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There’s a ton of things I need to update you on, important things that you need to know regarding what’s going on with the real estate markets – but the overall tone hasn’t changed of late. It’s still all about the interest rates.
What’s going on with the interest rates, where are interest rates going, and how does that affect you?
That’s ultimately what we’re going to be talking about more than anything here in this market update.
In general, D-FW is seeing price corrections in most markets.
So, from this time last year to today, we’ve been seeing anywhere from 10, to in some places, as high as 15% drops in average sales price lately.
Why? Because interest rates are rising…
So, in other words, if you had a home that was selling for $400,000 last year, it’s selling at a 10% correction this year most likely.
So, your price is probably going to be closer to $360,0000 now if you put it on the market.
Yes, we are still seeing price corrections.
And nobody wants to hear that as a homeowner. And I hate to deliver that news, but we are.
The good news though, is that you’ve probably owned your home for a while and understand that you still have equity in your home.
You still have seen price appreciation over the last few years, and you are going to continue to see price appreciation grow as we get through this little minor correction that we’re going to be seeing over the next few months.
And so really, what I have got to get to, is why are we seeing this price correction? And again, number one is because of interest rates.
It simply costs too much to make a move right now for most people. When you go from 3% and 4% interest rates to 7%, or as high as 8% now, people look at that and tend to want to stay still.
Like last week for instance. We had a Consumer Price Index (CPI) read come in, which is your inflation reading, and it came in a little high and a little hot than what we were hoping for. And so, we saw interest rates jump a little bit. And whenever that happens, we see a slowdown in the industry. It just gets more expensive to actually purchase a home.
So, what is happening, is 70% of Americans have a 4% or less mortgage rate right now and so they’re just staying put, and saying, “I’m not going anywhere,” or, “I don’t have to sell my house.” That’s what we’re seeing a lot of right now.
And, homes are sitting longer as well… But more than that, is people just aren’t listing their properties to sell at all. So, there’s nothing to buy out there right now.
And so, we’ve had this big standoff going on in residential real estate for about a month now of transactions not moving at all. It was June of last year when this all started out, and so now it’s been that long that real estate transactions have effectively been in negative territory.
In other words, real estate transactions have been in a recession for over a year now because people don’t have to sell and don’t want to sell in this current interest rate environment.
Typically, whenever we have a correction, transactions usually don’t slow down a whole lot because it creates a liquidity event where people have to sell.
Not in this case.
Like in 2009, you know, everybody’s losing their jobs. Well, everybody still has their jobs today. So, everybody is staying in their homes, they’re just deciding, “You know what, I don’t have to make that move.”
And that’s going to continue on until things naturally evolve out of this state – because at the end of the day, we are humans. We want change, we want to do things differently, we want new homes, bigger things, smaller things, a lot of downsizing going on or thoughts of downsizing, too…
So, we want change. And so, no matter what the interest rates are at, we’re going to get used to this new, new eventually and those that want change are going to get to where they’re making that move.
But, we just aren’t seeing enough of that right now.
And so, what ends up happening is the ones that do decide to make the move are ultimately going to have to lower their price expectations because the buyers are saying, “No, no, no, I’m not going to pay what you want. I can’t afford it anymore.”
Affordability in the Dallas Metroplex is, in fact, getting to be similar to the likes of Chicago.
That was a recent read that came out espousing that our market is even getting closer to that of New York’s in terms of affordability. There’s a great deal of demand and not a whole lot of supply.
And so, the buyers are saying NO. So ultimately, I don’t mean to be negative to our sellers.
We have a good number of sellers, we do a lot of listings here at M&D Real Estate.
But what we are is honest with ourselves and our sellers about the realities of this market we’re in.
When we list the property, the prices are going to have to come down from expectations of the past couple of years – and in fact, as we discussed, they are beginning to come down.
I think we’re going to see a little more of a correction into the next few months and that’s going to stimulate the activity in the market from where it’s at right now.
Everybody’s going to begin to adjust their expectations and the affordability part of it then comes back in to play.
The good news too, is that we actually have buyers in D-FW. This is one of the best markets in the country.
And I’m thankful for that. It’s not like the buyers left. What we see is whenever you price it right, boom, we’ll end up with an offer or multiple offers in some cases.
It’s true. If we go to the market at a good price with a good home, we’re still seeing multiple offers. So, it really is just a weird market right now.
Last year was when we began to see prices flatten out. And, that’s when we started seeing transactions drop.
We thought the world had fallen apart in real estate because everybody stopped moving because interest rates were too high, and it just didn’t make sense. But here we are still, in mostly unchartered territory right now, and still navigating through it.
Ultimately, the market always wins and the market is going to win with pricing.
And the prices are going to have to come down in D-FW to get the market moving back to more normal activity.
But, keep this in mind, even if you have to lower your price, you’re also seeing that on the purchase side as well.
So, you’ve got to understand that as a home buyer and seller, the different sides of the same coin.
Yes, you may lose a little bit on your sale, but you’re going to make that up on your purchase. You’re not going to be paying what you would have paid a year ago. It’s the same concept.
So hopefully, I’m guiding you through this right now. If you’re in the middle of that transaction, that process, hopefully this helps you gain some clarity and direction.
Another thing I want to add is that if you’re in a good spot where you are renting or the like and you want to buy something right now, you’re really in a good, good situation.
I would say your opportunity is going to come in the next six months.
Really, get out and make that offer. If you’re a buyer, make offers.
Even if it’s 100K below what asking price is… Just make the offers and you will be surprised.
It seems like every time we make one of these low offers right now, seller fatigue has sat in already and they’re thinking, “I have got to get rid of this. I’m done with this.” Or, they’re simply taking it off the market for now. One of the two. If they don’t need to sell right now, they won’t.
But it’s true, many sellers are out there making deals right now. So, I would encourage you, if you’re a buyer, send that offer out. You just never know.
So to sum it all up, the good news is we really needed a correction.
We could not sustain what we were doing for so long. And then of course, on the buy side, the good news is also that you’re going to see some relief over the next few months.
So that’s great for people wanting to purchase right now.
But of course, the bad news is your sale price may come down if you want to sell your property. But, you may not have to move it, maybe wait a couple of years. I would encourage you to do that, take it off the market, wait a couple of years, and you’re probably going to be in a better place by then.
But, really quickly, I want to do a breakdown of some of the main numbers we’re seeing across the region right now and show you what we’re looking at as far as housing prices and transactions today.
In Collin County, sales are down 3% year over year, and prices are down 4%. Dallas County is down 15% in closed sales year over year, and prices are actually up 2%. Ultimately, you have less new construction there, less inventory there. Collin and Dallas counties are still strong sellers’ markets. The outer counties that aren’t as developed are getting more months inventory right now, so that means getting closer to a balanced market where it’s easier to sell and buy in the outskirts.
Continuing on, Denton County is down 9% in transactions, but it’s up 2% in price year over year. Ellis County is down 19% in transactions and down 1% in price. Kaufman County is down 18% in transactions, and down 5% in price. Rockwall County is down 8% in transactions and down 10% on price — 10% in Rockwall County. Tarrant County is currently down 18% on transactions and down 2% on prices year over year…
Then for all Dallas-Fort Worth, transactions are down 13% from this time last year.
And that’s why we’re seeing so many title companies, mortgage companies, and agents leaving the industry, because there’s just no transactions to be transacted, and prices are flat year over year.
So, last month we saw that prices had fallen, and now this month they have flattened out.
So, that’s the market update, guys.
We’re in uncharted territory, and I really feel like there’s nobody better than M&D real estate to guide you through it.
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