Dallas Fort Worth Area Homes and Real Estate

The deadline to close on a home purchase in order to receive the home buyer tax credit is looming.  Home buyers who executed a purchase contract by April 30, 2010 have until tomorrow to close on their transaction in order to qualify for the tax credit.  Buyers taking advantage of the "move up" tax credit get an extra day. 

And quite a few buyers did take advantage of this program.  I was lucky to close a few myself this month.  Fortunately, all of my buyers were able to close by the deadline.  They are all happy to be homeowners and also happy to be $8,000 "richer".

Which got me to thinking.  Why did these people buy a home?  They all wanted to own their own home for different reasons.  The real question was why they chose to buy the home THIS MONTH.  Was it just because the government was giving them $8,000?  Or would they have bought a home anyway and just chose to buy sooner because, all things considered, $8,000 IS a LOT OF MONEY!

Not surprisingly, all of them would have bought a home anyway.  In fact, one of them thought he didn't even qualify for the tax credit.  As it turned out, he did, which resulted in him moving up his original plan to close later in the year. 

Another buyer I closed last week is a teacher.  He would have likely waited until the summer to even start looking at homes since he would have been on summer vacation, plus his lease wasn't up until the fall.  Ideally, he would have closed sometime in August, taken a month or so to make a few improvements on the home and taken his time moving.  Instead, he started looking in late February, found a home in mid April and then chose to wait until almost the end of this month to close.  He had to pay a penalty to get out of his lease, but that penalty was a fraction of the $8,000.   

I would have done exactly the same thing had I been in his position. 

A couple of other buyers closed on new homes.  One of them passed on a builder that was unable to guarantee completion by the June 30 deadline in favor of another builder that had an inventory home that lacked a couple of minor features she really wanted.  Instead, she's going to have a contractor install those upgrades once she gets the $8,000 check in the mail. 

So that begs the question.  How did Peter and Paul fare with the homebuyer tax credit? 

Forgive the arcane analogy.  Paul is the second quarter of 2010.  I see him as the main benefactor of the tax credit because this guy named Sam "robbed" a guy named Peter to pay him.  Who is Peter?  He's the third and fourth quarters of 2010.  He's the guy who would have likely ended up with these transactions if the $8,000 had not been a factor. 

And who is Sam?  He's your favorite uncle. 

My point here is not to make an argument in favor of or against the tax credit.  I'll reserve that for another time.  My point is that many buyers who took advantage of the tax credit would have bought a home regardless; they just chose to buy a little sooner to get the $8,000.  

So how might this affect home sales and prices for the rest of 2010?  Or longer?  How many transactions that would have closed in the latter part of the year got moved up to the second quarter? 

We're already hearing news that home sales are starting to plunge.  

How long will the "hangover" from the home buyer tax credit last?

The Dallas, TX real estate market has remained very resilient throughout the recession and housing crisis.  Below are some real estate statistics and charts for single family home sales in the city of Dallas, TX from December of 2007 to December of 2009. 

The median home price of homes sold in the city of Dallas, TX decreased by 6% from $145,000 to $136,250 from December of 2007 to December of 2009.  The significant movements in this median home price are likely due to the shift in activity on a seasonal basis, plus the changing availability of mortgage products, especially for jumbo loans. 

The most significant decline was in the beginning of 2009 when the financial crisis escalated and many home buyers were paralyzed by market uncertainty, plus the normal decline in sales activity during the winter months.  Overall, the market has remained relatively strong, especially compared to cities in the "bubble states" like California and Nevada, where median home prices have declined by over 50% or more in some markets. 

Although I do not like to post "seasonally adjusted" data because I do not believe it shows an accurate picture of the market, I do think it is very important to compare changes in statistics, such as the median home price, to similar months for different years.  For example, comparing the change between sales from June of 2008 to June of 2009 tends to show a more accurate picture of the market versus comparing June and December figures because of the normal seasonal decline in sales between June and December. 

The average days on market for single family homes in Dallas, TX varies greatly from one month to the next, but is usually greatest in the winter months because of the seasonal slowdown in real estate sales.  The average number of days that homes sit on the market in Dallas, TX actually decreased slightly (by 3%) from December of 2007 to December of 2009. 

This next chart shows the median for sale vs. the median sold price of sold properties in the City of Dallas, TX from December of 2007 to December of 2009.  This data shows that while the median price of homes listed for sale has increased by 64%, the median price of homes that have actually sold has decreased by 6%. 

I believe this to be a direct result of the tougher market for jumbo loan products combined with the incentives for conforming buyers (such as the home buyer tax credit and the Federal Reserve mortgage-backed security purchasing program).  Both of these programs are slated to end in just a few months, which I suspect will result in a reversal of this trend to some extent. 

And below is the data for expired listings in the City of Dallas, TX from December of 2007 to December of 2009.  This shows that the number of expired listings has declined by 19% from Dec 07 to Dec 09, and the overall trend of expired listings seems to be on a decline. 

And the decline in expired listings certainly seems to match the trend we've seen in the total number of "For Sale" properties.  This chart shows a steady decline for the last two years, with a marked decrease occuring over the last year.  In total, the number of single family homes for sale in the City of Dallas, TX has decreased by 28% from December of 2007 to December of 2009. 

