Dallas Housing Market Predictions: Hot Now, But Cooler in 2016?

Home prices in Dallas, Texas will probably keep rising through the end of 2016, but the gains might not be as steep as what we’ve seen in 2015. This is the general consensus among housing analysts and economists. Here are some more real estate market predictions for Dallas.

Price Peaks: Local Home Values Have Never Been Higher

Back in 2013, home prices in Dallas, Texas returned to pre-housing-crisis levels. In other words, they climbed back to where they were at the height of the bubble. And they’ve been rising steadily ever since. Last month, a widely cited housing report showed that Dallas home prices had risen to yet another all-time high.

Translation: House values in the Big D have never been higher than they are right now.

The question is, how long can this last? Will we see double-digit price gains in 2016, as we did in 2015? Not likely, say the economists. Most predictions for the Dallas real estate market in 2016 call for additional but more modest price gains. And to be honest, this market could use a little cooling.

Related: 5 of the priciest neighborhoods in Dallas

Prediction: Dallas Home Prices to Keep Rising in 2016

Dallas home prices rose sharply over the last couple of years, so much that some analysts were using the ‘B’ word — bubble. But the rate of appreciation seems to be slowing.

The economists at Zillow recently predicted that home prices in Dallas would rise by 5.8% in 2016, compared to a whopping 16% in 2015. This mirrors the general cooling trend that is happening in other markets across the country.

Like many cities in the U.S., the supply and demand situation in Dallas is starting to normalize. To be clear, there still aren’t enough homes listed for sale to satisfy demand — especially in popular neighborhoods. But the inventory crunch of the last couple of years seems to be easing. In December Realtor.com reported a 2.9% increase in the number of Dallas homes for sale, year over year. So there’s a bit more inventory today than the same time last year.

And speaking of Realtor.com…

Dallas One of the Hottest Markets Now, But Not Next Year

Each month, Realtor.com publishes a list of the “hottest” housing markets in the U.S. The report is based on various measurements including supply and demand for homes. Houses in these real estate markets tend to sell faster than in other cities.

In November, Dallas was ranked #5 on the hottest housing markets list. It was outranked by only four other U.S. cities — Denver, and three California markets.

But things might be different in 2016. In addition to looking at what’s hot right now, Realtor.com also publishes a list of markets to watch in 2016. And Dallas is absent from this real estate market forecast.

According to the company:

“Many of the markets that have consistently made our ‘hot list’ … didn’t make the cut for 2016, because they are predicted to see slower price appreciation and even declining sales. Notably, they include the greater metro areas of San Francisco, Denver, and Dallas.”

This is yet another housing forecast for Dallas that calls for smaller price gains in 2016. Granted, these are just predictions, so you shouldn’t bank on them. But when a lot of knowledgeable people are saying the same thing, there has to be something to it.

Threat of Rising Mortgage Rates Could Spur Home Buyers

Right now, there is a meeting of the minds among Federal Reserve officials. The Federal Open Market Committee (FOMC) is meeting over December 15 – 16 to discuss the current state of the economy and, more to the point, whether or not they should raise interest rates.

For years, the Fed has kept the short-term federal funds rate near zero to stimulate the economy. But improvements in the job market and other areas have changed their view. There’s a strong chance FOMC members will announce a much-anticipated rate hike soon.

What does this have to do with the Dallas housing market in 2016? Here’s what:

If the Fed raises the short-term funding rate, we will almost certainly see a corresponding rise in long-term mortgage rats. Some economists, including those at Freddie Mac, have previously predicted that mortgage rates will rise gradually throughout 2016. This will create a stronger sense of urgency among home buyers, which could lead to an upsurge in housing demand in Dallas (and elsewhere across the country).

After all, when home prices and mortgage rates are rising, it’s like a double-whammy for home buyers. It erodes their buying power over time. So Dallas home buyers who put off their purchases until later in 2016 could end up paying more for a house and a mortgage loan. Hence, the sense of urgency.

Disclaimer: This story contains predictions and forecasts for the Dallas real estate market in 2016. Such forward-looking statements should be taken with a grain of salt. They are the equivalent of an educated guess. This story cites predictions from third parties not associated with the Home Buying Institute. The publishers of this website make no assertions or guarantees about future housing trends in Dallas, Texas or elsewhere.