DALLAS — This story originally appeared in the Dallas Business Journal, a WFAA news partner.
The doubling of mortgage rates over the past year and the run-up of home prices amid the pandemic is a knockout combination for first-time and lower-income house-shoppers seeking an affordable home in the suburbs around Dallas-Fort Worth.
Prospective buyers hunting for the most affordable homes in DFW are well-served to look to the southeast, a Dallas Business Journal analysis of home prices shows.
Even with the sharp ascent in home prices in the last two years, cities such as Forney, Terrell, Lancaster, Seagoville, Ferris, Hutchins and Wilmer offer relative bargains compared to neighborhoods closer to downtown Dallas, in North Dallas, and in the suburbs to the north.
In large part because of the lower prices, home sales continue to be robust in the southeast sector, too.
In terms of speed of sales, Forney’s housing market was the hottest in North Texas and one of the top performers in the state and nation for home sales last year.
The 75126 ZIP code, which includes Forney and surrounding areas, ranked fifth nationally in the number of homes that went under contract within 90 days in 2022, according to research from Opendoor. Some 1,824 homes went under contract in Forney within three months — the highest number of sales in a three-month period last year in North Texas.
Of all ZIP codes statewide, only Katy and New Braunfels outperformed Forney, according to the Opendoor data. Katy’s 77494 ZIP code had 1,832 homes go under contract in a 90-day period last year, and New Braunfels’ 78130 ZIP had 1,825 homes do so — just one more house than Forney.
Affordability is a huge driver of the speedy sales in Forney and other cities southeast of Dallas.
From January 2021 to January 2022, the median single-family home price in Forney grew 20%, from $299,990 to $360,020, according to data from North Texas Real Estate Information Services. That’s a hefty percentage increase, but the home price point in Forney, which is 21 miles from downtown Dallas, is still significantly below that of other major North Texas suburbs.
Head 12 miles east of Forney on U.S. Highway 80 to Terrell, and the homes are even more affordable. From January 2021 to January of this year, the median home price in Terrell grew 15.6%, from $224,950 to $260,000, according to the NTREIS data, which includes sales of pre-owned homes and new homes sold through DFW Multiple Listing Services.
Big price differences
Compare Forney and Terrell to suburbs north of Dallas with a similar-distance commute to the heart of Big D, and the difference in home prices is substantial.
From January 2022 to January 2023, the median price of homes in Frisco grew 22.2%, from $531,500 to $649,300. The median price in Prosper grew 19.7%, from $689,700 to $825,400, in the same period. And in Little Elm, the median price grew 22.8%, from $350,000 in January 2022 to $429,800 in January 2023, according to NTREIS.
That means a buyer of a median-priced home in Forney would pay roughly $289,000 less than they would for a median-priced home in Frisco, $465,000 less than they would pay in Prosper, and $70,000 less than in Little Elm, which has relatively low home prices for a northern DFW suburb. A buyer who chooses Terrell instead of Forney can add $100,000 more to the savings on the price of a median-priced home, right off the bat.
While the price tag is important, the math that matters most to DFW shoppers searching for an affordable house is how their monthly mortgage payment stacks up. That’s where the U.S. Federal Reserve’s series of rapid interest rate hikes starting in March of last year has complicated life, forcing many would-be buyers in DFW — and indeed, nationwide — to the sidelines.
The rate for a 30-year fixed mortgage, which fluctuates week to week, was slightly above 3% in January 2022. The rate topped 7% in late October 2022 and has trended downward slightly since November to its current average of about 6.15% as of Feb. 1.
For a $400,000 home with a down payment of 20%, a 30-year fixed-rate loan at 3% would cost about $1,350 per month for principal and interest. At a 6% rate, the mortgage payment for P&I shoots up to $1,900 for the same price home — an extra $550 per month even before property taxes, insurance and other costs are tacked onto the tab.
The difference in a 3% rate and a 6% rate adds up to an additional $205,000 in interest payments alone over 30 years for a $400,000 house.
Lower costs in Lancaster, too
All of that math goes to show that homebuyers can safe several hundred dollars monthly — even with a higher mortgage rate — if their starting point is lower. After all, you can't do much to control your mortgage rate. But you do get to decide which house you buy and the price you pay up front.
And pricing in DFW, as is the case in most major metro areas, largely comes down what is commonly referred to as the No. 1 rule in real estate, though it is often the most overlooked.
Location, location, location.
It isn’t just in the Kaufman County cities of Forney and Terrell where the difference on a median-priced home can be a dealmaker for prospective buyers on a tight budget.
For proof, look at other suburbs generally southeast of Dallas.
From January 2021 to January 2022, the median home price in Lancaster, a 15-mile commute from downtown Dallas, grew 18.3%, from $245,000 to $289,900, according to the NTREIS data.
The median price in Hutchins, 12 miles down Interstate 45 from downtown Dallas, grew a modest 9.5%, from $237,400 to $259,900, in the same period. In neighboring Wilmer, the median price grew 20.6%, from $199,000 in January 2022 to $240,000 in January 2023, according to NTREIS.
A little further down I-45 in Ferris, the median home rose 12.1% in 2022, going from $288,900 to $324,000.
Swinging over to Seagoville, 21 miles from downtown Dallas on U.S. Highway 175, the median price grew from $230,000 in January 2022 to $275,000 this January, for a 19.6% increase, the data from NTREIS shows.