The North Texas housing market is downshifting quickly, with Dallas-Fort Worth being the only U.S. market to see a decrease in home sale prices last month, according to a report released today. DFW home prices are down 1.9% year over year in July, according to the latest Re/Max National Housing Report.
And what a difference a month makes. Last month, DFW led the U.S. for home price increases, with June prices up 29.3% over the previous year. In hard numbers, home sales prices in DFW fell to $413,900 in July from $422,000 in July 2021. Homes in DFW spend an average of 23 days on the market before selling.
Higher interest rates and inflation, as well as record home prices, triggered a sharp drop in demand for housing, said Todd Luong, a realtor with Re/Max DFW Associates: "Here at our Re/Max office in Dallas-Fort Worth, our listings are currently getting on average 2.7 showings per week," Luong said. "Last year, at this same time, our listings were earning on average 5.9 showings per week. That is a huge drop in buyer demand compared to the previous year. Record home prices and higher mortgage rates have forced many potential buyers out of the market, especially first-time homebuyers."
While the latest trends may disappoint some sellers, buyers now have more choices and better opportunities for good deals, Luong said. Luong said that the DFW housing market has been challenged with low inventory for years and reached an all-time low earlier this year, with only a two-week supply. Now, however, inventory is increasing. "Although buyers have more choices now, it is still not a balanced market as we only have about a two-month housing supply," Luong said. "In a normal market, you have about a five to six-month supply of housing."
A new report from Zillow also found falling home values, although the numbers didn't match Re/Max's precisely because of different study methods and different geographic definitions of DFW as a metro area, among other reasons. According to Zillow's findings, the Dallas-Fort Worth metro area's typical home value is $396,904, down 1.1% since June, the first month of decline. Values are up 55.4% since July 2019.
Zillow also reported that the mortgage payment on a typical home in DFW is $2,633 a month, including taxes and insurance. That's up 77.4% compared to July 2019.
According to Zillow, inventory in DFW has risen 10.2% since June, and the share of listings with a price cut in July was 22%, compared to 15.6% in June. Nationwide, after two years of unprecedented growth, home values fell for the first time since 2012 as competition for houses eased, according to Zillow's July market report.
The slowdown is being driven by decreased competition among buyers. Zillow's analysis says that affordability pressures have pushed many to the sidelines, and buyers are waiting in the wings to resume their search if and when prices relax a bit. Skylar Olsen, Zillow's chief economist, called the flattening of home values "a badly needed rebalancing. This slowdown is about discouraged buyers pulling back after the affordability shock from higher rates," Olsen said. "As prices soften, many will renew their interest, and we will continue our progress back to 'normal.'"
Luong said he sees positive signs in the market. The interest rate for a 30-year fixed mortgage dropped below 5% after peaking in June. More than 290,000 new jobs were added in Dallas-Fort Worth last year, so North Texas has one of the strongest labor markets in the country. "Reasonably priced homes that are in good condition and move-in ready are still selling very fast," he said. "However, the bidding wars have subsided considerably across the board."
Home prices in Dallas-Fort Worth rose a record 30.7% year over year in March, according to the latest report from the S&P CoreLogic Case-Shiller Index
Rapid Home price growth in North Texas and in cities nationwide continued to break records at the start of the year, but economists expect the market could change its tune in the months ahead. Home prices in Dallas-Fort Worth rose a record 30.7% year over year in March while national prices grew 20.6%, according to the latest report from the S&P CoreLogic Case-Shiller Index. "Demand for homes has stubbornly kept ahead of supply this spring, even in the face of rapidly rising costs," said Dan Handy, an economic data analyst for Zillow. "This imbalance between supply and demand for homes this spring has been the key driver in home price growth that continues to set records month after month." The index compares sales price changes of specific properties over time. Case-Shiller's price estimate is considered more accurate than MLS home sales data which can be influenced by the type of properties that are selling each month.
Economists predict the rapid price growth could finally begin to slow in the coming months as buyer demand is softened by affordability challenges. "Mortgage costs are more than 50% higher than they were a year ago, and prospective buyers will likely start to rethink what they can afford," Handy said. "Sellers may already be responding, with the rate of price cuts now on the rise, to meet buyers where they are. Price growth will likely begin to come back towards earth as many buyers are priced out and inventory rises." Dallas-Fort Worth home showings were down 9% year over year in April and 11% since March, according to ShowingTime.
Nearly one in five sellers dropped prices during the four week period ended May 22, Redfin Corp. said in a report Thursday. Other measures of how hot the market is, including a house's time on market and the percentage of homes selling above listing price, have also plateaued. Consumers are contending with some of the highest mortgage rates in years, despite the dip in those figures in the past two weeks. Higher rates, coupled with economic uncertainty, are raising questions about whether the US housing boom has met its limit with signs emerging that the once-intense pace of the market could be decelerating.
