For a while now in Dallas, water cooler or bar-side conversations with new homeowners have sounded the same: the process took forever, their first and second and third choices were snapped up by people who paid over asking, and eventually they learned to work fast and bid aggressively on the homes they really wanted. In other words: the market has been hot. But, according to the Wall Street Journal, a different story is starting to emerge—particularly in some of our region’s booming suburbs.
In a piece out this morning, the WSJ hones in on Collin County to explain a national slowing of the housing market alongside an otherwise strong economy. Home prices here have risen faster than wages—even amid the run of corporate relos—and now we have buyers who can’t keep up. More:
Yet even with the booming growth, Dallas’s once vibrant housing market is sputtering. In the high-end subdivisions in the suburb of Frisco, builders are cutting prices on new homes by up to $150,000. On one street alone, $4 million of new homes sat empty on a visit earlier this month. Some home builders are so desperate to attract interest they are offering agents the chance to win Louis Vuitton handbags or Super Bowl tickets with round-trip airfare, if their clients buy a home. Yet fresh-baked cookies sit uneaten at sparsely attended open houses.
A lot of this has to do with just how quickly prices have grown in recent years. Or, as the WSJ says it, the degree to which affordability has gotten “out of whack with historic norms.” At a median price of $235,000, a house in Dallas costs up to 50 percent more than it did in 2007.
The result: Zillow classifies the Dallas market as “cold.” Plano, McKinney, and Allen are each rated cold, as well, while Frisco earns a “very cold” distinction. You can play around with that for yourself here.
The WSJ talked to a couple who bought a house early this year when the market “felt extremely hot,” and then struggled to sell their previous home when they listed it a few months later in May. By then, mortgage rates had risen. In mid-October, they sold for $16,000 less than their original asking price.
The rising mortgage rates will naturally cause home-seekers to rein in their price points, another reason some of these brand new homes in Plano and Frisco are struggling for interest.
As mortgage rates rise, buyers increasingly look for less-expensive homes. That is pushing builders further out to the fringes in search of lower-cost land where they can try to build more homes priced at $300,000 or less. The median price for a new home in Dallas has dropped by some $3,000 this year compared with last year, according to Metrostudy, which suggests builders are building at lower price points.
That can be a risky strategy after the heat has already started to come out of the market. During the last downturn, it was precisely those exurban neighborhoods that got hit the earliest and the hardest as buyers migrated back to more desirable neighborhoods when prices fell.