Home prices in the suburbs are way up over the last five years.

Real Estate

The WSJ Hones in on Collin County to Illuminate the Sputtering Housing Market

DFW's rising home prices could be catching up with us.

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.

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Comments

  • Albert Gores

    Housing Bubble 2.0 starting to explode just like the same one. Anyone not see this coming? A decade of articially FED-suppressed low interest rate combined with QE1-QE3, QE to infinity, and Operation Twist has blow bubbles of massive sizes and know they are all exploding at once. You got housing bubble, bond bubble, stock bubble, cryptocurrency bubble, etc. The only thing that didn’t go up are the 99% wages as we shipped all our jobs to China!

  • Jared Hylton

    I could have told you this was going to happen as soon as Toyota of North Am moved in, as well as a ton of Californians with more money in their bank accounts stashed (because you HAVE to save for a home in CA for like 25 years) than should be legal!! They came and paid CASH MONEY, flat value with 0 negotiating, because they thought the prices were too good to be true!! Then the developers got those dollar signs in their eyes, got greedy, and now everyone will suffer for it. Some people will have an intense amount of negative equity in their property values soon, but the taxes WON’T be dropping much, but the home prices surrounding sure will. Comps in the area can go back YEARS, so you can always sell a $125,000-300,000 home up there, and not even need to take into account over 2/3’s of an area that paid close to $700,000 or more. That was just stupidity, on the part of everyone. No one did their research, everyone drove these home prices to a break-neck level, and now watch all the foreclosures and homes sit for YEARS after this all starts to TRULY unwind. This is JUST the beginning. I watched this happen in California, and have seen entire swathes of neighborhoods go to almost 100% foreclosure status, because everything was overpriced to begin with.

  • DubiousBrother

    What percentage of the homes bought over the last decade went to hedge funds or investors as opposed to occupants?

    • Phil

      Very very few in this market.

      • Jared Hylton

        Agreed, there aren’t many investor-held properties here, and most places are trying to put STR bans in place to make sure no more come to town.

  • Phil

    Rumors of the Dallas housing market’s demise have been greatly exaggerated. However, there are lessons to be learned. We’ve talked about a coming affordability crisis for over a year. A combination of labor, lumber (tariffs) and local regulation have all contributed to its arrival. Cities that embrace density and affordability will reap the benefits, those who don’t will “sputter.” Demand is still strong, but not everyone moving here is a CEO relocating from the west coast. If we don’t learn from the policy mistakes made in other markets, we are bound to repeat them and suffer a similar fate.

    • Jared Hylton

      Greatly exaggerated how? We already have an affordability crisis here, just with the RENTAL markets alone! This is only going to make it worse, while also pulling home values down in the process, and putting people at a negative equity stance on their mortgages that will take decades to right itself. This is probably the worst imaginable scenario for a place that hasn’t seen much wage growth until the last 2 years, and has had WAY too many people flood into the area. There’s simply no more space, anywhere, that’s affordable where you can commute to a job daily and not break the bank. It’s almost impossible to get anywhere unless you take toll roads, which they are only adding more of as well, AND raising existing rates!! This is like the perfect storm, man. This will hurt everyone, in Texas and across the nation. Frisco was the #1 market for 2018, so for it to be slowing down is….frightening at the bottom end, and on the top end….I don’t even wanna think about it.