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There are so many moving dynamics in our market right now. Predicting the market and trying to understand the market is nearly impossible right now. But, I’m going to do my best based on what I know from running a real estate firm, doing a lot of transactions personally, and then from pulling all of the most recent data we have from the North Texas Real Estate Information System (NTREIS).
To summarize, we are at the end of a real estate market cycle right now and hitting the hyper-supply side of the cycle. One of the problems we’ve had in DFW is not enough housing inventory, i.e., not having enough supply of homes for sale. And in every market cycle, before the start of a pricing correction, there has to be a hyper-supply.
So, we’re beginning over the last three to four months to see that phase of the market cycle, hyper-supply, begin to happen.
So, the question is, what’s the next thing that happens?
Always, in every cycle, the next part is that prices then must adjust. The question is, how much will they adjust?
Well, that depends. Back in 2008-2009, we saw huge price adjustments downward. I don’t believe we’re in that type of cycle today because we have a different economy here in North Texas right now. So, we’ll be insulated to some major price correction barring any huge catastrophe politically or in our stock markets.
However, we are beginning to see signs of a slowdown as a nation in our economy – where the consensus is that we’ll see a recession in the next six to nine months.
How does that affect you as a seller or buyer?
Real estate has actually been in a recession for two years now. The rest of the economy hasn’t seen that yet. Interest rates have just now begun to slow the rest of the economy down.
So the residual effect is you start hearing about layoffs and unemployment going up. And we have been hearing more about the market softening lately. The unemployment rate has inched up to 4.1 or 4.2% as of the last read as well. And that is the biggest indicator into the recession to come.
How big will it be? Nobody knows. Personally, in my opinion I don’t think it will be anything huge. But, there has to be a normal market cycle and it will have to run its course before the real estate market will get out of a recessionary environment.
What always has to happen is prices have to fall next. Probably by double digits. We’ve seen some price depreciation year over year and month over month lately. But it hasn’t been much. Just a few points at most.
We will most likely need to see prices correct to the double digits to get the real estate market operating at normal levels again.
So how do you as a buyer and seller capitalize on this market we’re in right now?
After all, that’s what these market updates are about – guiding you through the current environment. So, to answer your question on, “When do I sell?” or “When do I buy?” Here is my answer.
Ideally, you think, “I want to buy a house when the recessionary environment comes into play because there will be more distressed sales.”
But the issue with that is as soon as prices correct in DFW, you’ll most likely be coming into a lot of competition because there’s not enough housing here. Especially with so many people moving to this area.
I talked to an agent today who had two sales with a seller in distressed situations recently. They couldn’t sell their homes conventionally because the mortgage was too high. And I think we’ll see more and more of that, which will begin forcing transactions.
We’ve seen some uptick in transactions a little bit in some areas, and transactions still down in others. But overall, DFW is mostly flat in the number of transactions happening year over year.
Prices may fall, but it’s going to be more competitive in that environment. When you do see prices start to fall, you’re then going to see a lot more competition, including multiple offer situations, etc.
And I’ve said it every month for sellers, if you price your property right, you’ll sell it in this market because we still have demand. That demand may go down a little bit with a recessionary environment, but not to the point where we’re seeing what we dealt with during 2008-2009 with big, massive price reductions.
We have a great job economy in DFW, and we are top three in the nation for population growth. So, with that being said, there might be an opportunity to buy lower, but it’ll be more competitive with everyone else too buying houses in the next three to six months when prices are dropping.
So, my strategy for you is to get out and make those offers now while homes are sitting.
Interest rates might be higher now than at the end of the year, if they start lowering them as we go into a recession. But you’re going to get about the same value. Interest rates are already down to 6.34%, which is a full point below what it was a month ago.
And thinking that the Fed will lower even more by the end of the year, well, the markets have already priced that in and factored that in right now. So, the opportunity in my mind, is to buy now instead of waiting. Because properties are sitting (those that are overpriced), and there is seller-fatigue going on there, and those sellers are getting tired of waiting.
So even if it’s $50,000, $100,000 under asking, make those offers. You’ll know what offer to make based on the guidance of your REALTOR who will factor in how long that home has been sitting, what the current price point is, etc. and based on what the seller is most likely to accept.
So, make your offers now. See if you can get traction on your dream home and ultimately capitalize on what is a market in stand-still right now.
We’re still in a standstill just as we have been for a while now. And that’s why supply is building, and homes aren’t moving. Prices have moderated, and in some areas, we’ve seen double digit price drops. And interestingly, the areas with price drops by double digits have seen transactions pick up.
So, if you wait, then you’ll see the same thing. When the prices drop, transactions will pick up and you’ll be in a more competitive environment when that happens. So, take advantage now. Make an offer that makes sense and that’s affordable for you.
Huge steals in DFW are gone – the economy is too strong for that. But you can be strategic and come in 10 to 20% below what they’re asking and see if you can get traction on an offer.
Sellers, you get to make it up on the buy side. Recently, I saw where we were under contract with a seller for many months and it was for a higher price. So, they had to lower their price by $15K, and then they immediately got the home under contract.
So, there’s still plenty of price appreciation there. And, by them being willing to be strategic and sacrifice a little to get it under contract, they are able to move now, and they’ll realize savings on the buy side.
And it’s easier to do that now (drop price by a little to meet the market) than when everyone will be lowering their prices in the next several months because then you’ll have more competition.
The median price in Dallas County was flat from July 2023 to July 2024. Tarrant County was up 2.7%, Collin was down 3.4%, and Denton was down 1.1%.
For single family new construction, you’ll see home builders are typically quicker to lower prices. That’s because as a business, they need to move units. In Collin County, the price of new construction homes was down 14.7% year over year. Then, if you go to actual pending sales for Collin County, they’re now up 50%. So, you see what happened.
You get the price down, and then the number of sales goes up. So, the market is still strong. You just have to get it priced right. Again, when you get the price down typically by 10-15%, you’ll see the home move.
In Kaufman County, same thing. The average sales price was down 7%. New construction was down 15%. And then, pending sales this month are up 45% for new construction in Kaufman County.
In Tarrant County, you can see the flip side of this. The median sales price for new construction was UP 5.6%, and pending sales are now down by 10.7%.
The moral of the story: If you price your property right, you can still make a move.
So, to summarize what’s going on in the market right now, homes are still moving. Prices are all flat mostly. Transactions jumped up last month. But, that’s heavily based on what prices did in that area as to whether or not home sales were up.
As a strategy, ask yourself: Am I good with 10-20% less on the sell side, and then making it up on the buy side? Or, if you’re a seller, another option is you may just want to take it off the market right now and wait a couple of years to see if you can capitalize and get more down the road.
It’s going to be interesting to see what our real estate markets do in the next six to nine months.
With interest rates, I don’t expect that any small drops or changes by the Fed will make a huge impact to the market. Again, we’ve already seen some drops and the market has not picked back up drastically yet…But the recession to come, that’s the big question mark.
If you have any questions, please reach out to one of our agents.
Our agents are all market experts, and we would love the opportunity to advise you and provide you with all the information you need to make a good decision on your next move.
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