Is There a Bubble In Dallas Housing Prices? Zillow Senior Economist Says Nope

There’s no doubt that Dallas-Fort Worth is one of the hottest real estate markets in the U.S.

Zillow recently named it No. 3 in the country, noting a 4 percent unemployment rate and solid income growth. Additionally, the Zillow Home Value Forecast predicts the Dallas-Fort Worth median home value will go up by 5.6 percent in 2016.

But some housing analysts and mortgage insurance companies fret over the 6 percent increase in North Texas home prices over the past six years. They wonder, could this be another bubble?

Probably not, according to Zillow senior economist Aaron Terrazas.

“Dallas looks pretty good compared to so many other parts of the country,” Terrazas told the Dallas Morning News‘ Steve Brown. “We don’t have anything artificial right now inflating the housing market—the lending standards remain fairly tight.”

In 2015, the value of all homes across the U.S. increased $1.1 trillion, growing 4.1 percent over the past year, according to Zillow. At the end of 2015, they conducted a fourth quarter Zillow Home Price Expectations survey, asking more than 100 economists and real estate experts about their expectations for the national housing market and 20 large local markets nationwide in coming years.

The most optimistic quartile of panelists said they expected U.S. home values to rise 4.7 percent next year, while the most pessimistic quartile predicted growth of 2.3 percent in 2016.

So if Dallas-Fort Worth is predicted to see a 5.6 percent increase in median home value, it’s no wonder some are experts are asking about a bubble. Some parts of the country, like Las Vegas, as still recovering from the last one.

But Terrazas says he doesn’t see the signs here.

“Texas still looks very affordable—median home value in Dallas is something like 20 percent below the national median,” Terrazas told Brown. “Median income is bout 10 percent above.”

Terrazas previously worked as an economist in the U.S. Treasury Department’s Office of Economic Policy, and was in town this week to check out our housing market. He noted the slump in shale prices isn’t affecting North Texas like other parts of the state, like Houston and West Texas.

“Dallas is actually the least oil dependent market in Texas—if your story about economic diversification is true on the ground, that’s a good sign,” he told Brown.

So what’s in his immediate forecast for North Texas home prices?

“I don’t believe we will have a bubble-bust dynamic—I think a gradual deterioration of affordability will slow things,” he said. “Now, more than ever, it is important not to overpay.”