Bidding Wars and Slow Wage Growth Mean Scarcity of Starter Homes in Dallas

New analysis by Trulia confirms what we’ve been seeing all over Texas and the Dallas-Fort Worth region. Entry-level or starter homes priced in the median range, which usually falls below $200,000, are scarce. In fact, if you want to find a new home in the $200,000 range, it’s getting mighty difficult to impossible.

To measure the dearth of dedicated inventory for first-time homebuyers in the starter market, Trulia has launched the “Trulia Inventory and Price Watch,” which measures housing affordability along three market points: starter homes, trade-up homes, and premium homes.

Of course, you can see according to the map that Houston’s and Austin’s first-time buyer market is suffering, with Austin losing 82.9 percent of its starter homes in the past four years, whereas Houston has lost 74 percent. Dallas, by comparison, has lost 70 percent of its starter home inventory, with only 15.3 percent of the market consisting of starter homes as of first quarter 2016. This has been a huge problem for Millennials looking to buy in Dallas, forcing them into the pricey rental market:

Prospective first-time and trade-up homebuyers should consider that if the inventory of homes for sale continues to drop, finding a home will remain difficult. They likely will be faced with more competition for the few homes that are on the market, which can lead to bidding wars and homes selling higher than asking price. Sellers are in an increasingly better position to sell their home than in years past, but may have trouble finding another home to buy. Ultimately, premium home buyers will have a much better shot at finding a home, since over 46% of the listings in the last three months were in this segment.

We’re hearing from buyers and Realtors that many of the homes in the “starter” range are being snapped up by cash buyers and institutional investors, who are then flipping the homes at a breakneck pace. This leaves buyers with few options, seeking out Realtors who know insider baseball when it comes to affordable homes in Dallas.

One Realtor told me that if a buyer wants to find a home in Dallas in the $200,000 range before an investor, they either need a Realtor who is knocking on doors in their preferred neighborhood or they need to watch the obituaries. What’s your perspective on starter homes in Dallas and North Texas?