The Real Estate Market

Residential real estate prices have fallen and sellers ask "has it bottomed out yet?" The answer is no. A glut in available homes coupled with a downturn in homeowner purchasing power is a recipe for a market slump.

Flat wages and increased costs of living for transportation, utilities, and food have made it harder for North Texans to justify a mortgage commitment at the prices of yesteryear. In Tarrant County, a mortgage payment higher than $1,200.00 is beyond the means of most people. Yet the new home construction continues (typically priced at $150,000.00 or higher), adding to the oversupply problem.

The factors in North Texas leading to this crisis:

• overbuilding;
• speculation in the real estate market;
• the aggressive marketing of risky mortgage products, including interest-only and adjustable rate mortgages;
• the refinancing boom of 2002-2006, resulting in a reduction in home equity;
• a flat or falling job market in most sectors; and
• increases in consumer costs in transportation, food, and utilities

In short, this is an excellent time to be a buyer or a renter, but I would only recommend purchasing a home in this market to someone who plans on living in the home for at least the next three to five years.