Price drops are "becoming increasingly common" in some of the most popular housing markets across the United States. According to a new Redfin data. More than 20% of home sellers dropped their price in May in some of the best markets in the nation. "When mortgage rates were at or belw 3%, both local and out-of-town homebuyers were more than willing to tolerate high prices, but at more than 5%, many are now priced out," redfin chief economist Daryl Fairweather said in a statement. "A home's price is driven by the balance of supply and demand, and when demand drops off and supply increases like it is now, rapid price increases evaporate quickly." Areas that saw a huge surge in migration and sharp increases in home prices over the past two years are now seeing "an abrupt drop-off in demand," which is forcing sellers to "drop their prices with increasing frequency," Fairweather said.
Sharply higher mortgage rates have caused a sudden pullback in home sales, and now sellers are rushing to get in before the red-hot market cools off dramatically. "Rising mortgage rates have caused the housing market to shift, and now home sellers are in a hurry to find a buyer before demand weakens further," said Redfin Chief Economist Daryl Fairweather.
Sellers clearly see the market softening. Pending home sales were down just over 9% from April 2021, according to the National Association of Realtors. May 2022 will see a larger decrease. This index measures signed contracts on existing homes, not closings, so it is perhaps the most timely indicator of how buyers are reacting to higher mortgage rates. It marks the sixth straight month of sales declines and the slowest pace in nearly a decade.
Local housing supply is beginning to loosen, Realtor.com indicates
Dallas-Fort Worth is seeing a dramatic increase in homes up for sale over the last few weeks as many sellers look to take advantage of the market while it's still red hot. The number of active home listings last week spiked 41.6% from a year prior, the fifth consecutive week of gains, according to Realtor.com. Until April, the company posted supply declines in D-FW every week since March 2020.
The region saw the highest annual growth for any week on record since the company began tracking this figure in 2017.
New listings in D-FW rose 32.4% last week, signaling a huge influx of sellers putting homes on the market as summer approaches. "Sellers have been hearing for about two years what an amazing time it is for them to sell ... and they've seen their equity just grow like crazy," said Mike Reddell, senior executive vice president and managing director for Douglas Elliman Real Estate in Dallas. "With the stock market being wobbly and mortgage rates rising, I think sellers that have been thinking about this for a while, more of them are pulling the trigger and putting the house up for sale."
Reddell said if he were in a position to sell his house, he would do it right now.
Redfin reported May 15 that new listings throughout the U.S. climbed nearly twice as quickly as they did at the same time last year. "Rising mortgage rates have caused the housing market to shift, and now home sellers are in a hurry to find a buyer before demand weakens further," Daryl Fairweather, chief economist for Redfin, said in a statement.
Mark Wolfe, broker and owner of RE/MAX DFW Associates, said he has seen a significant spike in listings over the past few months. In his home city of Coppell, he said, there would have been only about five or six homes on the market at any one time a few months ago. In just five days last week, he said, 21 homes went up for sale. "We've been a boom economy, and now with the economy showing signs of trouble, people want to still get the most for their dollar while they can if they think that the prices might go down," Wolfe said. "I don't know if that's going to happen. I doubt that's going to happen."
The market is nowhere near balanced between buyers and sellers. Dallas-Fort Worth had just under a month of home supply in April, according to the Texas Real Estate Research Center at Texas A&M University. A balanced market would have about six months' worth of inventory. The competitive pressures have sustained high price growth over the past few months. The median home in April sold for $425,576, up 25% from a year earlier. The number of sales in April was down 7% from a year ago, but the dollar volume increased 13% to $4.2 billion.
Rising mortgage rates combined with record-high home prices have drastically increased the monthly cost of buying a home. Homebuilders have also noticed demand cool down through the past few months. "We've been in an unrealistic market for two years, and we're probably headed back to a normal market," Wolfe said. "It might be nice to just have a healthy even market. I'm hopeful that's what we're going to go into."
Housing Prices in DFW and Austin Have Surged Dramatically
The last time the national housing bubble burst, Dallas-Fort Worth and the state of Texas emerged comparatively unscathed from the massive 2008 home price corrections and foreclosure wave that slammed most of the country, including other Sunbelt markets like San Diego, Miami, Phoenix and Las Vegas.
A big reason was that home prices in the Lone Star State didn't skyrocket in the early 2000s preceding the subprime-mortgage-induced smackdown by nearly as much as prices in California, Florida, Arizona, and Nevada. Texas hadn't partied as hard as its Sunbelt compadres heading into the crash, so its hangover wasn't as bad.
This time, Texas — DFW and Austin especially — may not be so lucky if the national housing boom is a bubble and a popping ensues, a new study suggests. This time, housing prices in DFW and Austin, and to a lesser degree Houston and San Antonio, have surged, driven in large part by population and jobs growth spurred by companies large and small relocating to the state.
As of April 30, Austin was the second most overpriced housing market in the nation, and DFW was the 18th most overpriced, according to research by Florida Atlantic University. The recent heavy demand for homes put buyers at a "major disadvantage," said Ken H. Johnson, an economist in FAU's College of Business. To have an offer accepted, buyers had to outbid multiple competitors, he points out. Soaring prices fueled by the onset of the pandemic in 2020 and near-record-low mortgage rates have pushed the national housing market into a "crisis stage," and a reckoning is due, the Florida Atlantic researchers' latest report says.
