With North Texas home prices up by more than 10 percent so far this year, analysts are keeping a red flag on Dallas-Fort Worth’s home market.
New York-based Fitch Ratings says that DFW home prices are 10 percent to 14 percent higher than what’s sustainable in a just-released report.
The Wall Street ratings firm has been sounding the alarm about North Texas home values for the last two years because of the pace of rising prices.
Dallas-Fort Worth has seen some of the largest percentage gains in home prices in the country due to an economic boom that’s driven high demand for housing and a tight supply of properties for sale.
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“Dallas home prices are driven by solid income growth and low unemployment so the economy is certainly strong, but price growth is still just too fast,” said Fitch’s Grant Bailey.
Fitch analyzes home prices in 20 major U.S. markets for its quarterly report.
“Nevada has now emerged as the most overheated housing market year over year as per Fitch’s model, with home prices between 15 percent to 19 percent overvalued,” Fitch analyst Samuel So said in the report. “Home prices also rose rapidly in Western metro markets like Colorado, Oregon and Washington last quarter.”
Cleveland, Detroit and New York are the only markets on Fitch’s list that are still considered undervalued.
Home prices for the entire state of Texas are considered to be 10-14 percent ahead of what’s considered sustainable, according to the analysts.
When Fitch first raised concerns about Texas home prices in early 2015, the ratings firm said the state’s home market was overheated by about 11 percent.
Since then, the rate of price gains has moderated in Houston and Austin but there’s no sign of a slowdown in North Texas.
“In spite of the overvalued pockets, home prices nationally grew another 1 percent last quarter and are still growing at a rate of 3.5 percent annually,” Fitch reports.
DFW-area home prices are 55 percent higher than they were at the peak of the last housing cycle in mid-2007, according to the Case-Shiller Home Price Index.
And prices are 75 percent ahead of where they were at the worst of the housing downturn in 2009, according to Case-Shiller.
A recent report by Nationwide Mutual Insurance rated Dallas near the top of a list of troubled U.S. housing markets because of its soaring prices.