How the rules for DFW homebuyers have changed

The bad news for potential home buyers is that houses in most markets across the country, including Dallas-Fort Worth, are becoming increasingly unaffordable as prices rise at a faster pace than household income, mortgage lending expert Anna DeSimone says.

On the brighter side, over the past few years, federal housing finance agencies Fannie Mae and Freddie Mac have launched a series of mortgage initiatives that were modeled for the financial capacity, cultural and demographic characteristics of today’s consumer. Coupled with state and local programs, buyers have a bigger arsenal of tools with which to take on the soaring prices than ever before, DeSimone said in an interview with the Dallas Business Journal.

“The year 2020 will be a demographic turning point in real estate finance,” DeSimone said. “People are spending half of their income to cover housing costs, and they need to find out about all possible money-saving solutions.”

An affordability gap exists in 91 percent of the United States according to a housing index that compares average home prices to income, said DeSimone, the former owner and founder of Bankers Advisory, a mortgage compliance audit and consulting firm, and author of more than 40 best practice guides for mortgage industry professionals.

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For example, the average in home in the Dallas-Fort Worth metro area is $275,000. The index measures the amount of money a person would need to earn if they bought that house at $275,000 house with a 20 percent down payment and financed it at the prevailing interest rate.

According to DeSimone’s calculations, a homebuyer in DFW would need to earn $74,000 a year to buy that house. The median income in DFW is $67,400.

The shortage of affordable new and existing homes is a problem not just in DFW and Texas, but nationwide, and is especially severe in California, the South and Southwest, DeSimone said.

It all starts with a shortage of new homes, she said.

“We have an inventory problem because construction costs are higher in America. The cost of construction has changed to meet the sustainability and environmental requirements of programs,” DeSimone said. “What we have is a shortage of homes for starter, first-time homebuyers.”

The inventory shortage also has to do with seller reluctance, she said. Homeowners, especially baby boomers, are holding on to their homes longer, reluctant to downsize.

“People are afraid that they’re not going to have an affordable home for their next phase,” she said.

“There is a big segment of the population that wants to trade up,” she added. “They bought these starter homes 10 to 12 years ago and now they want to trade up, but what’s happened is, there is a gridlock between the median price of people living in their first starter home and the cost of premium homes.”

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