On one hand, the reckoning will likely hit the areas of the country with the biggest run-ups the hardest. On the other hand, areas of the country with persistent inventory shortages and increases in population, such as Texas, Florida and parts of the Northwest, likely won't see as steep of declines in home values, the researchers say.
Plano and Prosper also rank in the Top 10 out of over 1,000 cities
Coppell, Plano and Prosper are the most popular housing submarkets in North Texas — and among the tops in the nation — as suburbs shot past major-metro cores nationally and in Dallas-Fort Worth coming out of the worst of the pandemic.
Pricey suburban locales near major cities rose to the top of Zillow's nationwide list of most popular places to buy a home. In the Dallas-Fort Worth metro, Zillow found Coppell tops the pop chart. The typical home in Coppell is worth $565,930 and has seen 7% price growth in the first quarter of 2022, according to Zillow. Coppell home values are up 24% year over year. Coppell ranked as the fourth most popular place in the nation to start 2022.
Following Coppell in the North Texas rankings is Plano, where the typical home is worth $513,325 and has seen 10% growth in the first quarter of 2022. Plano home values are up 33% year over year. Prosper ranked third in the DFW market, with a typical home value of $774,456. That's up 13% in the first quarter of 2022 and 45% year over year. Frisco ranked fourth and Carrollton fifth in Zillow's popularity contest, with typical home values of $661,460 and $410,270, respectively. Those values are up 13% for Q1 2022 and 39% year over year in Frisco, and up 9% for the quarter and 28% for the year in Carrollton.
The numbers: Sales of new homes in the U.S. fell in April for the fourth month in a row to the lowest level since the pandemic owing to high prices and soaring mortgage rates.
New sales slowed to a 591,000 annual rate from 709,000 in the prior month, the government said Tuesday. That's how many homes would change hands in a full year if the number of sales were the same in every month as they were in April.
Big picture: The red-hot housing market was bound to cool off after mortgage rates jumped from just 2.75% in the fall for a 30-year fixed to more than 5.25% in mid-May. Low mortgage rates had made it easier for buyers to purchase a home despite record prices. Builders, for their part, still aren't producing enough homes to meet demand. High material costs, supply and labor shortages and lack of cheap lots are among the constraints holding back construction. A slower housing market is also likely to weigh on the broader economy. When people buy homes, they also need to buy lots of stuff to furnish it.
Key details: Sales fell in all four major regions of the country, but the largest decline occurred in the South, where about half of all new homes are built. Sales sank 20% in the South.
reverse the upsurge in prices over the past few years.
April 2022 Nationwide
27% Decrease in Sales from April 2021
12% Increase in New Listings over April 2021
We are in a Changing Market
The red-hot housing market is starting to cool this spring, after nearly two years of soaring prices and shrinking inventories.
Why it matters: Homebuyers and renters who've been struggling to find an affordable place to live will have more choices and fewer bidding wars — if only just a little.
What's happening: The supply of homes for sale is finally increasing, after being depleted over the past year and a half, Zillow reports.
More houses for sale should help slow the frenetic pace of the U.S. market, in which the median home was snatched up in just six days in April.
New home construction has also bolstered the housing supply, says Lawrence Yun, chief economist for the National Association of Realtors.
The big picture: The dynamics of the housing market are shifting in many ways, with rising mortgage rates becoming a factor for the first time in a while.
Between the lines: As inventories rise, prices soften. Redfin reports 15% of home sellers cut their asking price last month — up from 9% a year ago.
Be smart: The cooldown is not a sign of a housing crash — just an indication that we're going to return to a more balanced market, says Tucker of Zillow.
What to watch: Some overheated markets — like Charlotte, North Carolina, and Phoenix — could see a price correction over the coming year, Moody's Analytics chief economist Mark Zandi tells Fortune.
Dallas-Fort Worth saw the largest spike in home sales prices in the nation, according to a new study, with home prices up 39.5% over last year. The jump brought the current median home sales price in DFW to $362,782 in April, according to the latest Re/Max National Housing Report.
Todd Luong, a real estate agent with RE/MAX DFW Associates, called the increase "astonishing." Breaking it down in some of the popular suburbs north of DFW shows Frisco increased 36.6% over one year ago, McKinney rose 34.2%, and Little Elm climbed 33.9% over one year ago, Luong said. Luong said that population and job growth are pushing home prices higher across North Texas. "Corporate relocations have been the primary driver for all this," he said in an email. "During these past 10 years, office space in Dallas-Fort Worth has increased by over 55 million square feet, and only New York City has had more office space growth. "During the same 10 years, industrial space in Dallas-Fort Worth grew by 230 million square feet. All this growth means more jobs, and more jobs mean more people are moving here."
The high price growth affects longtime homeowners and current and recent home buyers and sellers, Luong noted. He said that appraisal districts have increased 2022 market values significantly across North Texas. On average, he said that home appraisals across Dallas County are up 25% compared to previous years. "I have never had so many people asking me for help with protesting their property taxes than this year," Luong said. "I hope there can be property tax relief for homeowners in the future. Otherwise, some people may not be able to afford to live in their current neighborhood anymore. I have clients who have already expressed this concern."
