D-FW housing market gets bad marks for soaring prices (Houston: sales, 2015)

[RonnieinDallas]

New report: D-FW housing market gets bad marks for soaring prices | | Dallas Morning News

“Looking at Dallas, Houston and Austin, all of them are in the neutral range in our performance ranking,” Berson said. “The big negative is house price growth vs. income growth.

“These markets are becoming unaffordable.”

North Texas home prices are at an all time high and have shot up by more than 40 percent since early 2008.

[Aceraceae]

:Bookmarks article to take to office Monday morning and demand a raise:

I'm far from a housing guru, but I'm glad we currently own a home in this market. Hopefully it pays off in a few years and we have some nice equity to throw at another home. Unless my company headquarters leaves Downtown(extremely unlikely) at some point I'll have to commute there to continue my trajectory, and I'm sure as hell not commuting from here everyday.

[Made_it_To_the_Metroplex]

Originally Posted by Aceraceae

:Bookmarks article to take to office Monday morning and demand a raise:

I'm far from a housing guru, but I'm glad we currently own a home in this market. Hopefully it pays off in a few years and we have some nice equity to throw at another home.

Same situation here. Glad we got in when we did. But, as I said in another thread the marketplace tends to sort these things out. If the market won't bear it, prices will come down.

[biafra4life]

Originally Posted by Made_it_To_the_Metroplex

Same situation here. Glad we got in when we did. But, as I said in another thread the marketplace tends to sort these things out. If the market won't bear it, prices will come down.

Me three
The problem is though, I don't think the prices will come down (barring some epic national collapse, in which case we will have bigger problems to worry about). This is not California in the 90s. Home prices are not rising due to flipping/speculation. Like other posters have said on other threads, the continuous influx of high paying jobs, especially from both coasts, is bringing folks with the big bucks down here, driving up the prices. It's been incredible to watch. We bought our place in Wylie for $170K in 2012. We could easily sell for at least $230K less than 3 years later. If the kids were grown and out of the house then we could sell and downsize...but our youngest is 16 years away from college, so we'll be here a while. In the meantime we have to contend with rising prices for that time period, and yes I know about the homestead but that merely limits the increase to 10%. That's still a significant increase year after year. Interesting times ahead.

[mSooner]

Yeah, the whole high Texas property tax vs state income tax could really become a thorn in the side at some point.

[aznkobee]

It is because of the high property tax that I think will put a cap on the housing market increases. I know alot of good jobs are moving here but I still don't think the average household can afford yearly 10k - 20k property taxes. Clueless out of state people rushing to buy houses with inflated price and end up suffocated by the property tax and force to downsize. I think the starter home prices will run up the most and the million+ houses will just sit on the market.

[Transplanted99]

Originally Posted by biafra4life

Me three
The problem is though, I don't think the prices will come down (barring some epic national collapse, in which case we will have bigger problems to worry about). This is not California in the 90s. Home prices are not rising due to flipping/speculation. Like other posters have said on other threads, the continuous influx of high paying jobs, especially from both coasts, is bringing folks with the big bucks down here, driving up the prices.

Agree on a national driver for a downturn...still awaiting the full impact of oil price drop on the DFW market (with our economic diversity - some say it might only slow the growth down vs cause a downturn).

Still, if a national event happened, we've not as far to fall, in relative terms (and therefore less to recover).

And, yes, folks from the coasts see Texas as a bargain. That, perhaps, makes it easier for them to psychologically absorb a bigger bid in a competition for a specific house. However, it is still a matter of supply and demand.

For a variety of reasons, Texas, in general, and DFW, specifically, is a lot more "friendly" to developers / builders (meaning, in a non-corrupt way) that their projects are faster, and cheaper to get off the ground in response to our growth driven demand.

Most metros on both coasts get bogged down and are, perhaps an order of magnitude, more costly (and risky) to get going and completed.

[Transplanted99]

Originally Posted by mSooner

Yeah, the whole high Texas property tax vs state income tax could really become a thorn in the side at some point.

Originally Posted by aznkobee

It is because of the high property tax that I think will put a cap on the housing market increases.

Sorry, but you are conflating two things in a non-apples to apples comparison.

First off, ultimately, it should be net yearly "after tax cash in pocket" that is used for apples to apples comparison. On this basis, one would think a big majority of those who are moving here are making a net gain (otherwise, why move?)

Just focusing on property taxes alone though, it is still the net dollars that matters for those folks moving from the east and west coasts. While the rates are lower there, the dollars (in most markets) are relatively close (even closer when combined with the local portion of sales tax).

The cost of the government is the driver of the net local tax dollars that we pay.

The thing is that the biggest expense in running a government, schools, etc. are salaries and benefits. These are not radically different across the country. The only break might be in the cost of the property (but again we are talking new acquisitions only, a problem for high growth metros - but bond issued financing smooths these out). Other capital expenditures, such as cars, computers, etc. all cost nearly the same.

So, if we were to see a huge sustained decline in DFW housing prices, we will surely see an increase in property (and sales) tax rates. If we see outbound increases for some time, we will see (and have seen) a corresponding decrease in tax rates (though not in lock step, of course - but time lagged, as governments tend to want to keep some extra funds).

[biafra4life]

I think the problem affects different groups in different ways (blindingly obvious one there right). For people coming from the coasts, DFW is still a cheaper place to buy a home. Even if prices doubled here, you still get far more for your money (larger, newer homes in safe areas) at almost every price point than you would find in NYC or LA.

The problem is for those DFW native born, or folks who are not coming with a ton of equity from the coasts. For these folks, these 10% increases in home prices year after year are just unaffordable. Right now it impacts those buying homes, but very quickly you are going to see home owners who cannot afford the tax increases every year and will be forced out or become house poor. That is why I think if we continue in the boom for another 5 or 10 years, it's going to be an interesting conversation.

[Transplanted99]

Originally Posted by biafra4life

The problem is for those DFW native born, or folks who are not coming with a ton of equity from the coasts. For these folks, these 10% increases in home prices year after year are just unaffordable. Right now it impacts those buying homes, but very quickly you are going to see home owners who cannot afford the tax increases every year and will be forced out or become house poor. That is why I think if we continue in the boom for another 5 or 10 years, it's going to be an interesting conversation.

The underlying assumption is that prices will increase like they have for 5 to 10 years - maybe, but unlikely, especially at 10% p.a. - unless local governments suddenly decided to become a whole lot more restrictive in approving new developments (like they have on the coasts), or we see a "gold rush" of businesses relocating to DFW - not sure what would trigger that.

Another assumption is that incomes overall will stand still - they don't.

Yet another assumption is that tax rates will remain unchanged - they haven't, so no reason to assume that they would.

Those "not coming with a ton of equity" will still have other choices. Right now, DFW is in a sweet spot of affordability and job availability. If that changes, presumably people will choose other locations to relocate to.

Likewise for DFW born folks. It is no different than first home buyers (presumably, this is who you mean) on the coasts. It comes back to choices.

Those choices lead to a change in demand, which itself affects prices.