D-FW homebuyers can thank lower mortgage rates

Real estate prices in North Texas have more than doubled since the Great Recession.

But home buyers spend less of their income on home buying than they did more than a decade ago.

How does this work? It’s because of the insanely low mortgage rates.

Dallas-Fort Worth homebuyers are spending just over 18% of their income on housing this year.

But in 2008, when the Great Recession hit, homebuyers gave up more than a quarter of their household income, according to a study by Realtor.com. And in 2018, D-FW buyers still needed more than 20% of their salary to be able to afford to buy a home.

While home equity has skyrocketed during this period, mortgage rates are less than half what they were in 2008, which has softened the blow of higher home prices

Plus wage increases over the years have brought more income to buyers.

“Several factors will help homebuyers stop paying more than they can afford in 2021, but one thing stands out: mortgage rates remain near all-time lows,” Realtor.com economist Danielle Hale said in the new report. “By keeping monthly payments in check, low mortgage rates give Americans more purchasing power in the face of record high house prices and fierce competition.

“Recent data suggests that despite rising home prices, home ownership will still be more affordable for the typical household in 2021 than it has been in previous periods,” said Hale. “But today’s competitive housing market dynamics can still put pressure on buyers to over-spend.”

A mid-priced home in North Texas is now selling for about $ 350,000. In 2008, the average home cost was just over $ 144,000.

But mortgage rates are currently averaging around 3% on a 30-year loan, compared to the average mortgage rate of almost 6.5% in the summer of 2008.

The dramatic decline in home financing costs has mitigated the impact of record housing costs in North Texas and most other US housing markets.

Despite the price increases, Dallas residents spend their income on home purchases than in other major US markets.

In California’s major markets, households spend more than a third of their income on home purchases. And in Miami, home buying takes home nearly 27% of people’s salaries.

Of the largest US markets, Houstonians spend the lowest proportion of their wages on home purchases at just 16.5%.

While mortgage rates have remained near record lows for more than a year, the dramatic increases in home costs since 2020 have seen buyers adding more to their income. In 10 of the largest metropolitan areas, buyers spend a higher percentage of their income on home than they did a year ago.

And as the Federal Reserve signals that it will raise interest rates over the next year, mortgage costs are expected to rise, requiring homebuyers to dig deeper to build a roof over their heads.

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