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4 Signs the Dallas Real Estate Market is Cooling

Mark Madria • Jul 20, 2017

Dallas has been a hot market since 2012 and seriously so since 2013. In fact, when I bought my own personal residence in 2013 it was a Multiple Offer situation and I paid over the listing price. It was the only home my husband and I could fully agree on so I couldn’t let it go. There were four other bids, one that equaled mine in price but I had a larger down payment and we are still living there.

4 Signs Market is Cooling

Why do I think the market is slowing when the numbers aren’t really showing it yet? There are four sure signals not previously seen in four years.

1.Agents in my office are asking why their listing hasn’t sold. Last summer this lament was heard only at the higher price points and now it’s being said at the lower price points. Just the other day an agent was asking why her $350,000 listing has been on the market for almost 60 days. And in April an agent with another brokerage lamented about his listing in McKinney, priced under $300,000, had not sold in two months on the market. And, to really cinch my belief this is happening, a well-known coach stated he has heard the same from some of his top clients across the nation.

2.Builders of new construction are offering more incentives to buyers and dropping prices significantly. My inbox is flooded with messages from builders who have available inventory and discounted prices on existing specs. One builder in Frisco, with home prices in the upper $500’s - $700’s was dropping $60,000 and more off the price of inventory homes. And, I’m seeing more new construction in the lower $300’s than previously. Two years ago it was nearly impossible to find new construction under $400,000 and builders offered no incentive or very little incentive to buyers. Negotiations at that time consisted of the builder saying this is the price; do you want it?

3.Fewer multiple offers on houses. While it’s true that some properties are still seeing a large number of offers, that is not as prevalent as it was two years ago. Now it’s likely there isn’t multiple offers on a house, and when there is it may be just two or three offers. That hasn’t always been true but today many houses are sitting longer on the market and may not receive multiple offers.

4.There is lesser talk about new jobs being created. For several years now if people weren’t talking about how hard it is to get a house, they were talking about the constantly increasing jobs market. And rightfully so. DFW has seen the addition of 100k+ jobs per year from 2012 to 2015 but 2016 didn’t see the same increase in jobs creation. According to an article in D Magazine’s July edition, 2016 new jobs created only equaled about 88,000 for our area.

Very soon we should be seeing data showing houses staying on the market a little longer, even in the lower price points. Does this mean prices will start rolling back? Absolutely not! It means that there’s finally available housing to choose from.

Spec Homes

What is driving this shift back to normalcy? Builders have provided sufficient inventory for those seeking new construction. As we were exiting the Great Recession Builders only built house that were already sold; they did not build houses on speculation. So as the jobs increased and more people moved here, completion on a new house was often 10 months or longer. Today Builders have properties that are move-in ready and some are even offering a Move-In package that includes Refrigerator, Washer, Dryer and Blinds on all the windows.

Available Apartments

In addition to this abundance of move-in ready new construction, we also have many new apartment complexes reaching completion in the past year for those who aren’t sure where they want to live or just don’t want a house at this time. The one sector we are still missing is the existing home sales. Would-be Sellers are not yet comfortable of where they would go or what it would cost for them to move so they are staying put at the moment.

Back to Normal

As the market cools and prices normalize, existing homeowners will feel more confident about buying their next home and will be willing to sell. As all these pieces come back into normalcy, we will have a stable market.

If you’d like a CMA (comparative market analysis) for your home, give me a call at 469-408-3148.

People often need help finding honest and trustworthy trades people such as air conditioning, plumbing, or white collar help like a financial planner or CPA. If so, give me a call or email me at BrendaPatton@Ebby.com ; I’d be happy to refer some really good people.

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2024 Market Predictions for Residential Real Estate

