To start with, let’s go over some interesting facts from 2022 to kick off this market update.
Did you know that multi-million-dollar homes were the only thing up on sales for the year in 2022?
Sales were up 23% in D-FW for multi-million-dollar properties. Why is this? Because we have a lot more million-dollar homes than we used to. And, the price appreciation has changed our million dollar market to where we even have to redefine what a luxury home is – it used to be $750,000, now it’s got to be a million or more easily.
Also, Dallas-Fort Worth Home Prices were down 10% from June’s peak in 2022 as of December. This was for the whole metroplex.
Price appreciation slowed much more than 10%, however.
If you look at it year over year, single family homes were only up 6% in the whole D-FW Metroplex – whereas a year ago, they were up 30% year over year
So, we’ve been talking about this month after month, about how we are going to need to get into the single digits before we would really begin to see the market pick up in activity and move again as far as transactions are concerned.
And, we’re there! Lo’ and behold, we came into the first part of the year and now we are beginning to see a big increase in transactions finally.
However, I think it will come in waves of activity simply because there isn’t enough inventory still.
Another interesting fact. D-FW Condo sales for 2022 fell 48%, which is a massive drop in activity. Townhome sales fell by 17%, and the median price for a condo was up 9%, and median price for townhomes were up 6%.
So, we’re seeing a lot of prices falling now. Have they fallen enough is the big question? I don’t think they have quite fallen enough. They are getting closer. If we could get more inventory, I could be more confident about whether they need to fall anymore.
In the market last year, we saw a pause in transactions essentially, including a 30 to 50% decrease in closed sales depending on the area. Buyers got priced out of the market with interest rates going from 3 to 7% and activity stopped.
But the truth is, which we can see now and knew then, they are not out of the market completely. Because what we are seeing is when the homes are priced at the correct market price, there is still fundamental demand and those homes go under contract quickly.
People are still flocking to the D-FW Metroplex. We have some of the hottest zip codes in America here – and U-Haul just put out their report saying that the majority of people are moving to Texas.
The demand is here, we just need affordability which was what the Fed was working to do. So, if we see prices come down just a little bit more, we will get back to more normal activity as far as transactions are concerned.
For interest rates, we expect them to stabilize around where we are at now.
Right now, we are at 6.46% for the national average on a 30-year mortgage.
We expect it to basically just go up and down a little throughout the year in 2023. It has moderated as inflation has begun to come down. We hopefully won’t have to have more aggressive policy on interest rate hikes in 2023 if that trend continues.
I don’t expect interest rates to go much lower this year – but to probably keep bouncing around between 6 and 7%. So that’s what we can look forward to for 2023.
The biggest bear in the room, however, is inventory. We’re beginning to see sellers start to come to the market and listings pick up somewhat already this year. But, Dallas-Fort Worth had a decline of 38% in new home construction. That’s the biggest decline since 2009 percentage wise. We still have an inventory problem.
And, this is still a seller’s market because now we are building less homes – and this is because builders have to pull back to get construction costs down, labor costs down, and then be able to get back into the market and compete at lower prices.
It’s a big shift in our market – longevity wise, it is good. Price appreciation was out of control. I am excited as a broker to see prices coming down and transactions pick up.
We are not only seeing sales prices come down, but we are also seeing rents coming down. We are noticing in our Property Management Division that if we lower that price point by just a little, the market comes to us and we get those homes rented immediately – it’s just about affordability.
But the good news is, buyers and renters are still here. With the huge growth in D-FW, and businesses moving here, that pendulum is not going to shift backward anytime soon.
If you look at this chart above, according to the Dallas Morning News, you can see the bigger picture of what’s going on across North Texas. Key in especially on the price and year over year percentage increase or decrease.
We are actually seeing some price correction in the Rockwall area, which is at -1% according to this data. So, we are in the single digits on price appreciation, and it’s not a surprise that due to that, we are now seeing more movement in the market.
The biggest reason why we are seeing more activity is this chart – it is because prices have come down. When things are priced right, no matter what market you’re in, it will sell. So now it is actually the sellers getting used to the price.
We had buyer fatigue, which you heard about often, where buyers get tired of the market conditions. But right now, we are actually starting to see some seller fatigue. Sellers now are fatigued, wanting to sell, they’re done. They are ready to make a move.
Rockwall is actually down 4.4% according to MLS year over year. Kaufman County is up 3.7%, Hunt is up 1.6% and Dallas County is down 1%.
So, we are seeing flattening out and even corrections now on price appreciation from December 2021 to December 2022. The consensus is that the price corrections won’t continue in a huge way or be too strong.
An indicator of this is that we have already seen activity picking back up with where we are now on price.
If you are listed on the market right now, you are probably frustrated because Days on the Market is way up.
It is up 60% in Rockwall County, 106.3% in Kaufman, 75% in Hunt and 46.2% in Dallas County.
We were at such low levels that we are actually just getting back to a more normal Days on Market if you look at the chart and compare it back to pre-Covid times.
This is the big bear again. We are trying to get to pre-Covid levels here and are getting closer.
Three months inventory is still a strong seller’s market. It’s 4 to 6 months for a balanced market.
We don’t seem to get there because every time we do get price adjustments, a wave goes under contract and inventory goes down again.
December was down but from what we are seeing in January so far, new listings are picking up and coming on to the market.
Pending Sales into January 2023 are down 43.2% in Rockwall County, down 35.2% in Kaufman, 5.2% in Kaufman and 32.6% in Dallas County. So, these are huge drops in transactions still leading into January is what this data shows.
These were also down across the board about 30% except for in Hunt County, which was down about 18%.
Closed Sales will still be down, but I do believe we will see a bump in activity coming into the new year.
We do a lot of business here at M&D and we really are seeing things start to move more since Jan. 1.
A very interesting number to look at is Average Percent of Original Price.
Last year, we were getting an average of 104% over-asking price on homes.
As a buyer, you don’t want to pay 6% interest rate and high prices…
So, the difference now, is you are getting 92% of list price in Rockwall county.
So, you are 10 percent or more off list price in all of these counties.
For buyers, if you measure apples to apples, you might be paying higher in interest rates but your price is significantly lower than what you were paying before, which offsets that increase completely and you may even be coming out better.
What we are telling all of our buyers right now is this… Make offers. Make offers. The owners are ready for offers – they are in seller fatigue. Nothing is selling for list price, so get out there and make those offers and see what kind of traction you can get.
And overall, I do think we will have a better transactional market this next year. There may be a small correction in prices to just more normal levels of price appreciation.
As always, M&D Real Estate is here to help you with your real estate needs and questions however we can.
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