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."
North Texas home sales dropped in September by the largest percentage in more than seven years. Preowned home sales in the area fell by 7 percent from September 2017. That was the biggest year-over-year sales decline since early 2011, according to data from the Real Estate Center at Texas A&M University and North Texas Real Estate Information Systems. Home sales by real estate agents have been down in three of the last four months. Higher mortgage costs and years of rising home prices have caused some buyers to pull back from the market. Mortgage rates on average are currently about 4.7 percent — the highest level in seven years — and are expected to go higher in 2019. With September's sales decline, preowned home sales by real estate agents in North Texas are now flat with the same period of 2017. A record of more than 106,000 homes sold in the area last year. "We think things are going to be flat," said Dr James Gaines, chief economist for the Real Estate Center. The Dallas-Fort Worth housing market has cooled significantly since early in the year when sales were still up by double-digit percentage rates from 2017 levels.
Home price growth has also slowed. Median home sales prices rose by 4 percent in September from a year earlier to $251,000. For the first nine months of 2018, prices are up 5 percent from the sale period in 2017. With sales declining, the number of houses on the market in North Texas has growth to 25,895 preowned single-family homes listed with real estate agents at the end of last month. That's 16 percent more homes for sale in the area than a year ago. On average it took 44 days to sell the houses that trade in September — up 5 percent from a year earlier. Currently there is about a 3-month supply of homes available for purchase in the more than two dozen North Texas counties included in the survey.