Dallas Home Price/Income Ratio Edging Higher: Housing Getting More Expensive Here

We’ve known this was happening for awhile: it’s becoming harder, if not impossible, to find a housing bargain in most of the largest cities in our country. I’m talking San Fransico, Seattle, New York City, and LA.

Real Estate expert and consultant John Burns tells us the ratio of median home prices to median household income exceeds historical averages (since 1981) in 20 of the top 21 housing markets. Burns is chief executive of Irvine, CA-based John Burns Real Estate Consulting, which also has an office in Dallas.

The big news is that our Dallas home price-to-income ratio is up to 3.1, from a historical average of 2.7.

We know median sales prices of existing single-family homes here are up about 10 percent from a year earlier. That’s the highest home appreciation Dallas has seen in 20 years, or maybe ever.

Jim Gaines, an economist for Texas A&M University’s Real Estate Center doesn’t think that pace will slow a bit in the fourth quarter and next year.

The average U.S. home price-to-income ratio is 3.7, up from a historical  3.1. Of course the California and west coast averages are higher in four California markets. Dallas is still below the national average, whereas Atlanta was the only one of the top 21 housing markets whose ratio actually dipped below its historical average.

My concerns, of course, are what will this to the the middle class if Dallas continues to see home price increases? Already middle-class home buyers are struggling to find affordable homes on the market what with rising prices, higher interest rates, and flat incomes limit their choices. A Trulia study found that more than half of homes for sale in 14 of the 100 largest metros were out of reach for middle-class home buyers. The real estate company based affordability rates on a monthly payment — after a 20 percent down payment as well as taxes and insurance costs — that was less than 31 percent of the metro area’s median household income. We know much of California real estate is untouchable, but even in Boston, middle-class buyers now can afford only 41 percent of homes on the market, down from 53 percent last year. In Denver, they can afford 55 percent of the market, down from 70%. Seattle has dipped to 55 percent affordability from 66%.

Consider this: in Orange County, CA only 23% of the middle class can afford homes there, down from 44 percent. That’s less than a quarter!