Buying a home in Dallas isn’t a bargain anymore, not like it used to be.
For decades, this region’s low cost of living has attracted families and employers from around the country, helping the economy weather the booms and busts of the oil business. Now that competitive advantage is eroding in a big way.
Since 2010, the median price for new and existing homes sold in the Dallas-Plano-Irving area has soared 77 percent. Over the same time, median incomes are up about 4 percent.
As a result, buying a home in Dallas is beyond the reach of many, according to a measure of affordability. In 2010, almost 80 percent of homes sold in Dallas were affordable to families earning the median income. By late 2016, just 50 percent were affordable.
That’s Dallas’ lowest score since 1991, when the National Association of Home Builders/Wells Fargo Housing Opportunity Index was launched.
The impact has been greatest in the all-important starter-home market. In 2011, over three-quarters of home sales in Texas were for less than $250,000. By 2016, that number was down to 62 percent.
Within the state, the change has been strongest in the Dallas metro. While Dallas’ affordability score was at 50 percent in the fourth quarter of 2016, the number for Fort Worth-Arlington was 64 percent, according to the index. In Dallas, the median home sold for $274,000 compared with $212,000 in Fort Worth.
The index considers home prices, median family income and interest rates to derive its measure of affordability. In late 2016, the median family income in Dallas was $71,700, according to the index.
Dallas is still much cheaper than Los Angeles, San Francisco and New York. But on housing affordability alone, Dallas trails Chicago, Atlanta, Phoenix, Denver and most other rival metros.
Eventually, that may create headwinds.
For local residents, it gets a lot more difficult to buy a house but it also affects recruiting from other cities and states. There’s more to relocation decisions than the price of housing. North Texas also touts business-friendly regulations, no state income tax, a central location and a history of strong job growth.
Yet homebuilders are concerned about housing affordability, according to the Dallas Fed’s Beige Book, which regularly contacts industry players. Several builders are focused on ways to lower prices, including reducing square footage and lot sizes.
Builders have steadily turned upgrades into standard equipment, such as granite countertops, ceramic floors and sprinkler systems. While communities usually require a share of the exterior to be brick, builders will often cover it completely. Land prices also are higher, in part because the housing bust led to tougher lending standards for developers. At the start of the recovery, the Dallas area had more than 50 months’ supply of vacant home lots; today, the supply is less than 20 months.
The price of materials, especially lumber, have risen recently, and there’s a shortage of construction workers. Their weekly wages have increased much faster than in the U.S. According to the Dallas Builders Association, the Dallas metro has 81,000 construction workers and needs 99,000. In previous housing booms, Mexicans and other immigrants helped meet demand, but that talent pipeline has practically dried up because of increased enforcement.
For prospective homebuyers, there’s often a big disconnect on price. While 31 percent nationwide said they wanted to spend less than $150,000, only 6 percent of the home starts came in at that price. D.R. Horton, Inc., the nation’s largest builder, launched the Express line for entry buyers in 2014. With an average selling price of $220,000, the line accounted for 29 percent of Horton’s closings in the most recent quarter.
Published on 2017-05-17 16:08:02
