After 2015 was a boom for home sales in the Dallas-Fort Worth area, the real estate market has significantly slowed down in 2016. Early 2017 home sales are projected to remain flat then rise again. This is namely on account of slow job growth but a severe housing shortage.
Compared to Northern Texas where exposure to the tech and energy industries has less magnitude, Dallas-Fort Worth has been seeing the most growth out of any other region in the state. However, home sales in the Dallas market have overall been down year-over-year from 2015 to 2016.
Mid Year DFW Market Update
August 2016 was unexpectedly strong compared to 2015 with a 12% increase in home sales while July home sales dropped significantly year-over-year. Homes in North Dallas south of LBJ remain on the market for an average of 68 days, up 39% from last year.
Plano is seeing the highest growth with both total home sales and median home price rising 12% over 2015. Homes in Plano only sit on the market for 21 days on average.
Richardson is also seeing high growth with home sales increasing 28% year-over-year, median price increasing 7%, and homes only sitting on the market for an average of 25 days even though it used to be 18 days.
Lack of inventory is the primary driver in home sales remaining flat. A majority of the 25,700 jobs added to Texas in August being in the Dallas-Fort Worth area, with the Dallas Federal Reserve estimating 2016 will end with 138,200 new jobs.
Dallas is facing the second-largest demand for housing compared to other urban areas in the United States. With no readily-available housing to sell, sales remain flat. Over $10 billion has been invested in new construction in the area to accommodate the influx of new residents.
Texas is also seeing a boom in foreign home buyers and is currently home to the second-largest foreign-born population in the country. Over 21,000 homes in Dallas-Forth Worth were sold to foreign buyers in the past year. A majority are in Latin America and Asia (36% and 34% respectively), with 12% coming from Europe. South Asian home buyers are eyeing Texas as it currently has the largest volume of home purchases from India than any other state.
Increased Home Values
Increases in home price are playing a part in both stagnating home sales and the rise in foreign buyers. Texas may be gaining jobs steadily but the real dollar value of wages remains far below what it was when the Dallas-Fort Worth housing market peaked over 15 years ago.
Foreign buyers feeling less impact from wage stagnation are going to be more likely to qualify for mortgages in the current economic climate or the ability to make cash offers. Of the new construction cropping up in the area, there will not be enough single-family homes and condos in the $150,000-200,000 range that middle class home buyers are more likely to be able to afford.
Single family homes in the $200-299K price range comprised 27.9% of sales in 2016, up 16% from last year. Condos and town homes in the same price range accounted for 23.9% of sales for this home type in 2016.
Constraints on new construction are being felt nationwide. Texas is building more homes than other states but not enough to keep up with the current demand. Job growth and real value of wages also remain front and center in the Dallas-Fort Worth housing market.