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Bill Head

Housing markets are overheating! Get ready for an even bigger housing crash! Housing bubbles are popping up all over the place! If you’ve been listening to some economic forecasts lately, you might be nervous about the housing market in North Texas. Want the truth? Housing prices are increasing. Supply is low. There are a lot of people moving to the area for jobs and opportunities. All of those things are true. And it’s also true that the housing market is still at healthy levels and is predicted to stay healthy for at least the next five years.

Let’s take a closer look at why national analysts worry that the market is overheating. It’s true we have seen prices rise at a sometimes surprising rate. The truth is, compared to the rest of the country, we’ve enjoyed low housing prices for a long time, and relatively speaking, housing prices are still low compared to many similarly sized metropolitan areas. So it makes sense that North Texas is still an attractive place to relocate when you’re considering a job change. We’re welcoming an average of 10,000 people every month to the area. And as you can see all over town, builders are doing their best to keep up with the influx. But not all of those new people can wait to build and so there is a shortage of housing, and with every shortage you see prices rise. In our case, prices across the Metroplex on average rose about 7% last year.

A housing bubble is feared when the price of buying a home rapidly outpaces that of renting one. In our case, rents also rose about 7% last year. Analysts also worry about lending practices of that past that made loans people couldn’t afford. New lending requirements now clearly inform consumers about the true cost of their loans before they buy. Finally, economists fret when prices rise beyond affordability for the average consumer. We’re fortunate in North Texas because even with prices on the rise, housing is still affordable for most.

Real estate experts like to look at average income levels compared to average housing prices and to rate their affordability. In DFW, the average household income is generally thought to be around $58,190, and the average house price is around $265,000. An average household with a car payment, an average credit card payment, and some money saved for a down payment on a house, should be find that buying a house is within reach. Mortgage lenders like to use ratios to determine the size of a loan, and a good general rule of thumb is to have no more than 41% of your income dedicated to paying monthly debt payments toward mortgage, homeowners insurance, car payments and credit cards. If we look at the average income of $58,190, then that 41% is $1988 per month. An average payment on a new car is $483, or $361 for a used car, which still leaves some room for a home purchase.

Of course no one is perfectly average and buyers should always consult with a MetroTex Realtor to see how their own situation fits into today’s housing market. One thing buyers shouldn’t worry about is that housing prices are out of reach for them entirely. It may take patience to find the right house, and it may take time to pay off some debt to qualify for a loan. And MetroTex Realtors know how to guide you through the process of finding the right house at the right time for you.

For more information about buying or selling a home in the area, visit dfwrealestate.com or ask a MetroTex Realtor to help you.

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