In a grim sign for the housing market's busiest season, pending home sales, which measure signed contracts on existing homes, fell 4.1% in February compared with January, according to the National Association of Realtors. Sales were down 5.4% compared with February 2021. Analysts were expecting a slight gain. This is the fourth straight month of declines in pending sales, which are an indicator of future closings, one to two months out. Since this count is based on signed contracts in February, when mortgage rates really started to take off, it is a strong indicator of how the market is reacting to the new rate environment, especially as it is entering the crucial spring season.
Pending home sales declined in February for the fourth month in a row, as would-be buyers grapple with fewer, pricier homes to choose from and rising interest rates. Contract signings dropped by 4.1% last month from January and were down 5.4% year over year with all four regions in the U.S. seeing a decline, according to the latest data from the National Association of Realtors. "Pending transactions diminished in February mainly due to the low number of homes for sale," said Lawrence Yun, NAR's chief economist. "Buyer demand is still intense, but it's as simple as 'one cannot buy what is not for sale.'" Yun anticipates a 7% decline in home sales this year compared to last, and forecasts that rates will hover around 4.5% to 5% for the remainder of 2022. "It is still an extremely competitive market, but fast-changing conditions regarding affordability are ahead," he said. "Consequently, home sellers cannot simply bump up prices in the upcoming months, but need to assess the changing market conditions to attract buyers."
Rising mortgage rates are starting to take their toll on the nation's homebuilders, who are more concerned about affordability heading into the all-important spring housing market as mortgage rates surge.
Builders' sales expectations for the next six months declined a steep 10 points to 70, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The index doesn't often see such large monthly moves. Builders' view of current sales conditions fell 3 points to 86.
Overall, builder sentiment in the market for single-family homes dropped 2 points to 79 in March. February's read was also revised lower. Last March it stood at 82. This is the fourth straight monthly decline and the first time the index has slipped below 80 since last September, when the delta variant of Covid-19 was spreading. Anything above 50 is considered positive sentiment. Overall sentiment is still good, but there are concerns for later this year.
The popular spring home-buying season is just ramping up. But one analyst is warning that it could be a bust. Ian Shepherdson, chief economist and founder of research consulting firm Pantheon Macroeconomics, is predicting a dramatic fall in the pace of home sales this year. In a research note, he projected that existing-home sales will drop roughly 25% from the annual pace of 6.02 million set in February to a rate of 4.5 million by the end of summer.
"The housing market is in the early stages of a substantial downshift in activity, which will trigger a steep decline in the rate of increase of home prices, starting perhaps as soon as the spring," Shepherdson wrote in a research note distributed Sunday. There has been a drop in mortgage demand which typically predicts a downturn in home sales, since most buyers rely on financing to make sure a large purchase. Issues around affordability are likely to blame for the decline.
The ripple effects of a shift in existing-home sales would be far-reaching, Shepherdson said, arguing that the pace of rent increases would eventually slow and perhaps even reverse. It also would spread to new-home sales, which he expects will likewise fall. A decrease in new-home sales would represent a downward drag on GDP, since that would implicate less demand for services tied to home-building and less spending on items like building materials and appliances.
The bad news for any Americans who persist in trying to buy a home under these conditions is that it's less clear how this situation will ultimately impact the availability of homes for sale. Part of why home prices have surged is that there is a significant lack of inventory in the housing market, which has fueled competition for what few homes are listed for sale. A drop in demand would seemingly lead to a boost in the inventory of homes for sale.
As home prices soar, housing affordability is sinking to the lowest levels since 2008 and first-time buyers - who haven't benefited from rising home values and are also coping with rising rents - are being squeezed out.
First-time buyers accounted for 27% of existing home sales in January, according to the National Association of Realtors, near 2014 levels. With mortgage rates above 4%, around the highest in about three years, and expected to rise further, buyers on tight budgets may struggle even more to find homes they can afford.
Collin, Denton, Ellis and Kaufman counties
As home costs soar across the state, four counties in Dallas-Fort Worth saw especially significant growth over the last year. The median sale price for single-family homes increased nearly 27% in Collin, Denton, Ellis and Kaufman counties in February compared with a year prior, according to the latest numbers from the MetroTex Association of Realtors. Collin County holds the highest median sale price at $475,000. Tarrant County led in sales, with 1,812 homes changing hands. The sale price for local single-family homes sold by real estate agents across North Texas reached a record median of $365,000 in February, up 21% from a year earlier, according to the latest data from the Texas Real Estate Research Center at Texas A&M University and North Texas Real Estate Information Systems. It shot up $15,000 from January to February, a 4% increase.
"Everyone is hoping for a spring inventory influx, but it's unlikely it will be nearly enough to balance this market," Marissa Benat, president of the Collin County Association of Realtors, said in a statement. "We are getting buyers ready to make competitive offers so they can get moved into their home sooner than later."
Inventory is not keeping up with the high demand, and building permits are down as builders face supply chain and labor challenges.
