Advice to would-be Dallas homebuyers: Keep renting, economists say
Economists have some advice for potential home buyers in Dallas-Fort Worth – don’t buy it.
Given record home prices in North Texas, economists at two Florida universities tracking housing costs say it is better to rent here than pay for an expensive home.
In Dallas, Denver, Houston, Kansas City, and Seattle, residents are financially better off renting, according to a study by professors from Florida Atlantic University and Florida International University.
“Home prices have skyrocketed so quickly in these five metropolitan areas and the potential for short-term price drops is just too great,” said Ken Johnson, Florida Atlantic University real estate economist, in the new report. “There is strong evidence that home prices in these markets are well above their respective long-term price trends.”
In the current S&P CoreLogic Case-Shiller Home Price Index, home prices in the Dallas area rose 25% year-on-year.
A lack of homes for sale and thousands of people moving to North Texas have caused property sales prices in the area to rise unprecedented over the past year.
Regular nationwide housing studies by Florida universities have marked the Dallas-Fort Worth area as a market with overheated property prices. Analysts say D-FW’s real estate purchase cost is nearly 37% above where it should be based on economic fundamentals.
More than half of the apartments sold by D-FW real estate agents cost more than the asking price.
While the new study says that rents in D-FW outperform home purchases, tenants are not immune to the near-record-breaking inflation. Average home rents in the area rose 16% year over year in November, according to Richardson’s RealPage.
And the monthly costs for the latest D-FW apartments have increased by more than 20%.
Less than 3% of rental units in North Texas are vacant.
“Rents and house prices are rising to near-unprecedented levels, creating an affordability crisis,” said Johnson.
In the past two years, low mortgage rates have led many tenants to move into their own homes. But even with low financing costs, the rise in home prices has made home buying a challenge.
The cheapest homes – often the only choice for first-time buyers – have even tighter stocks than the rest of the market.
And investors are competing with buyers for D-FW properties priced below $ 300,000.