Homes in southeast Dallas are relatively affordable despite higher mortgage rates.

DALLAS – This story originally appeared in Dallas Business Magazinenews partner of the WFAA.

The doubling of mortgage rates over the past year and the surge in home prices amid the pandemic is a knockout combination for first-time homebuyers and low-income home buyers looking for an affordable home in suburban Dallas-Fort Worth.

Potential buyers looking for the most affordable homes in DFW should look to the southeast, Dallas Business Magazine home price analysis shows.

Even with house prices skyrocketing over the past two years, cities such as Forney, Terrell, Lancaster, Seagoville, Ferris, Hutchins, and Wilmer are offering relatively favorable prices compared to areas closer to downtown Dallas in North Dallas and in the suburbs of Dallas. north.

Due in large part to lower prices, home sales in the southeastern sector also continue to be strong.

In terms of sales speed, the Forney housing market was the hottest in North Texas and one of the state and nation’s best in home sales last year.

Zip code 75126, which includes Forni and surrounding areas, ranks fifth in the country for the number of houses delivered under contract within 90 days in 2022, according to a study by Opendoor. About 1,824 homes were sold in Forney in a three-month period, the highest number of sales in a three-month period last year in North Texas.

Of all the ZIP codes in the state, only Kathy and New Braunfels have surpassed Forney, according to Opendoor data. Katie’s 77494 zip code had 1,832 homes in a 90-day period last year, and New Braunfels’ 78130 zip code had 1,825 homes — just one more home than Forney’s.

Accessibility is an important factor in fast sales in Forney and other cities southeast of Dallas.

From January 2021 to January 2022, the median price of a single-family home in Forney increased by 20%, from $299,990 to $360,020, according to the North Texas Real Estate Information Service. This is a significant percentage increase, but the price of a house in Forney, which is 21 miles from downtown Dallas, is still significantly lower than in other large North Texas suburbs.

Head 12 miles east of Forney on U.S. Route 80 to Terrell and homes will become even more affordable. According to NTREIS data, from January 2021 to January of this year, the average home price in Terrell increased by 15.6%, from $224,950 to $260,000, including sales of used homes and new homes sold through DFW Multiple Listing Services.

Compare Forney and Terrell to the suburbs north of Dallas, with the same distance to the center of the Big D, and the difference in house prices will be significant.

From January 2022 to January 2023, the median home price in Frisco increased by 22.2%, from $531,500 to $649,300. The average price at Prosper increased by 19.7% over the same period, from $689,700 to $825,400. And at Little Elm, the median price rose 22.8%, from $350,000 in January 2022 to $429,800 in January 2023, according to NTREIS.

This means that a buyer of an average-priced home in Forney would pay about $289,000 less than an average-priced home in Frisco, $465,000 less than he would pay in Prosper, and $70,000 less than in Little Elm, where relatively low house prices are in the northern suburbs of DFW. A buyer choosing Terrell over Forney can add another $100,000 in savings on the price of a mid-priced home right away.

While the price tag is important, the math that matters most to DFW buyers looking for an affordable home is how their monthly mortgage payments stack up. This is where a series of rapid interest rate hikes by the US Federal Reserve that began in March last year made life difficult, forcing many potential buyers in DFW – and, indeed, across the country – to sideline.

The 30-year fixed mortgage rate, which fluctuates from week to week, was slightly above 3% in January 2022. The rate topped 7% at the end of October 2022 and has declined slightly since November to its current average of around 6.15%. dated 1 February.

For a $400,000 home with a 20% down payment, a 30-year fixed-rate loan at 3% would cost about $1,350 per month principal and interest. At 6%, the P&I mortgage payment goes up to $1,900 for a house at the same price—an additional $550 a month, even before real estate taxes, insurance, and other expenses.

The difference between the 3% rate and the 6% rate is an additional $205,000 in interest payments over 30 years alone on a $400,000 home.

Lower costs in Lancaster too

All this math shows that homebuyers can save several hundred dollars a month—even with a higher mortgage rate—if their starting point is lower. After all, there is little you can do to control your mortgage rate. But you decide which house you buy and the price you pay upfront.

And pricing in DFW, like in most major metropolitan areas, is largely driven by what is commonly referred to as Rule #1 in real estate, although it is often overlooked.

Place, place, place.

Not only in the county cities of Kaufman, Forney and Terrell, the difference in average home price can be a deciding factor for potential buyers on a budget.

For proof, look at other suburbs, usually southeast of Dallas.

From January 2021 to January 2022, the median home price in Lancaster, 15 miles from downtown Dallas, rose 18.3% from January 2021 to January 2022, from $245,000 to $289,900, according to NTREIS data.

The average price in Hutchins, located 12 miles on Interstate 45 from downtown Dallas, rose a modest 9.5% over the same period, from $237,400 to $259,900. In nearby Wilmer, the median price rose 20.6%, from $199,000 in January 2022 to $240,000 in January 2023, according to NTREIS.

Just below I-45 in Ferris, the median home is up 12.1% in 2022, rising from $288,900 to $324,000.

The median price rose from $230,000 in January 2022 to $275,000 this January, up 19.6% from Seagoville, 21 miles from downtown Dallas on Highway 175, according to NTREIS.