Shares of Redfin were falling sharply Friday after the online real estate brokerage said it expected a first-quarter loss wider than analysts' estimates. The company said it expects to report a loss in the first quarter of $115 million to $125 million vs. analysts' forecasts that called for a loss of $75 million. For all of 2021, the company lost $109.6 million. Redfin said it expects first-quarter revenue of $535 million to $560 million. Revenue at the company's properties segment, which including iBuying — a business that rival Zillow (Z) has been exiting — was forecast at between $330 million to $350 million. For the fourth quarter, Redfin reported a loss of 27 cents a share vs. a profit of 11 cents a year earlier. Analysts expected a fourth-quarter loss of 31 cents.
Analysts at RBC Capital Markets downgraded their rating on Redfin shares to Sector Perform from Outperform, and lowered their price target on the stock to $23 from $60. "We throw in the towel on RDFN as the primary points of our thesis appear broken and unlikely to show enough improvement in the coming year to warrant an Outperform rating," RBC analysts wrote in a research note. They added that share gains at Redfin "are simply not materializing at a fast enough rate," and said "home inventory challenges" and "lack of secular story should make for slower growth."
'IBuyers purchased 70,402 homes in 2021, more than double the previous annual high of 32,726 homes in 2019,' according to Zillow's Q4 iBuyer report.
iBuyers sold homes they bought for a median mark-up of 1.1 percent in the fourth quarter, according to the Zillow report. That's the second-lowest margin on record, down from 8.6 percent in the first three months of 2021.
Companies operating as instant buyers picked up more than 70,000 homes last year, setting a new high water mark for the industry. A new report from Zillow looking at the final figures from 2021 found that iBuyers more than doubled their previous annual high for homes purchased in the 38 largest markets and also sold more homes.
However, iBuyers continue to struggle to show profitability at a scale where they're valuating, buying, repairing and selling thousands of homes across the country. The data also included homes bought and sold by Zillow Offers, which was famously shuttered in the fourth quarter after it failed to correctly valuate and sell homes for enough profit. (The segment lost the company $342 million in the fourth quarter of 2021.)
Opendoor, the largest of the major iBuying companies, bought 9,639 homes in the fourth quarter and sold 9,794. Both were major increases for the company, and it ended the year with 17,009 homes on hand. In the same timeframe, its losses grew. It lost $191 million, more than triple the $54 million the company lost during the final three months of 2020. Opendoor lost $662 million in total for 2021.
The companies operating in their 38 largest markets picked up 1.9 percent of homes sold in the third quarter of last year, a record high. But as their market share grew, so did the time it took to get rid of the homes. Hold times for iBuyers rose to 98 days in the fourth quarter, up from 63 days in the middle of the year. To flippers, the time spent holding onto a house is a significant operational cost that has implications for profitability. Investors pay utilities, property taxes, financing (if needed) and other costs while they still own the home.
First gas, then heating and now rents. Runaway inflation is driving rents skywards across America, delivering an average of a 20 percent increase in the U.S.'s biggest 50 cities over the past 12 months, a study details. The rent spike has stung wallets nowhere more than in the Miami metro area, where the median rent surged to an eyewatering $2,850, 49.8 percent higher than the previous year. Other cities across Florida — Tampa, Orlando and Jacksonville — and the Sun Belt destinations of Texas and Tennessee, all saw spikes of more than 25 percent in some cities during that time period. Rising rents and high inflation are moving hand-in-hand to become one of the nation's top economic problems. Economists worry about the impact of rent increases on inflation because the big jumps in new leases feed into the U.S. consumer price index, which is used to measure inflation.
Go further North young family, go further North! The building permit decline didn't occur across the board. January building permits jumped 87% in Anna. Permits in Melissa also rose, from 59 in January 2021 to 89 in January of this year, which is a 51% increase. Denton new home permits jumped 171%, from 77 in January 2021 to 209 in January 2022. Sherman rose 69%, from 32 in January 2021 to 54 in January 2022.
Homebuyers looking to move to Dallas from other regions last year, especially from California and the west coast, were willing to pay 10.6% more than locals, new research finds. People looking to move to Dallas are willing to pay an average maximum budget of $701,760, while locals are willing to pay up to an average of $634,465, according to a recent report from Redfin. The company compiled the average maximum list price filters for homes in the saved home searches of its users. The analysis includes cities with at least 3,000 home searchers from inside the metro and 3,000 from outside the metro last year.
North Texas suburbs Plano and Frisco are prime examples of out of state transfreees willing to pay more. Plano's average maximum for migrants was $695,729 and the average maximum was locals was $646,383 for a difference of 7.6% more. Frisco had an average maximum for migrants of $784,688 and the average maximum for locals was $802,154 for a difference of 2.2% less.
States without income taxes such as Texas and Tennessee are seeing many transplants from California who see that as a deal, said Redfin. "People moving from the West Coast will pay way over asking price without batting an eye," Geyer said. "It's really hard for locals to compete right now, and it can be devastating for first-time buyers who aren't able to offset high prices by selling a home before they buy a new one." The number one out of state buyer into Dallas-Fort Worth is from the Los Angeles suburbs.
