The DFW housing market is NOT sustainable (Frisco, Comfort: good credit, hotels)

[Leonard123]

Originally Posted by Lorne

The cliental I'm referring to actually want to live here and settle down. They are not purchasing as rentals. And majority of them either have citizenships or are green card holders. They see themselves living here for the foreseeable future. As long as they are happy in their home and the area they live in, home price fluctuations does not matter to them. Not everyone views home prices like a stock ticker. They love this area and the future growth potential.

Why the sudden frenzy? Is this anything that hasn't been happening for a very long time already?

[Lorne]

Originally Posted by Leonard123

Why the sudden frenzy? Is this anything that hasn't been happening for a very long time already?

I wouldn't consider it as a sudden frenzy. They've been on the sidelines for a while since they wanted to avoid the ridiculous bidding wars in the previous years. They've reemerged since the market has soften and want their kids to be ready for school by the next school year.

[LocalPlanner]

A similar upsurge in sales activity, at least for new homes, is happening in the Houston area. Mortgage rates plateaued or softened, the recession hasn't happened (apart from primarily tech industry layoffs, and not so much in TX) and may not happen to any significant degree in TX, and people are just plain becoming used to this level of mortgage rates, which are not historically out of whack at all. Prices in some markets like parts of DFW also plateaued or softened (may be temporary if enough buying activity occurs). And folks are still moving to TX. All these things have brought an upswing in activity.

[mikestrong]

One the new home side, in January, my friend who works for a builder, had a goal in DFW of 89. They sold 190. In Feb, they have a goal of 94 and have sold 155 so far for the month. Sept-Dec the new home side slowed down considerably, but took off in January. I have heard this from friends at several builders. There do seem to be a lot of investors out, but its regular people too. Maybe some of the sticker shock has worn off with the rates being higher. Lots of the builders are paying for buydowns on loans which helps alot.

[Igor Blevin]

I think we have gone for FOMO to HIDMO. "Hey I Didn't Miss Out".

I still think they are buying too early.

[Lorne]

There's no point trying to time the market if you see a home and area that you love. Especially if you see yourself and your family living in that house for 10+ years. And if affordability is not an issue.

[Xalistiq]

Originally Posted by LocalPlanner

A similar upsurge in sales activity, at least for new homes, is happening in the Houston area. Mortgage rates plateaued or softened, the recession hasn't happened (apart from primarily tech industry layoffs, and not so much in TX) and may not happen to any significant degree in TX, and people are just plain becoming used to this level of mortgage rates, which are not historically out of whack at all. Prices in some markets like parts of DFW also plateaued or softened (may be temporary if enough buying activity occurs). And folks are still moving to TX. All these things have brought an upswing in activity.

Mortgage rates have not softened. As of today, they’re up, near 7% for a 30-year conventional:

https://www.nerdwallet.com/mortgages/mortgage-rates

Moreover, demand for mortgage applications continues to plummet. According to Market Watch:

“The purchase index — which measures mortgage applications for the purchase of a home — fell by 18.1% from last week.”

And

“Demand for purchase applications has plunged to the lowest level in nearly three decades, since 1995, the MBA said.”

https://www.marketwatch.com/amp/stor...-flee-e5abee6f

Last week’s disastrous CPI report, which saw services inflation surging, means the Fed will need to keep tightening well beyond their projected terminal rate of 5.1%. The Fed funds rate is currently floating between 4.5% to 4.75%, against a yet-again manipulated CPI of 6.4%.

It seems that national housing demand data does not corroborate the anecdotal reports of strong demand that those on this forum are reporting. Texas may very well be an outlier, but with consumer savings depleting and credit card balances surging, I do not understand how these astronomical home prices are tenable for the average consumer.

The “disinflation” narrative heavily being touted by the Federal Reserve, the mainstream media, and Powell himself on his braggadocios and premature victory lap, can be soundly put to rest. The most recent jobs report was shockingly strong and wages are going up too, which the Fed has been adamantly opposed to. This inflation battle isn’t anywhere close to being won.

[Kenro911]

Median income in Frisco is 120K. Now can someone walk me through on how does one purchase a home with no prior equity? Given that 120K gross is like 7K per month net with sensible deductions for health and retirement. 500K home with 10% down is a $4200 mortgage.