By Brenda Patton • 07 Sep, 2023

How Could a Recession Impact Home Prices? What are the factors or indicators that I watch as predictors? The first is Jobs. For people to buy a home they must have Cash or an Income. Most of us will finance our home so we must have a job to repay the mortgage each month. When jobs are cut, people cannot afford their mortgages, so they sell. However, they need to sell immediately and so will tend to sell lower. Additionally, they may not have funds to do much in the way of updates so again the house will sell lower. Loss of jobs (or higher unemployment) can cause a Recession and possibly reduce home prices. The jobs market in DFW Metro is very strong with low unemployment. The 2nd factor I watch for the housing market is the Interest Rate for mortgages. Rising interest rates translates to lower purchasing power for the Buyers. When purchasing power is less than the Market price, Buyers cannot purchase so houses will sit on the market longer. In this most recent period of high interest rates, Buyers were initially reluctant to purchase when rates started rising. However, lenders have changed the narrative to help buyers understand that buying at today’s prices with higher rates is fine if the buyer can qualify. Mortgages can be refinanced if rates come down. And, the 3rd factor is owners’ equity position in their homes. If there’s a large equity position in a home, Sellers are less prone to sell. During the Pandemic when interest rates were in the 2’s and 3’s many homeowners refinanced their homes to the lower interest rate and thus reduced their monthly payment. A large number of homeowners have over 50% equity in their homes now. In her article on Rising home prices, Monique Beals states, “Since 2000, median home prices in the U.S. have increased by nearly 160 percent.” This surprisingly high increase in home prices covers the Great Recession of 2008-2009 where home prices dropped as much as 25% in some areas. Since 2000, other than the Great Recession era, there have been a very few moderate declines in home prices which did not last. Recession Predictions 2023 – 2024 “A prophecy fulfilled is a failure.” (unknown) In mid-2021 a few bank CEOs were raising the flag that inflation was hitting the economy very hard and we would be in a recession soon if interest rates didn’t increase. By Spring 2022 all bank CEOs were raising the volume on inflationary chatter. It was true. The price of groceries had gone up 20% - 30%, gas prices were higher and house prices were higher and continually increasing. The Fed started rate increases in June 2022. In midsummer 2022 most economists were saying we’d have a recession by mid-2023 and the Fed continued rate hikes for 10 consecutive sessions, resulting in mortgage rates going from 3% to 6% in the shortest timeframe in history. By February 2023 it appeared that the inflationary period was abating and a recession may not be imminent. Many prices have stabilized instead of continually escalating, including house prices. There are only a few economists still predicting a recession for 4Q2023. Next year, 2024, may see a recession but economists are now thinking the U.S. will have a rolling recession either late 2023 or early 2024. Housing Predictions 2023 – 2024 "It is difficult to make predictions, especially about the future." Yogi Berra With this great philosophical statement in mind, and years of experience in the rearview mirror, let’s look at Housing Predictions for 2023 - 2024. Housing predictions for 2023 was for prices to be flat or fall ~ 5%. The opposite has been true in DFW Metroplex. There are fewer houses to sell and we still see multiple offers on some. Prices have still increased from 2022 levels, at least 5% in my market area. For 2024, assuming no major impact to the economy, housing in DFW Metro will increase 3% - 5%. No one, without a doubt, no one predicted the escalation of home prices that started in May / June 2020. In fact, most were predicting a dour environment during the Pandemic which prompted the Fed to lower interest rates. Lower rates meant small investors could afford to buy single family homes. Money was cheap in that time. People who wanted to move could buy bigger homes. Those who already owned a home could sell for much higher and move to something better. However, as the rates remained low, demand increased in DFW Metro as WFH became more common and people could work from anywhere. As demand increased so did competition for housing, it became fierce, and prices kept going higher. Additionally, supply chains were disrupted during the Pandemic with entire plants being shut down. It was difficult to obtain materials or labor for construction and price increases were happening monthly to builders. It became impossible for builders to provide entry level homes and be profitable. A few builders have tried to maintain entry level pricing for homeowners and have done so by building smaller homes on smaller lots and denying investors; selling only to owner-occupants. With fewer entry level homes being built, the demand for existing homes increases putting pressure on prices once again. For 2024 I’m of the opinion that the DFW marketplace will see a minimum of 3% appreciation if interest rates remain in the high 6’s and low 7’s. If they decrease, as I’m starting to see some economists predict, then we’ll have a much higher volume of properties moving and far more buyers back in the market. That will drive appreciation to 5% or higher in 2024.

Brenda Patton and the Patton Williams Team supports The Colony Chamber of Commerce

By Brenda Patton • 07 Jul, 2023

Brenda Patton and the Patton Williams Team supports The Colony Chamber of Commerce as a Bronze member and sponsors the quarterly Women in Business luncheon. These luncheons are hosted the last Friday of each quarter. Reach out to Brenda at 469-408-3148 for more information, or Amanda Porter with The Colony Chamber at 214-886-4942.