After a year of record-breaking construction, North Texas homebuilders are starting 2022 with a backlog of sales and not enough supply. Dallas-Fort Worth builders sold almost 46,000 single-family homes in 2021. Even though local builders started more homes than in any market in the country, they can't keep up with demand for new housing units in North Texas. Don't look for the supply-demand imbalance to end this year, housing analysts warn. "2021 turned out to be one of the most extraordinary years in D-FW housing history," said Ted Wilson, principal with Dallas-based housing analyst Residential Strategies. "Builders were enveloped by an unprecedented swell of housing demand that prompted the industry to rev up its production pace. "Unfortunately, as builders rushed to sell houses to the wave of buyers, the resulting surge in starts was quickly met by the reality that there were limitations to the North Texas construction capacity." A lack of labor, materials shortages and other constraints have driven up costs and stretched out average building timelines, Wilson said Thursday in his firm's quarterly market update. Unlike in previous housing cycles, North Texas builders can't meet the appetite of consumers. "There appears to be ample demand to sell houses at healthy margins but the reality is that no one is able to get houses constructed and completed as quickly as they would like," Wilson said. North Texas housing demand is being driven by a combination of demographics and relocations to the state. D-FW led the country in single family new home starts last year.
Phil Crone, executive director of the Dallas Builders Association, said most of the area's builders are focused on overcoming the unprecedented challenges of the pandemic-impacted industry. And with the prospect of both higher mortgage rates and construction costs this year, affordability issues will continue to plague D-FW builders. "We can't just have a market where only Californians can afford it."
Inflation Concerns Are Sweeping the Nation
The U.S. housing market shifted into overdrive during the pandemic, with more than 6 million homes selling in 2021 despite skyrocketing prices in many cities. The median selling price for a home in November, $416,900, was nearly 25% more than it was in February 2020. In the early weeks of 2022, there's no sign that cutthroat bidding and rising prices won't continue. The total inventory of homes on the market dipped below 300,000 nationwide in early January — less than half of the inventory available before the pandemic. "It's uniquely challenging for first-time buyers, since they're not benefitting from the increase in home prices," said Realtor.com chief economist Danielle Hale, who predicts more record-high home prices this year. "We don't have prices decreasing in any area of our housing forecast, calling into attention that many of these issues are nationwide."
Homebuyers got crushed last year as home prices soared at their highest clip on record. Housing economists saw that price growth—which peaked at a year-over-year rate of 20% last year—as simply unsustainable. Their economic models agreed: Among the seven forecast models reviewed by Fortune heading into 2022, every single one predicted home price growth would slow significantly this year.
But over the past few weeks, that consensus is no longer so unified. Now, more industry insiders are throwing out their previous forecasts and replacing them with more bullish short-term outlooks. Indeed, some experts say the 2022 spring housing market might go down as one of the most competitive on record.
Look no further than Zillow. Back in December, the home listing site predicted that U.S. home values would climb 11% this year. Economists at Zillow now say that forecast is too conservative. Their latest forecast finds home prices are set to spike 16.4% between December 2021 and December 2022. If it comes to fruition, it would mark another brutal year for home shoppers.
When North Texas homes hit the market, they're getting plenty of attention from potential buyers. The number of showings per home listing is among the highest in the nation. That's according to the latest data from ShowingTime, a home-showing management and market stats firm. But the bigger news is the declining available inventory. As of this past weekend according to a broker report there were only 610 active listings in the Dallas Fort-Worth area, down from over 13,000 active listings at the same time period some five years ago.
Rates are rising, inventory remains historically low and prices are sky high. Is a buyer's market on the horizon? Even as forecasters predict an uptick in homes hitting the market early this year, the most homes under construction since before the Great Recession, and more buyers to be priced out due to already high prices and rising mortgage rates, economists told Inman they don't foresee a return to what has traditionally been known as a buyer's market any time soon. Sellers remain in the driver's seat, and economists told Inman the country still has a long way to go to settle into potentially new ways of thinking about just what is a normal housing market in the modern age. So while December 2021 saw more new homes hit the market than at any other time, the country is working its way through a supply backlog that is helping to keep sellers in control. If you look at demographics, you can say that the current level of construction is pretty close to normal. But what that doesn't tell you is how much behind that total supply is. "It's still going to take a really, really long time to make up for the last 15 years of a lack of supply coming in," said Nicole Bachaud, economist for Zillow.
Rising mortgage rates and last-year's record-breaking runup in home prices are expected to price many would-be homebuyers out of the market this year, denting sales of existing homes but bringing home price appreciation back down to more sustainable levels, Fannie Mae economists say.
"We expect the narrative around housing this year to shift from one of extremely limited inventories leading to hypercompetitive bidding wars to one in which increasingly more would-be homebuyers are priced out of the market," Fannie Mae economists said in commentary accompanying their latest monthly forecast.
Source: Fannie Mae Economic and Housing Outlook, January 2022.
Fannie Mae economists see sales of existing homes falling by 3.2 percent this year, to 5.945 million, which would still be the second-best year since 2006. Sales of new homes are projected to grow by 14.9 percent, to 885,000, as builders start putting homes now under construction on the market. Even with the projected increase in new home sales, total home sales are expected to fall from 6.91 million in 2021 to 6.83 million this year.
