With home prices down but other costs up, are there any winners in DFW’s housing market?

Almost as quickly as it ratcheted up into a historic frenzy, the housing market in Dallas-Fort Worth is swiftly cooling.

To the relief of prospective homebuyers, home prices are finally plateauing.

Between August 2020 and May 2022, the median home price in Fort Worth jumped 48% from $248,000 to $367,000. In the three months since housing prices peaked in Fort Worth, the median home price dropped almost 5% to $350,000.

But that doesn’t mean it’s easy to find cost-appropriate housing in DFW.

Thanks to rising interest rates aimed at curbing inflation, you won’t feel the tides turn toward a buyers market when paying your mortgage.

A $300,000 house with a 20% down payment now costs $400 more a month than it would have six months ago.

Prices may be falling, but for DFW’s buyers, sellers and renters, navigating the housing market remains a challenge.

An abrupt change

Over the course of just a few weeks, competition for available homes dried up.

The white-hot pandemic housing market — marked by multiple offers well above the asking price — “seems to be a thing of the past,” said Shelby Kimball, a Realtor and former president of the Greater Fort Worth Association of Realtors.

In a study of houses purchased through Redfin, 41.9% of offers for homes in Dallas-Fort Worth faced competition in August, down from 53.6% in July and 65.6% in August 2021.

“The surprising thing to me is how quickly it changed. It seems to have decelerated very abruptly,” Kimball said.

From May to August, the number of active listings nearly doubled, from 1,224 to 2,207.

Buyers have backed off. Houses are staying on the market longer and many sellers are reducing prices, Kimball said. As a result, Realtors are seeing more open houses, which reflects that more marketing is required to sell a home than previously.

The prices aren’t dropping so much as they’re correcting, said Misty Michael, team lead for the Michael Team. A bubble isn’t bursting; the market is simply normalizing.

“It’s because sellers have been pricing above where comps were, thinking it could sell, and now it’s no longer selling,” she said. Taking cues from houses that experience price reductions after sitting on the market, real estate agents are practicing more restraint in pricing.

Buyers’ double-edged sword

DFW Realtors agree: It’s certainly better to be a home buyer now than it was six months ago. But that doesn’t necessarily mean it’s easy — especially for first-timers.

According to a recent report from Redfin, more than 15% of home purchase agreements fell through in August nationwide, an increase of about 3% over this time last year.

In Fort Worth, the rate is even higher, at 21.5% — the eighth highest among the country’s 50 most populous metro areas.

The report attributes these increased rates to more leverage on the part of the buyer due to less competition. Previously required to waive contract contingencies when buying a house in order to compete, buyers are now more easily able to cancel a contract if there’s an issue with the home.

Buyers are also canceling home contracts because of rising mortgage interest rates.

The Federal Reserve again increased interest rates by 0.75% on Sept. 21 and is poised to increase rates again before the end of the year. Freddie Mac puts the rate at 6.7%.for a 30-year fixed rate mortgage.

In a roundtable hosted by real estate company Opendoor on Sept. 27, Bill Head, a spokesperson at MetroTex Association, a real estate trade association in North Texas, recommended buyers “marry the house and date the rate.”

He and his family are looking to buy a new house, and he’s counting on the ability to refinance his mortgage in the future.

The industry is working to make it easier for buyers to take advantage of the cooling market amid mortgage rate volatility.

Opendoor announced the expansion of its finance app to the Dallas-Fort Worth market. The app helps buyers identify loan options.

Michael recommends buyers shop around for a lender and take advantage of programs, like Bank of America’s Home Grant program, which offers a lender credit of up to $7,500 that can be used on closing costs or to buy down the interest rate.

Renters and first-time buyers

Entering the housing market in the last two years has been extremely difficult for first-time homebuyers, said Michael.

With abundant competition, sellers chose buyers with cash or conventional loans over buyers with Federal Housing Administration or Veterans Affairs loans, which impose stricter requirements on the seller.

“A lot of them have gotten discouraged, because the market has beat them down,” Michael said.

The unsuccessful would-be first time home buyers continued to rent.

While housing prices have started to level off, with occupancy rates at historic highs and supply chain issues making construction more and more expensive, rent prices continue to grow.

Good news for the Metroplex’s many renters: that growth has started to slow.

According to data from ApartmentData.com, rent in Dallas-Fort Worth increased by an average of:

  • 18.8% during 2021
  • 14.4% between August 2021 and August 2022
  • 11.7% between May and August 2022

Among big Texas metros — Dallas-Fort Worth, Houston, Austin and San Antonio — rent growth is highest in DFW. Within the Metroplex, rent growth varies from neighborhood to neighborhood, said Shakti C’Ganti, CEO of real estate company Ashland Greene. It’s surging most in more suburban areas with highly ranked school districts.

“It’s a tale of a couple of different markets, several microclimates, within DFW. But I see that outer ring, 20 to 30 miles from each city center being like the path to progress, where the largest rent growth is going to take place,” he said.

DFW’s growth

While Dallas-Fort Worth reflects the national housing market in many ways, the Metroplex’s housing trends are bouyed by its consistent, rapid growth.

People keep moving here, and they’ll need places to live.

Growth “helps insulate the Dallas area from dramatic market shifts,” said Michael.

Even so, volatility has inspired caution in buyers and confusion among Realtors and experts trying to determine what comes next for these unprecedented times for the housing market.

“Given what’s happened in the last 90 days, there’s no way I could tell what’s happening in the next 12 months,” Head said.

 

 

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