Jill Rooney found a house she liked with quartz countertops and wood floors in Mansfield, and immediately offered to buy it for $210,000.
That was $15,000 over the asking price. And it wasn’t enough.
“I went 15 grand over, and I thought for sure I had this house,” said Rooney, 39, a Mansfield High School teacher. “I even wrote a personal letter to one of the owners. She had been at the house when I visited it, and she had her baby, and we talked for a long time. She was so proud of the house. I thought we had made a personal connection, and we did, but it didn’t help.”
Rooney’s experience is becoming more common as North Texans deal with historically high residential property prices — which have risen to levels that make some question whether buying a Fort Worth-area home is still a worthwhile investment.
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The median sales price in the Dallas-Fort Worth-Arlington market has skyrocketed 33 percent in just three years and housing costs — once considered a bargain in Texas — are now comparable with other major metropolitan areas.
Rooney has made four unsuccessful offers on houses since October — each time for thousands of dollars over the sticker price. She has left her former leased home in Grapevine, and is living with her father in south Arlington until she can find a willing seller in Mansfield.
“I feel like I am a strong buyer. I have the 20 percent for a down payment, a conventional loan. I can move in at any point,” she said. “The market is just really tough right now.”
The median sales price of a home in North Texas is now $249,000, up from just $188,300 in 2014, according to the National Association of Realtors. A decade ago, before the Great Recession was triggered in part because of a nationwide mortgage financing crisis, the median price of a Metroplex home was $150,900.
And higher prices aren’t the only factor causing prospective buyers to slow their roll.
The new federal tax law that passed Congress last month and was signed by President Trump on Dec. 22 limits how much mortgage interest and property tax payments can be deducted from homeowners’ taxes, which could motivate some prospective buyers — especially those interested in higher-end homes — to rent instead.
“A lot of clients, just because of the property value questions, are not trying to borrow the maximum amount they could borrow,” said Carla Johnson, a real estate agent with Next Level Realty Group who sells homes across the region but specializes in the Keller/Haslet area. “They’re most concerned about being able to make a monthly payment.”
Sharon Carson began searching for a new home in the $250,000 to $300,000 range last summer, but every time she was ready to make an offer another buyer would swoop in and outbid her.
By the fall, she was second-guessing her choice of buying a house in the Dallas-Fort Worth area as an investment.
“They were selling so fast, if you saw something you liked and didn’t go see it on the same day, the next day it would be gone. That happened to me several times,” said Carson, who is in her 50s and works at a nonprofit in Dallas.
“My idea is to buy a home that I can retire in and live it, and in another year or so buy a second home and have a rental property,” she said. “But I don’t know if I can handle two (houses).”
Carson eventually found a terrific home in east Dallas. But real estate agents say her experience in struggling to find a home in her price range is becoming more common as residents deal with rising residential property prices in North Texas.
Experts say yes
Despite concerns about the housing market being too hot to handle in North Texas, those who follow the industry say buying a house is still a wise use of your money.
The Dallas-Fort Worth area is the second hottest housing market in the U.S. — behind only Las Vegas — and home sales in 2018 are expected to increase 6 percent, according to the National Association of Realtors.
North Texas is one of several metro areas in the southern U.S. that has enough job growth to justify the rising cost of properties, one expert said. The cost of housing is rising dramatically, but the demand for housing for new residents moving into the state ensures that plenty of prospective buyers will always be around — at least for the foreseeable future.
“It’s still relatively affordable for a family to get into a big home,” said Javier Vivas, director of economic research at Realtor.com.
“We can only predict so far into the future, but if you look at the next 12 months you’ve got a good economic foundation, and employment growth twice as fast as the rest of the country,” he said. “If you look at an investment for young people in particular you’re really buying into the neighborhood, and if it’s a fast-growing neighborhood in Fort Worth or Arlington those will be good investments.”
North Texas is projected to have the second-highest increase in home sales in the U.S. in 2018, behind only the Las Vegas area, according to a national housing forecast by Realtor.com. The Metroplex is projected to have a 6.02 percent increase in the number of residential retail sales and also a 5.57 percent spike in the price of homes for sale.
Nationwide, the forecast projects a more modest 2.5 percent growth in existing home sales as the supply of available houses for sale finally begins to catch up with demand.