This is likely the result of decreased equity that many home owners have, which means they are not able to sell their homes, as well as a decrease in available financing compared with prior years.  This would also seem to reflect the general slowdown in the economy as a whole. 

The total number of single family home sales in Dallas, TX has declined steadily for the last two years, showing a total decrease of 19% from December of 2007 to December of 2009.  Again, this is likely due to the general slowdown in the economy, lack of available mortgage products and also some home owners that may be "upside down" on their current homes and unable to sell. 

And here's a chart that shows the total number of single family homes with purchase contracts in Dallas, TX from December of 2007 to December of 2009.  The trend seems to closely follow the number of closed sales (above), but there is a slight gap that appears to be widening during some months.  The difference in sold homes versus homes that are under contract to sell represents all contracts that have fallen out due to financing problems and buyers who terminate due to other reasons, such as those that are unable to negotiate repairs with the seller.   

This market data was provided courtesy of MarketMetrics.  The data is believed to be reliable but I cannot guarantee its accuracy.   In addition, sales of "by owner" properties, as well as some MLS sales where the buyer and seller opted out of disclosing the sales price are not included in these figures.

Interactive Map Showing Dallas/Fort Worth Area Home Prices and Statistics for 3rd Quarter of 2009

The Dallas Morning News published an interactive map today showing the performance of the Dallas / Fort Worth area real estate market for the third quarter of 2009 compared to the second quarter of 2009.  This interactive map, broken down into the various MLS numbered areas, shows various data about home values and the Dallas real estate market, including:

• The number of home sales.
• The percentage change in the number of sales compared to the previous year.
• The median home price.
• The percentage change of median home price compared to the previous year.
• The median number of days on the market.
• The median price per square foot.

Their source for this data was the North Texas Real Estate Information Service, which is the company that manages the MLS system that all realtors use to input home listings and home sales prices.   It's important to note that some of these numbered MLS areas overlap into different cities and parts of town. 

This data does not include homes that have sold "by owner", nor does it include home prices of homes that were "Z'd out" in MLS by home buyers and sellers.  "Z'd Out" is a term used by real estate agents when the sales price of a home was not disclosed in MLS.  Texas is a non-disclosure state, which means that a buyer and seller can opt-out of publicly disclosing the sales price of a home in the MLS system if they both agree. 

THE NUMBER OF HOME SALES IN THE D/FW AREA

• While it appears that every single area had a decrease in home sales compared to the previous year, some areas fared better than others.  Frisco showed only a 4% decrease in the number of home sales, while Far North Dallas, Westlake and Kaufman county only saw single digit declines.
• The highest percentage decrease in home sales were the Wilmer-Hutchins area, followed by the Park Cities and Sunnyvale area.  All three had a decrease of greater than 30%.  The Grapevine area also posted a 28% decrease.

THE MEDIAN HOME PRICE IN THE D/FW AREA

• Some areas of the D/FW area actually had either small increases or saw no change in the median home price from Q3 2008 compared to Q3 2009.  Overall, Westlake showed the largest increase in median home price at 14%, followed by Duncanville at 7%, while Arlington and Ellis County showed median home price increases of 4% and 3% respectively. Cedar Hill, Garland, Richardson, Wylie, Euless and Denton County all increased by a modest 1%.  Areas that posted saw no percentage change included Far North Dallas, Northeast Dallas, Colleyville and Grapevine. 
• Areas that saw modest price declines of only 1% were The Colony, Northwest Dallas, Grand Prairie.  The Sachse-Rowlett area dropped by 2%.  The highest drops in median home price included Wilmer-Hutchins, which dropped by 35%, Oak Lawn and Southeast Dallas, which saw decreases of 23% and 17% respectively, as well as North Dallas and Park Cities, which both saw declines of 13%.  The declines in Wilmer-Hutchins and Southeast Dallas were likely due to the high number of foreclosures and general oversupply of homes, whereas North Dallas and Park Cities likely decreased because of the lack of financing available at their median home price range, which is generally above both the Fannie Mae conforming loan limit, as well as the FHA loan limit for this area.  Oak Lawn likely suffered because of declining prices in some condos, as well as some of the areas priced above the loan limit for traditional financing.

Overall, the Dallas real estate market is still performing very well compared to many of the bubble states, such as California, Nevada, Arizona and Florida, which saw enormous inflation in real estate values for many years in the late 1990's and early to mid 2000's.  Although prices in many areas of Dallas did post increases during these same periods, the median home price to median income ratio never rose to levels anywhere close to the bubble states. 

While this data can be very useful, it does not tell the whole story.  Real estate values can fluctuate significantly even between individual neighborhoods and subdivisions.  Ultimately, appraisers determine market value by the sales price of comparable homes that have sold within a short distance from the subject property within the last three to six months.  The individual characteristics of a home, as well as the specific market demand in the neighborhood, have a significant impact on the appraisal value of a home. 

DALLAS MORNING NEWS INTERACTIVE REAL ESTATE MAP