Seth Fowler: The End of Affordable Housing as North Texas Knows It

“Eli’s coming..Eli’s coming…Well you better hide your heart, your loving heart…Eli’s a-coming and the cards say… a broken heart.“

Yes, I am going to compare the Dallas-Fort Worth housing market to “Eli’s Coming” by Three Dog Night, a song about a womanizer on his way to breaking hearts. “Eli’s coming” also means that something evil or bad is on the way.  That “something” is the pending affordable housing crisis in the region.

There is an affordable housing crisis coming to the Metroplex (if not already here) and it has potential to drastically affect our cities, market, and economy in a bad way.

No this is not the crisis of 2007-2010 where loans were hard to get, prices dropped, foreclosures abounded, and inventory skyrocketed. It could be worse.

Throw Out The Term “Affordable Housing” Forever

This housing crisis is coming for the lower priced homes; homes that were previously called “entry-level homes” and “starter homes.”  Homes priced under or around $200,000. Recently the total number of single-family homes under $200,000 in MLS in the 13 counties that comprise the DFW Metroplex showed 1,852 homes.  For an area of over 7 million people, that’s not much.

Homes sold in the last 90 days using the same criteria revealed over 5,000 homes … MLS basically stops counting at 5,000.

So inventory is low, no big deal, right?  Wrong.  Inventory being at an all-time low for these “affordable houses” has a potentially damaging affect on the rest of the economy.

What if…

… a professional buyer, young family or empty-nester couple can’t find a home in their price range? They’ll stay put.

… a long-term renter doesn’t “get into” the home buying world? They won’t have any equity invested.

… inventory is low? Then homes are the market will be going for all-time high prices.

… a buyer can’t afford a $200,000 home because it now costs $250,000 or more because of demand? Then that seller won’t be able to buy the $350,000 home. Then that seller won’t be able to buy the $500,000 home … and it will continue to hurt the housing market at every single price point. We’ll call it trickle-up economics.

Eventually, buyers looking for a home they can afford will just give up searching. This could hinder the Millennials, companies, or other job seekers from moving to the Metroplex.  That’s when the economy becomes stagnant.

Sad But True

Unfortunately, this scenario rings true to many prospective buyers and real estate agents across the region. Today, homes under $200,000 don’t stay on the market very long.  Open houses look like flea markets. Bidding wars abound. Many home buyers are being squeezed out of the market. Forget using an FHA loan on buying a home, if a buyer isn’t coming strong with cash and offering over asking price then it’s a waste of time and paper.

Investors, entities, and internationals are buying homes with cash and don’t really care if the home appraises. Many just want to get money out of China or Mexico and rent the home for a number of years then sell it for a profit.

Eli’s Coming. What Can We Do?

While many think it’s great to have prices increase and competition, think about what will happen when an entire generation of home buying-eligible people spend all their money on monthly lease payments, don’t have any equity, and never can get into the home-ownership game.

Now that the problem has been identified, we need to figure out the solution. In upcoming parts to this series I will discuss potential issues and hopefully solutions.

Eli’s coming D-FW … it’s time to be proactive, creative ,and solution-oriented.

Well that’s all from Tarrant County this week, Dirty Readers. Remember, if you have comments, questions, or ideas for future stories – I’m always here to listen!  Bring it.

Seth Fowler is a licensed real estate sales professional with Williams Trew Real Estate in Fort Worth.  Statements and opinions are his own.  Seth has been involved in the home sales and real estate business in DFW since 2004.  He and his family have lived in the Fort Worth area for over 14 years.  Also, Seth loves bow ties.  You can reach Seth at 817.980.6636 or [email protected].