How does this work? Can a family survive on $2800 a month for food, med bills, cars, gas, repairs etc?

These days 120K HH income salary means nothing. It’s all about equity you got in the home - if you dont then suck it.

[Xalistiq]

Originally Posted by Kenro911

Median income in Frisco is 120K. Now can someone walk me through on how does one purchase a home with no prior equity? Given that 120K gross is like 7K per month net with sensible deductions for health and retirement. 500K home with 10% down is a $4200 mortgage.

How does this work? Can a family survive on $2800 a month for food, med bills, cars, gas, repairs etc?

These days 120K HH income salary means nothing. It’s all about equity you got in the home - if you dont then suck it.

And that $500k buys a much smaller, less desirable home with cheaper build quality and finish outs, compared against what could be had in 2020 or 2021, thanks to current high interest rates and high prices.

The destruction of buying power/rate of inflation/devaluation of currency since 2020 is frankly terrifying, and explains why more than half of $100k+ households report they are living paycheck to paycheck, according to a recent survey by PYMNTS:

https://fortune.com/2023/01/30/more-...inflation/amp/

With this level of inflation, a $120k household income without equity or a significant down payment will struggle to buy a $400k home (let alone a $500k home), as the cost of servicing a mortgage has more than doubled over the past 18 months.

Proportionally, how many first time home buyers earn $120k? Not many. $120k households represent the top 28th percentile of US (and Texas) households as of 2022 (https://dqydj.com/household-income-p...le-calculator/).

As of Q4 2022, the average home price in Texas stood at $345,000 (https://www.bankrate.com/real-estate...-market/texas/). Yet another example illustrative of how detached home prices are from fundamentals and also explains why mortgage demand has fallen sharply on an aggregated basis nationwide.

[Kenro911]

Originally Posted by Xalistiq

And that $500k buys a much smaller, less desirable home with cheaper build quality and finish outs, compared against what could be had in 2020 or 2021, thanks to current high interest rates and high prices.

The destruction of buying power/rate of inflation/devaluation of currency since 2020 is frankly terrifying, and explains why more than half of $100k+ households report they are living paycheck to paycheck, according to a recent survey by PYMNTS:

https://fortune.com/2023/01/30/more-...inflation/amp/

With this level of inflation, a $120k household income without equity or a significant down payment will struggle to buy a $400k home (let alone a $500k home), as the cost of servicing a mortgage has more than doubled over the past 18 months.

Proportionally, how many first time home buyers earn $120k? Not many. $120k households represent the top 28th percentile of US (and Texas) households as of 2022 (https://dqydj.com/household-income-p...le-calculator/).

As of Q4 2022, the average home price in Texas stood at $345,000 (https://www.bankrate.com/real-estate...-market/texas/). Yet another example illustrative of how detached home prices are from fundamentals and also explains why mortgage demand has fallen sharply on an aggregated basis nationwide.

Another thing to note that in car-bound states/places like suburban Texas. You will need a reliable car to make income per each working adult.

Used/New Cars and Insurance are through the roof. Its great if you bought a used car pre covid. Sooner or later they will fail and you will need to buy a newer one at insane cost and interest.

Thing is, this will all collapse later - not now or anytime soon. There are a lot of people who bought pre covid, locked low mortgage payment and take advantage of HELOC to supplement income.

Reality is that your 120K HH is either living in mcmansion or in an apartment struggling to make ends meet. While making same income. It will take a while to people lose that built up equity and low mortgage payments.

Perhaps we will transition to same lifestyle as in UK. Where your well being largely depends whether mum and dad left you a paid off home when they died. Because mortgage/rent will take up almost 3/4 of your income.

I mean there are people who bought in 2019 in Prosper for 500K (McMansion) which is now valued at 1M+ or was not long ago. Then went ahead and refi and locked ultra low interest in 2020. Some even decided to go for a mortgage holiday break which was offered. These people while on 120K HH or slightly above are doing absolutely amazing.

I literally financed my paid off car at 1.49% for 5 years during the craze. I’m literally making money on that loan given the inflation.