," Wilson said.

That being said it's getting more difficult for first-time homebuyers — or even buyers making the median income in the region — to afford to buy a home.

"Only 16.2 percent of the new homes sold are affordable to a household in Dallas making the median household income," he told the DBJ."This means if you are making under $70,000 a year, you have to look at the existing home market because there's not many new homes in that price point."

The median price of a new home is about $345,000. That is far more than the maximum amount the median household in Dallas can afford, which is about $240,000, he said.

"As rates go higher, housing will remain expensive," he added. "There's no bubble here and I've told people if you are in the market for a house and qualify, it's as good a time as any to buy."

Candace Carlisle/Dallas Business Journal.