Written by Taylor Wilson
With the recent increases in interest rates, the market has been moving into the third quarter about as expected. Especially when taking into consideration the yearly seasonal changes we see in the North Texas market. Inventory has finally started to catch up as buyer demand has shrunk to some degree,. This is demonstrated by our increase in months supply of inventory and the decrease in showings. Our buyer demand tends to drop annually with school starting in August, but compiled with increased interest rates and increases in home prices over the last two years has seemed to emphasize it.
We are finally seeing inventory levels comparable to 2020 and 2017, which is great news for perspective buyers. But don’t worry potential sellers, 82% of homes still sold within a month nationwide which historically is outperformed by North Texas. Collin Country has especially seen an increase in new listings in recent months.
So, what can we expect for the rest of the year and into 2023?
If you are a prospective buyer or agent working with buyers, this fall may be an ideal time to find success in the market. Interest rates have already seen new heights this year, landing at 5.66% at the moment. That change in rates have increased the average $400,000 loan by around $500 a month compared to rates earlier this year. Even in recent weeks, we’ve seen significant increases and the Fed’s recent announcements indicate that rates will likely continue to rise over the next year, and possibly into 2024. Although interest rates have influenced buyer demand and likely availability of homes for sale, I wouldn’t expect to see a decrease in pricing.
In fact, it could be expected that prices will continue to increase overall, but at a slower rate through the remainder of the year.
Average sales price dropped slightly from June to July but have increased again in August showing some short-term stabilization. Some higher end markets will likely see a price correction to some degree and areas outside of the metroplex will likely see some price corrections over the next few months as well. We do appear to be nearing the back end of the bell curve, which could be slightly seasonal but also could be signs of the pendulum entering the other side of the swing, as indicated by closed sales slowing…
And the increase in Homes For Sale, which is the number of properties available for sale at the end of each given month, as shown below.
However, aside from short term price corrections, I would not expect home prices to decrease in the long run. Home prices in 2022 were more than 20% higher compared to the same time last year, with most of the price growth being from February to June. 2021 saw a similar trend of low inventory in the first quarter and increased demand moving into the second quarter, causing increased competition driving prices higher. We can expect to see somewhat similar trends for the remainder of this year, with new inventory slowing moving into the holidays, as seen in past years and shown above. This expected shortening of supply means we can also expect to see repeated trends for early 2023, with increased buyer competition likely driving home prices higher through the Spring. Mortgage Applications are down 23% compared to this time last year, which means from a broad view we are seemingly trending toward a more balanced market. But this balancing is also relative to the price point you are competing in. Markets under $500,000 are seeing less added inventory and higher demand, as the price floor has been pushed up the past couple of years
Long story short, in my professional opinion, beating the incoming rise in interest rates should be something for any prospective home buyers to seriously consider. The DFW market has historically stayed stable, even through economically unstable times, and we don't expect to see any drastic crashes or even smaller dips in the market that would be strong enough to counter the increases in interest rates.