Large Number of Texas Home Buyers Priced Out of New Home Market

Why does Texas have the largest number of home buyers priced out of the new home market? What are the Fed’s plans for the interest rate? We look at this and more in this week’s roundup of real estate news.

$1,000 INCREASE ELIMINATES MANY FROM NEW HOME OWNERSHIP

Texas has the largest number of homebuyers that would be priced out of the new home market if the cost increased by $1,000, the National Association of Home Builders said last week.

Nationwide, a $1,000 increase would push 127,560 prospective buyers out of that market, while in Texas, it would push out 11,152 households, more than California at 9,897.

That threshold is met when, based on income, those households would not be able to qualify for a mortgage after a $1,000 price increase.

“The numbers are even more startling when looking at the impact of potential interest rate increases,” said the NAHB. “Just a quarter-point rise in the rate for a 30-year fixed-rate mortgage would price out around 1 million households.”

“This study illustrates how even a relatively small increase in price or interest rates can dramatically impact housing affordability,” said NAHB Chairman Randy Noel. “Rising interest rates, regulatory barriers, higher building materials costs, and labor shortages all add to the cost of a home and are preventing households from achieving the goal of homeownership.”

HOUSING INVENTORY RISING YEAR OVER YEAR IN DFW 

While the North Texas housing market still isn’t at the healthy six months of inventory experts say shows a balanced market, November marked an increase in inventory year-over-year for most Dallas-Fort Worth counties, according to data from the Texas A&M Real Estate Center.

Overall, the Dallas-Fort Worth-Arlington MSA decreased slightly from October’s three months of inventory to 2.9 months, but November 2017 had inventory at 2.3, showing a steady climb in inventory.

Tarrant County also decreased ever so slightly from October’s 2.4 months to November’s 2.3, but again, year over year, inventory increased half a month from 1.8 in November 2017.

Collin County was down in November from October 2018, from 3.6 to 3.5, but up compared to November 2017, where was at 2.6 months.

Dallas County remained unchanged from October at 3.0 in November, but is up from November 2017, when inventory was at 2.2 months.

FEDERAL RESERVE SIGNALS SLOWDOWN ON INTEREST RATE HIKES

Interest rates may not rise as quickly as previously thought, according to a CNN report of the latest Federal Reserve meeting.

“Despite earlier commitments to steadily lift rates above their historic lows, discussions among policymakers at their last meeting in December showed growing wariness amid signs of a weakening global economy, according to minutes of the Fed’s December meeting,” CNN reported.

Although the economy is healthy so far, with a string of strong job gains months, market volatility has increased, and worries over the economic impact of a continued shutdown loom.

“The Fed has so far penciled in two rate hikes in 2019, but Chairman Jerome Powell said in remarks in Atlanta last Friday that the central bank is ready to change course ‘significantly if necessary,’” the network said.

The Fed raised rates for a fourth time in 2018 at December’s meeting, raising the federal funds rate — which impacts the cost of mortgages and other credit — to the 2.25 percent to 2.5 percent range.