Is Cooldown Coming For D-FW’s Searing Home Market?

The North Texas real estate market is having a record year for both sales and prices. But don’t be surprised if the pace of housing gains slows in 2022.

While house costs in the Dallas-Fort Worth area have increased by about 17% in 2021, price increases are expected to average just under 5% over the coming year, predicts Dr. James Gaines, longtime Texas Real Estate Research Center economist at Texas A&M University.

“Many of you have heard that the housing market is running out of steam,” Gaines told members of the MetroTex Association of Realtors in a virtual meeting. “There seems to be a certain slowdown in the pace of sales going on.

“Affordability has become an issue obviously,” said Gaines. “We are starting to see the first signs of a sticker price shock. Incomes haven’t gone up as fast as house prices, and it just puts everything out of balance. “

North Texas home prices have climbed more than 45% in the past five years. In July, single-family home prices in the Dallas area were up 23.7% year-on-year, according to the latest estimate from the S&P CoreLogic Case-Shiller Home Price Index.

“We expect total sales for the year to increase at a rate of 3%,” said Dr. James Gaines, longtime economist at Texas A&M’s Texas Real Estate Research Center.(Real Estate Center / JP Beato III)

Although prices continue to rise, area home sales have declined slightly year over year over the past three months.

“The real reason for the slowdown in sales is the lack of inventory and the problem of affordability of prices,” Gaines said. “Active registrations continue to decline.

“There is very low stock in this price range of $ 200,000 to $ 300,000,” he said. “As a percentage, almost 67% of sales exceed $ 300,000. “

There has been an increase in the number of homes in the D-FW area listed for half a million dollars or more.

This year, nearly 23% of D-FW homes sold were for $ 500,000 and over. In 2019, less than 13% of the area’s sales exceeded half a million.

Statewide, there has also been a shift in the prices of properties sold, Gaines said. “Almost a third of home sales in Texas in the second quarter of 2019 were less than $ 200,000,” he said. “Now it’s less than 20%. “

Gaines said the pandemic has changed home buying habits in the state.

“Statistically there is probably a bigger movement to the suburbs – more people looking for lower prices and more space,” he said. “But there are significant numbers that go both ways.

“We are seeing an increase in the demand for housing in urban centers and simultaneously an increase in the suburbs. “

Even with a slowdown in real estate activity in the final months of 2021, the Texas Real Estate Research Center is forecasting a record year for existing home sales at D-FW.

“We expect total sales for the year to increase at a rate of 3%,” Gaines said. “It will be even higher than in 2020.

“Texas home sales are expected to set a record.”

The forecast for next year is about a 3.5% increase in sales in D-FW.

The region’s limited supply of housing is stimulated by widespread construction.

“At D-FW, we’re seeing a huge build in the housing market,” Gaines said. “This year, so far, it’s up 37%, which is over the 22% we expected.

“By the end of the year, if builders can keep up the pace, it will be an extraordinary year for new home construction.

Gaines said employment in Texas and D-FW is seeing a substantial rebound from last year’s slowdown caused by the COVID-19 pandemic.

“It looks like by the end of this year on an annual basis we should be back where we were, if not slightly ahead of where we were in 2019,” he said. “We are adding jobs every month. Consumers are spending.

But there are still uncertainties due to the ongoing pandemic.

“It all depends on getting COVID under control,” Gaines said. “Last summer we thought we got the COVID under control.

“Then we had this thing called the delta variant.”

Although sales increases are smaller, D-FW is still expected to post record home sales in 2021.
Although sales increases are smaller, D-FW is still expected to post record home sales in 2021.(Texas Real Estate Research Center)