The population is now 7.1 million in the 12-county metropolitan statistical area tracked by the North Central Texas Council of Governments, the region’s official planning body. That population is expected to grow to about 10.7 million people by 2040, according to council of government forecasts.
Over the next few years, residents whose incomes don’t steadily rise could find themselves pinched if housing prices continue to go up.
How much a family should spend on a home depends upon many variables — including whether applicants have children, large amounts of outstanding debt, etc. But one rule of thumb is that mortgage lenders will typically approve applications for mortgages equal to 30 to 35 percent of their pre-tax income.
Personal finance experts differ about whether prospective homebuyers should borrow that much, with some arguing that about 30 percent of after-tax income is a better ratio for most households.
Fueled by job growth
North Texas will have to continue its current home-building binge to keep up with growth, as roughly 100,000 new residents move into the region each year, many seeking jobs in the Metroplex’s growing employment base.
Tarrant County and southern Denton County not only generate their own jobs, with employers such as Schwab and Lockheed Martin recently announcing hiring plans, but also benefit from a spillover effect of development in other growing areas such as Frisco, Vivas said.
The Dallas-Fort Worth region is the ninth fastest-growing metro area in the U.S. based on rising home ownership levels, he said.
Nationwide, the supply of available homes for sale are expected to increase next year for the first time since 2015, holding down the cost of home prices to an average of 3.2 percent higher than in 2017.
Also, the inventory of available homes for sale nationwide has hit its all-time low, with only about a three-month supply of housing available, according to the Wall Street Journal. That trend could continue to push the cost of buying a home further upward.
As recently as 2010, a nearly 12-month supply of homes for sale was available.
The lack of inventory is even more striking in Tarrant County, which only has a 1.8-month supply of homes for sale, according to North Texas Real Estate Information Systems. Homes for sale in Tarrant County are staying on the market an average of only 34 days.
New tax burdens
Lawrence Yun, chief economist for the National Association of Realtors, is one among many experts concerned that changes in federal tax law could put a damper on growth in home sales in Texas and across the country.
He said portions of the new federal tax law approved by Congress could limit homeowners’ income tax deduction for property taxes and mortgage interest paid on a home.
The most dramatic effect will be on prospective buyers of high-end homes. For example, the new law allows home buyers to deduct interest payments on mortgages up to $750,000.
The new law also caps the amount of property and state income taxes that can be deducted at $10,000. Since Texas doesn’t have a state income tax, the overwhelming majority of residents likely won’t hit this cap.
For example, the owner of a hypothetical home valued at $400,000 in the Keller school district with a homestead exemption would pay $9,784.76, according to a Tarrant County online calculator.
“The higher-end market is getting an additional burden. That’s where there is some softness,” Yun said.
But overall, Yun said, states such as Texas with no state income tax will still be a more attractive place to buy a home than places such as California or New York.
“If the 5 to 6 percent of home sales growth was calculated before the tax changes, you may have to shave it to 3 or 4 percent growth,” he said.
Renting an option
Some people may opt to rent instead of own to avoid taking a hit on their income taxes, said Chris Salviati, housing economist for Apartment List, a consumer search service.
The median cost of a two-bedroom apartment in Fort Worth is now $1,140 a month, up from $970 less than four years ago, In Arlington, the median rent for a two-bedroom unit is now $1,200, up 9 percent in the past year.
Still, renting may be an option for North Texans who are in the market for a high-end home but don’t want the higher federal income tax.
The region has a short supply of multifamily housing, especially high-end apartments costing $1,900 a month or more, though many complexes are under construction, Salviati said. As a result, the escalating rent rates in Fort Worth and Arlington likely will stabilize in the coming years, making renting more of an option.
“It really depends upon your individual factors, such as how long you plan to stay, how much money you can put down on a house and the rate you’re getting on a mortgage,” Salviati said. “For a lot of people, they may expect to purchase homes and see a benefit, but it may not be as big of a benefit as they thought.”
‘I will be ready’
Carson eventually bought a home just weeks ago in east Dallas, though she had to make an initial offer about $5,000 above the listed price. And, she is postponing buying the second home for rental income, opting to build up her retirement savings and pay off her debts until the housing market cools off a bit more.
“I think the market will come down in a year or so, and when it does I will be ready,” she said.