Is D-FW in a home price bubble? A Dallas Morning News Opinion Article


Researchers warn of a potential Dallas home price correction as housing costs soar. North Texas home prices were up 18% year-over-year in April.(Vernon Bryant / Staff Photographer)

By Steve Brown:46 AM on Jun 3, 2021 With so many people overpaying for Dallas-Fort Worth housing, what could possibly go wrong? More than 30% of North Texas homes are selling for more than asking price, with buyers sometimes forking over $100,000 or more than what the houses are listed for. That has landed the Dallas area on a list of cities “prone to a market downturn,” according to a new report by Florida researchers.

“Home prices are escalating quickly in Dallas and a handful of other U.S. cities where consumers would be better off financially by renting and reinvesting the money they would otherwise have spent on homeownership,” the study by professors at Florida Atlantic University and Florida International University says. The researchers looked at home prices in 23 U.S. metro areas in the first quarter for their report. The bottom line is that “Dallas is one of the U.S. metros where it made the most sense to rent in the first three months of 2021,” the study found. “Consumers also were wise to rent and avoid the overheated housing markets in the following areas: Denver, Houston, Kansas City, Miami and Seattle.” All of the cities have seen huge run-ups in home prices during the last year. “Scores for these areas suggest they are the most exposed to price corrections in the event of a real estate downturn,” Ken H. Johnson, a professor and real estate economist at Florida Atlanta University who is coauthor of the study, said in a statement. “Buyers are bidding up home prices to near peak levels.”

The median home prices in North Texas are now at record levels of more than $325,000, rising 18% year over year in April. That’s the highest rate of home appreciation on record for the area in decades.

The Florida researchers said many consumers are buying houses in today’s market because low mortgage rates allow them to purchase. “But the nation’s housing market would take a hit if rates rise,” the study said. The Florida universities have been doing the housing studies since 2013. The index looks at home prices, rents, mortgage rates, investment returns, property taxes, insurance and home maintenance costs in each market. Nationwide home prices are rising at the fastest rate in 15 years, according to the latest reports by CoreLogic. Wall Street firm Fitch Ratings has red-flagged the Dallas-Fort Worth area as one of the most overheated residential property markets in the country. Fitch estimates that property prices in the D-FW area are overvalued by 15% to 19%. “Home prices in Texas are following most of the rest of the country where supply has not kept pace with demand,” Fitch analysts Suzanne Mistretta said in an email. It’s not the first time analysts have warned that D-FW home values are out of whack. For several years analysts, have said that North Texas home cost increases are outstripping consumers’ abilities to keep paying more.

But so far buyers have shrugged off those concerns in a scramble to buy houses that increased during the COVID-19 pandemic. D-FW home prices have soared in the last year because of a severe shortage of properties on the market. The situation has been made even worse by tens of thousands of people relocating to North Texas from out of state during the pandemic.


Some buyers who are desperate to acquire housing acknowledge that they are overpaying for properties.


Steve Brown, Real Estate Editor. Steve covers commercial and residential real estate in Dallas-Fort Worth. stevebrown@dallasnews.com @SteveBrownDMN