Rising Mortgage Rates Slowing DFW Housing Market

Mortgage Rates Increase | Image by Shutterstock

Property showings have slowed, inventories are rising, and first-time homebuyers are feeling the pinch in North Texas, according to the Dallas Business Journal.

“About a year ago, you could get a 30-year mortgage just north of 3%. Now a 30-year mortgage is just north of 5%,” said Kent Lugrand, CEO of Plano-based InTouch Credit Union.

“With the average home prices in DFW, that could mean the difference of $500, plus or minus $100 or so, in a monthly mortgage payment,” Lugrand continued, adding that reduced mortgage application numbers are cutting into InTouch profits.

“The rising interest rates have had a slowing effect on the number of applications we’re getting and the number of homes we’re seeing sold,” he added.

Clare Losey is an affordable housing expert at Texas A&M University’s Texas Real Estate Research Center (TRERC). She said rising mortgage rates drive potential purchasers out of the market and are particularly hard on first-time buyers.

Prospective homebuyers are experiencing rising monthly mortgage payments and increasing income requirements to qualify for a home loan.

“As mortgage interest rates increase, purchasing power declines, and households must earn more money to purchase the same-priced home,” Losey said.

The average 30-year mortgage rate in the United States has increased by more than two percentage points over the last year. As of June 7, the average rate was 5.09%, up from 2.96% the previous year.

Losey analyzed first-quarter data for 2022 and found that buyers needed an income of about $59,000 to qualify for a 3% loan on a $229,000 home. She noted that if rates climb to 5.5%, that income requirement jumps more than $10,000 to $70,891.

A 5.5% interest rate means that the income needed to qualify for a loan rises from $10,000 to $70,891, Losey found.

Losey estimated that only 30% of the state’s renters could afford those sale prices at a 5.5% rate. By comparison, about 39% of Texas renters could pay the state’s first-quarter sale prices at 3%.

DFW home prices have also seen an increase. Median home prices rose 3.5% in the last month and 17.8% over the previous year, according to Realtor.com.

This is the fifth consecutive week that the number of active listings in the housing market has climbed, indicating that sellers are eager to cash in while the market is hot. Before April, the number of active listings had fallen each week since March 2020.

At the same time, DFW home showings are on the decline.

Dallas-Fort Worth homes had 14.3 showings per listing in April, which is still relatively robust, according to showing management and marketing stats firm ShowingTime.

Showings per listing in DFW fell 11% from March to April and 9% from April 2021, according to the latest data from ShowingTime.

Overall, U.S. buyer demand fell by 10.7% in April, year over year. Fort Worth’s 14.3 showings per listing placed it 10th in the country.

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