Texas housing market: Hate to burst your bubble, but we have a problem

Housing Prices in DFW and Austin Have Surged Dramatically

The last time the national housing bubble burst, Dallas-Fort Worth and the state of Texas emerged comparatively unscathed from the massive 2008 home price corrections and foreclosure wave that slammed most of the country, including other Sunbelt markets like San Diego, Miami, Phoenix and Las Vegas.

A big reason was that home prices in the Lone Star State didn't skyrocket in the early 2000s preceding the subprime-mortgage-induced smackdown by nearly as much as prices in California, Florida, Arizona, and Nevada. Texas hadn't partied as hard as its Sunbelt compadres heading into the crash, so its hangover wasn't as bad.

This time, Texas — DFW and Austin especially — may not be so lucky if the national housing boom is a bubble and a popping ensues, a new study suggests.  This time, housing prices in DFW and Austin, and to a lesser degree Houston and San Antonio, have surged, driven in large part by population and jobs growth spurred by companies large and small relocating to the state.

As of April 30, Austin was the second most overpriced housing market in the nation, and DFW was the 18th most overpriced, according to research by Florida Atlantic University.    The recent heavy demand for homes put buyers at a "major disadvantage," said Ken H. Johnson, an economist in FAU's College of Business. To have an offer accepted, buyers had to outbid multiple competitors, he points out.  Soaring prices fueled by the onset of the pandemic in 2020 and near-record-low mortgage rates have pushed the national housing market into a "crisis stage," and a reckoning is due, the Florida Atlantic researchers' latest report says.

On one hand, the reckoning will likely hit the areas of the country with the biggest run-ups the hardest. On the other hand, areas of the country with persistent inventory shortages and increases in population, such as Texas, Florida and parts of the Northwest, likely won't see as steep of declines in home values, the researchers say. 

• Dallas Business Journal, May 28, 2022