Chart of the Week: Home Price Affordability

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By Walter Bialas

JLL Research took a look at home affordability and how it has been changing in support of understanding where Legacy / Frisco is going in response to high job growth .

This is no surprise because it is in the news often – home prices have been rising fast here in Dallas/Fort Worth, with numbers like 8% to 10% annually commonly quoted. The chart below shows the median home price increase since 2013 for the core counties and the northern suburbs.

home-price-affordability-10_21_16

On the one hand, for all the rising net worth’s, we are still at all-time low interest rates, which is helping buoy affordability right now. This MSN link illustrates select markets and where affordability stands.

For our market, even though home prices are low compared to many larger metros around the US, a gap is forming between income and price. In the northern suburbs, homes have increased 41% in the last three years. Although incomes have risen, they have not done so at the same pace. Using, what I believe to be a more “normal” measure of affordability (3 to 3.25-times income), there is now an income shortfall of $20,000-$24,000. That will only widen as all the jobs flow into DFW over the next two to three years.

So, what does this mean? Quite simply, home buyers, especially those in the high-demand northern suburbs, will have to –

  • move farther out to see the affordable home prices,
  • buy a home of lesser quality than what they would have in the past, or
  • accept the higher prices, spending a greater proportion of their income on housing.

This last option is, in my opinion, where it may end up. We’ll be monitoring and update you on our findings.

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