100,000 More Dallas-Fort Worth Homes Just Became Affordable

Record low mortgage rates are boosting affordability

The 30-year fixed mortgage rate, the most popular loan product, set new record lows at least 14 times during 2020. By year-end, mortgage rates fell to levels lower than when the government started tracking them in 1971. This is good news for homebuyers in the Dallas and Fort Worth housing markets, whether you are an investor or looking for a place to call home. 

79,000 more homes became affordable to households earning $50k/year

​Lower rates result in lower monthly payments. Thanks to these lower payments, more houses became affordable compared to just one year ago. In 2020, 79,000 more homes in the D-FW area became affordable to households making $50,000 per year. Similarly, in 2019, 67,000 new homes became affordable. 

Two out of five of the newly affordable houses are in areas with  strong fundamentals

Many of the newly affordable homes are concentrated in Garland, Mesquite, Irving, Grand Prairie, and the City of Fort Worth. ​Many of the homes are in areas on strong footing, with 42% of the total (33,000 houses), located in areas that score a 6 out of 10 or higher on our Locate Alpha Homeowner Index. This index is heavily weighted on school scores, crime rates and access to amenities. Some homes do even better, with 14% of of the total in areas scoring 7 out of 10 or above.

There are opportunities for investors too. 77% of these homes were in areas scoring a 6 out of 10 or higher on the Locate Alpha Long-Term Investor Score, which is heavily weighted on rentability: access to jobs, and potential for cashflow.

106,000 more houses became affordable to households earning $70k/year

​Similarly, for households earning $70,000 per year, 106,000 more houses in Dallas-Fort Worth became within reach in 2020, thanks to lower mortgage payments.

Of those, three out of four are in hot areas

​For those buying homes on the Dallas side of the Metroplex, newly affordable opportunities entered the scene in areas such Allen east of US 75, parts of Little Elm, Carrollton. On the Fort Worth side, they appeared in areas like Saginaw and Arlington. Many of the homes were in neighborhoods with strong fundamentals, with 72% of the houses, or 76,000 units, located in areas scoring 6 out of 10 or above on the Locate Alpha Homeowner Index. 43% scored a 7/10 or above. For investors, 54% of the homes scored a 6/10 or higher for long-term investment.

What about rising prices?

​For those following the Dallas real estate market, lower rates have contributed to rising prices in many parts of D-FW this year. In doing this analysis, we assumed prices in previous years were the same as they are today, in order to properly isolate the effect of interest rates from rising prices. This helps us show that there has in fact been a net gain in affordability.​

The inventory challenge

However, the challenge remains that inventory is very low, and while many houses are affordable based on their value, the ones that do get listed on the market are snapped up faster than ever before. This requires you to be vigilant and responsive, ready to snap up the right opportunity when it appears. Read more about falling inventory in our article here.

Our assumptions:

We calculated the PITI required for every house in the metro area, based upon prevailing 30-year fixed mortgage rates for each year, valuations of the houses at present, and a debt-to-income ratio (DTI) requirement of 25% for a house (which allows some room for other debts that may take it up to 35%, generally the higher end of what is acceptable for lenders). Also a 25% down payment is assumed. If assuming a 20% downpayment, total houses involved are 6-10% lower, but the change from year to year is about the same. Conventional, conforming loans only. Other programs are not taken into account.