But that forecast could prove to be overly optimistic, Fannie Mae economists warn, if mortgage rates continue to rise as the Federal Reserve winds down its purchases of government debt and mortgages and starts raising short-term interest rates.
"The Fed has accelerated the pace at which it intends to reduce monetary accommodation, as inflation appears more resilient than initially expected," said Fannie Mae Chief Economist Doug Duncan, in a statement. "Currently, we expect inflation to run above the Fed's two-percent target through 2023, and for the Fed to respond by tightening over that period. The resultant rise in interest rates will likely put additional stress on housing affordability measures vis-à-vis higher mortgage rates for consumers and the continued, though decelerating, rise in home prices."
The Fed is in the process of winding down an emergency program implemented during the pandemic, in which it was purchasing $120 billion in Treasurys and mortgage-backed securities every month to keep interest rates low. When it's done tapering, Fannie Mae economists expect the Fed to start raising the short-term federal funds rate in March, and implement three rate increases this year.
Fannie Mae economists project mortgage rates will rise only gradually, hitting 3.4 percent by the end of this year before leveling off at 3.5 percent in 2023. Economists at the Mortgage Bankers Association are predicting a more abrupt rise in rates, to 4 percent by the end of 2022 and 4.3 percent next year.
But both projections were made before minutes of the Fed's December meeting were released, which revealed that after tapering its asset purchases, the Fed was contemplating shrinking its balance sheet.
That news prompted a runup in 10-year Treasurys and mortgage rates, which pose an "upside risk to our published interest rate forecast," Fannie Mae economists said. Based on more recent data, Fannie Mae estimates that mortgage rates could go up by two-tenths of a percentage point more than currently forecast.
The latest survey from the Mortgage Bankers Association shows rates on 30-year fixed-rate loans averaged 3.64 percent during the week ending January 14. The Optimal Blue Mortgage Market Indices, which track daily changes in mortgage rates, show rates on 30-year fixed-rate conforming mortgages hit 3.78 percent on Tuesday.
Looking at recent history, a 100-basis point change in the 30-year mortgage rate over the course of a year can dent home sales by 8 percent, with a one-to-two quarter time lag, Fannie Mae economists noted. "As such, we could expect home sales to be about 1 to 2 percent lower than our published forecast over this next year if the recent rate increase holds."
However, the same forces pushing interest rates higher — consumer and investor confidence in continued economic growth — could also support home purchases, "partially mitigating any negative effects on sales from higher rates," Fannie Mae economists said. But if interest rates are readjusting "due to new expectations over long-run inflation or a shift in monetary policy, then the effect could be larger. Our next forecast will of course incorporate formally any recent interest rate changes."
The forecast assumes that in the near term, the Omicron surge "will have only modest and temporary economic impacts. The severity of the variant appears to be lesser than prior waves, and most high frequency economic indicators suggest a smaller change in consumer behavior compared to the 2020-2021 winter wave of COVID."
Source: Fannie Mae Economic and Housing Outlook, January 2022.
Fannie Mae economists expect that national home price growth "will remain strong but decelerate" in 2022, and that worsening affordability will slow home price growth from a peak of 18.5 percent during the third quarter of 2021, to 7.6 percent by the end of the year.
"Our expectation of 7.6 percent growth in 2022 is still considerably higher than the average pace of 5.4 from 2012 to 2019," Fannie Mae economists said. "However, this represents a large deceleration from 2021's expected record house price growth of 17.3 percent."
Fannie Mae economists are keeping a close eye on recent increases in the average back-end debt-to-income (DTI) ratios of borrowers, particularly for first-time homebuyers, as an indicator of growing affordability issues.
"This measure is likely soon to meet or eclipse the recent high recorded in 2018, which precipitated a notable slowing in home sales following a rise in mortgage rates," they said. "For now, there appears to be ample prospective homebuyers engaging in bids to facilitate sales even as some drop out of the market completely, but the amount will likely lessen as the year unfolds."
However, Fannie Mae economists see a risk that some metro areas "have overheated and will experience at least modest price declines over the next year or two," singling out Boise City and Austin as examples "where there may be declines."
Source: Fannie Mae Economic and Housing Outlook, January 2022.
While a modest dip in home sales is expected this year, Fannie Mae economists see rising home prices driving a 10 percent increase in purchase mortgage originations, which are projected to hit $2.049 trillion this year. But rising mortgage rates are expected to gut the pandemic-fueled refinancing boom, with refi originations falling by 50 percent, to $1.289 trillion.
But if recent increases in mortgage rates hold, Fannie Mae economists say purchase mortgage volumes could be $33 billion lower in 2022 than they're currently forecasting, and that 2022 refinance volumes could be about 10 to 15 percent lower than forecasted.
The word "unprecedented" may have been a bit overused during the months since the pandemic began, but it definitely applies to the housing market across the United States.
