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."
April 2022 Nationwide
27% Decrease in Sales from April 2021
12% Increase in New Listings over April 2021
We are in a Changing Market
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.
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