What bubble? Dallas-Fort Worth homes aren’t overvalued, Wall Street says

Fitch Ratings says DFW is one of just 3 U.S. metros with “sustainable” prices, citing rising wages, low unemployment

Fitch Rating's Jian Mao (Linkedin, iStock)
Fitch Rating's Jian Mao (Linkedin, iStock)

The North Texas housing market is hot, but not overheated — at least according to Fitch Ratings. The Wall Street firm’s latest report named Dallas-Fort Worth one of just three metro areas across the country with “sustainable” home prices, the Dallas Morning News reported.

That might come as a surprise to buyers. Median-priced homes in the metroplex sold for a record $335,000 in March, up 19 percent from a year earlier, according to the Metrotex Association of Realtors. Prices have jumped about 45 percent in the past three years, according to the Dallas Morning News. Homeowners, meanwhile, are also getting sticker shock from higher property tax appraisals.

Just last year, Fitch called Dallas-Fort Worth one of the nation’s “frothiest” housing markets, with home prices overvalued by as much as 24 percent. But its new report, which noted that homes are now overpriced in three-quarters of U.S. metro areas, indicates the Texas metroplex — along with Detroit and Las Vegas — isn’t one of them.

That’s due in part to the improvement of “Dallas’ fundamentals,” Fitch’s Jian Mao explained to the Dallas Morning News in an email, citing growth in the area’s rental market as well as rising incomes and decreasing unemployment.

“Nominal home price gains are declining, and when adjusted to ‘real’ home prices by adjusting for inflation, the home price gains are much lower,” Mao wrote.

Sign Up for the undefined Newsletter

By signing up, you agree to TheRealDeal Terms of Use and acknowledge the data practices in our Privacy Policy.

Metro area inflation was recently estimated to be about 9 percent, according to the newspaper.

More generally, the Fitch analysis warned that rising consumer prices and mortgage rates could affect affordability, lowering demand in most of the country and resulting in “a home price correction up to 9.2 percent.”

Nationwide, Fitch’s analysis pegged Seattle and San Francisco as the most overvalued housing markets, noting that “housing in approximately 46 percent of the metropolitan areas is more than 10 percent overvalued, compared to only 4 percent overvalued pre-pandemic.”

[DMN] — Cindy Widner

Read more