A confluence of factors such as low mortgage rates, remote work, shortages of homes and building materials, along with wealth inequality exacerbated by the economic fallout from the pandemic led to a wild housing market in 2021, according to Redfin real estate brokerage's chief economist Daryl Fairweather. Redfin's real estate analysts reviewed housing statistics for 2021 and found the following 10 records that were broken:
Click here to view full article - https://www.redfin.com/news/housing-market-predictions-2022/
Data source: U.S. Census Bureau
· Urban Edge
Home sales in North Texas are slowing. But buyers aren't getting a price break. Almost 54% of the homes sold in the Dallas-Fort Worth area through September went for more than the asking price. That's higher than the nationwide average of properties that are pulling in more dough than the sellers are asking, according to a new report by Porch Group, a home sellers service firm. "In most years before the pandemic, the percentage of homes selling above asking hovered around 20% during off-peak times and around 25% during the busy summer season," analysts at Porch.com said. "In 2020 and 2021, however, the share has remained much higher than usual. Throughout 2020 and 2021, the market has seen steep increases in home prices as a growing number of buyers compete for a limited inventory of homes," the new report said. "These conditions have required bidders to be aggressive in their offers to beat out competitors, often offering amounts significantly above sellers' asking price."
DFW homes are selling for an average of 102% of asking price through the first three quarters of this year. "The latest rankings show that prices in some metro areas, such as Atlanta and Dallas, are rising rapidly, producing market premiums much greater than the last housing run-up about 15 years ago," the new Florida report says. Dallas-area home prices were up 25% year-over-year in the latest S&P CoreLogic Case-Shiller Home Price Index.
North Texas home sales by real estate agents have been down from a year ago in each of the last four months because of the shortage of properties on the market and growing affordability challenges.
Labor shortages, rising construction costs and supply chain issues have made it harder for Dallas-Fort Worth homebuilders to keep up with record buyer demand. As a result, the D-FW area is short 167,093 homes built between 2008 and 2020, the largest of any U.S. metro area, according to a new report by Zillow. Nationwide, there's a shortage of 1.35 million homes built since 2020, analysts say.
During the last 10 years, North Texas builders have started about 290,000 houses, almost 20% fewer than in the previous decade. At the same time, population in the area and demand for housing has boomed, creating a chronic shortage. "The implications of this shortfall are being felt now as home prices rise in Dallas and across the country," Zillow spokesman Mark Stayton said. "A limited supply of homes as demand has surged is a main driver of rapid home price growth during the pandemic."
Along with the D-FW area, the biggest building shortfalls have been in Miami (142,650), Phoenix (122,288) and Seattle (113,292), according to Zillow. North Texas homebuilders have been scrambling to catch up. The number of homes under construction in the area has jumped by almost 77% in the least year, according to Dallas' Residential Strategies. And D-FW builders have started a record almost 59,000 houses this year. But with huge backlogs of sales and buyers on waiting lists, it's unlikely that area new home construction will meet the unprecedented demand.
Ted Wilson, principal with Dallas-based housing analyst Residential Strategies, said demand for housing in North Texas has increased significantly because of the growing economy here, large numbers of young renters entering prime home buying ages and low mortgage rates. "In the 10 years leading up to the COVID pandemic, D-FW saw the net creation of about 1 million jobs," Wilson said. "During this period, due to housing affordability challenges, there were many would-be purchasers of homes that became renters instead. "This trend signaled to us that there was a building of pent-up demand for for-sale housing," he said. " The dramatic decline in the 30-year mortgage rate during the COVID outbreak has unlocked much of this demand as renters can now afford to purchase new homes." Wilson said many aging millennials are ready to buy houses.
Dallas-Fort Worth had the greatest third-quarter home sales decline of any major Texas metro area. But D-FW still topped the state in total properties sold by residential real estate agents. In the third quarter, area real estate agents sold 31,486 single-family homes — 9.3% fewer sales than in the same quarter last year, according to a report from the Texas Realtors Association. "Although we're seeing a slight decline in homes sold from the same period a year ago, it's important to remember we're comparing to 2020′s record-breaking numbers," Marvin Jolly, chairman of the Texas Realtors Association, said in the report. "Across the state, we're still experiencing strong demand for housing, and buyers are moving to Texas from all over the nation." North Texas single-family home sales by real estate agents have been lower than the previous year in each of the past four months. The drop in home purchases is due to a lack of properties on the market and record prices, which have kept some potential buyers out of the market, analysts say.
The pandemic-fueled Texas house-buying "frenzy" is in the rearview mirror, but it's being replaced by more long-run, sustainable rates of growth on the road ahead, according to a research economist for the Texas Real Estate Research Center at Texas A&M University. Housing sales growth and price growth have peaked and are slowing, the center's Luis Torres said. In addition, months of inventory, listings and days on market have bottomed and are beginning to rise. "Texas housing sales accelerated after the pandemic shut down the economy in March and April of 2020," Torres said. "This caused the already depleted inventory of homes for sale to reach historic low levels and led to exuberant home price growth." Texas Real Estate Research Center forecasts for 2021 and 2022 include expectations for strong demand, improving inventories, moderate price growth, and slowly rising mortgage rates.