Published: September 16, 2022
By: Danny Perez
So, where are we in the housing market currently? We are still in the middle of a shift, a hard shift. So let’s dig in and take a look at exactly what’s going on right now.
The median price of homes in Dallas-Fort Worth was $415,000 in the month of August, up 15 percent year over year from August of last year. With that, we are beginning to see the price appreciation slow down, which is what we need for the consumer, the buyer – and the seller even — to be able to have an opportunity to buy a home at a reasonable price.
Price appreciation has gone down from around 30 percent to now at 15 percent, and I really believe it needs to move another 10 to 12 percent to get to a more normalized price appreciation, where you get that 3 to 5 percent year over year appreciation.
And I think that’s what we are going to have to see before we see the market move again in a strong way.
The good news is that inventory is rising, and prices are coming down.
Looking at our local market here, at the price drops, we have been averaging in our area about 30 price drops per day and today, in the last 24 hours, it was 101 price reductions on homes. That’s good news for the buyer and even for the seller. Sellers might not want to lower their price but if you’re planning on making a move, you will make it up on the buy side because you will realize that lower priced as well.
We have to get the prices down in order to offset that new 6.2 percent interest rate on the average mortgage right now. Prices have to come down in order for us to get the market moving and to see more buying activity.
We expect we’re peaking out on interest rates between this 5.5 to 6.25 percent range. We’ll probably just see things fluctuate back and forth within that range in the coming months. The federal reserve has plans to raise interest rates again, but typically the market has already built in what those rates are going to be. If anything, I think we will see lowering of interest rates as inflation comes down.
But speaking of inflation, we are starting to see more inventory across the board – in car lots, houses, everywhere you go. For instance, inventory of homes is up 68 percent in the Dallas-Fort Worth Metroplex. Homes sales have dropped, car sales have dropped, people are being offered more incentives on financing. It’s all moving in the right direction. The same for homes sales. Home sales have dropped 10 percent year over year. And in fact, home sales in Collin County have dropped a whopping 20 percent year over year.
Rents right now are higher as well. Rent prices are 14 percent higher year over year. So those are also beginning to moderate. Whereas before it was 20 to 25 percent price appreciation, now it’s down to 14 percent. We manage a lot of properties in our property management division of M&D Real Estate, and we are even making some price adjustments on rentals. However, there is still high demand.
Because fundamentally, the DFW Metroplex is just going to keep moving up and forward. The reality is that our metroplex will continue to appreciate over time, barring any geopolitical catastrophe in the market of course.
So, we are seeing rents moderate, home price appreciation come down and inventory go up. This is all good and going in the right direction. Because truthfully, things were out of control regarding the price appreciation the past two years, so interest rate increases are doing exactly what they were supposed to do, which is slowing things down. Being in real estate, I don’t like that for business purposes, but I do know it’s better and healthier over the long-term for the housing market.
Now let’s look at a county by county breakdown of the numbers.
Starting with the average price of homes right now, in Rockwall County, homes prices are currently up 18 percent, up 15 percent in Kaufman County, up 19 percent in Collin County and up 27 percent in Hunt County. For Hunt County, we are still seeing pretty significant price appreciation because of the demand for that lower price point.
Price Per Square Foot is up as well, all around 20 to 26 percent. And again, we really need to see this at 5 percent appreciation before we see the market pick back up again. Rockwall is up 21.5 percent, Kaufman up 21.2 percent, Collin is up 20 percent and Hunt County price per square foot is up 25.9 percent.
For Average Number of Days on the Market, these are up 100 percent. But it is still just 30 days in Rockwall, 32 in Kaufman, 23 in Collin and 33 in Hunt County. So, we are still at only 30 days on the market, which is still a very strong seller’s market.
Months Supply is also up, but we still won’t be out of this seller’s market until we are at least around 4 months of inventory and beyond to move to a more balanced market. And the last 3 months, we have just been hovering around 3 months of inventory because there is still just so much demand out there even in this high price, high interest rate environment. Rockwall Months’ Supply of Inventory is up 93 percent, Kaufman up 55 percent, Collin up 109 percent and Hunt County is up 52.4 percent.
So that is the shift, being up 100 percent nearly in inventory. That’s what we call a shifting real estate market.
Looking at Number of Homes For Sale, this is up 100 percent as well, twice the amount of homes for sale as last year. Not that there was a lot of homes this time last year, but it’s still coming up, which is good. There are 97 percent more homes for sale in Rockwall, 65 percent in Kaufman, 75 percent more in Collin and 72.7 percent more homes for sale in Hunt County than there was this time last year. More homes for sale is good.
New Listings are only up 18 percent in Rockwall, 10 percent in Kaufman, .3 percent in Collin and 13 percent in Hunt County. We really need to see this come up some more, to help finish this shift out. The shift will be prolonged it if we don’t see more new listings.
For Pending Sales, Rockwall is flat at -1.7 percent, Kaufman is down 9.6 percent, Collin County is down 19.5 percent and Hunt County is down 10.7 percent. So, we are seeing less transactions and closed sales.
Closed Sales are down 4 percent in Rockwall, 5 percent in Kaufman, 20 percent in Collin and 5 percent in Hunt County.
So, in general, for your residential market update – you’re going to begin to see opportunities if you’re looking to make a move. For sellers, it’s hard to reel in expectations and maybe you aren’t getting 30 percent price appreciation. Maybe it’s 5 to 10 to 15 percent, but you still have all that equity over the last two years you have built up. When you go to make a move, you’re going to realize that lower price on your home purchase.
For interest rates, you’re seeing more incentives from new builders offering 4 percent finance rates, they’re buying down the rates… But be careful because you pay for that buy down in the price of the home. So, you may be better off to pay 6 percent to another builder that isn’t offering a buy down because you’re paying less on the price of the home.
We are still in the midst of the pause, the hard shift, but things are moving in the right direction to create a more balanced market where we will begin to see more transactions. For Dallas-Fort Worth, price appreciation is here to stay but perhaps not at the levels we had been seeing the past couple of years. This should provide some relief for buyers and get the market moving again soon once price drops continue to happen and inventory continues to rise. Transactions and prices are down in D-FW, but the demand remains strong and this market will continue to balance out leading to increased activity.
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