What a year! We started the year with 3% mortgage rates and will end the year with 6% mortgage rates, a 20-year high. The doubling on rates actually occurred half way through the year, and the speed of this increase shocked our real estate industry. The Federal Reserve, in an attempt to tame the rising inflation, raised rates six times and appears to have made progress, as we have seen a leveling and less volatility in the mortgage market. The chief economist at the National Association of Realtors, Lawrence Yun, believes rates have peaked and won’t cross the high water mark of 7% reached in the fall.
Also exhibiting support is pricing. Although sales of single family residences in November were down 30% from this time last year, median sales prices, which have also softened in the second half of the year, were still 10% higher in November than a year ago, and down just 3% from September levels. Year to date, sales are down 11% in North Texas (-15% nationally) and median prices up 17% compared to the first eleven months of 2021.
What does this portend for 2023 and 2024? We start knowing that real estate is a cyclical industry and the best hedge against inflation of any asset class. Nationally, Yun expects a slowing in the sales decline, down 7% in 2023 compared to this year’s 15% drop but a better outcome in North Texas. He predicts median prices will begin stabilizing in the third quarter. In 2024, he sees a 10% increase in sales nationally and median prices rising 5%. The reason? The Fed is expected to reach its goal of 2% inflation, and correspondingly reduce the government’s borrowing rate. Mortgage rates have historically tracked this federal funds rate with a 2% premium, which could mean a 4% mortgage rate. When mortgage rates drop, home sales rise, as recently demonstrated.
Okay, if you are a buyer, what do you do? If you need to buy, then buy. Buy and then re-fi. There is no need for a 30-year mortgage. Consider a 20-year or 15-year or adjustable. Buy when everyone else is waiting for prices to fall 25%, when there is no panic buying, when you have a few more choices and can get the house you want, not the house you have to settle for. Inventory is still tight, buy you have time. We have seen another “up” cycle begin correcting itself. Many of us thought we were overpaying in the 70’s, the 80’s, the 90’s, even 10 years ago. Yet, look at how our equity has grown. You can’t time the market; just be confident in the future of your real estate investment.
Check out last month’s performance in selected sub markets in the list below:
Overall Single Family Market (North Texas):
Nov 22 vs 21: Sales down 30%, median price up 10%, DOM 44, up 76%
Oct 22 vs 21: Sales down 22%, median price up 11%, DOM 38, up 65%.
Sep 22 vs 21: Sales down 17%, median price up 13%, DOM 33, up 65%.
YTD 22 vs 21: Sales down 11%, median price up 17%, DOM 24, up 41%.
Overall Condos Market (North Texas):
Nov 22 vs 21: Sales down 49%, median price down 2%, DOM 40, down 13%
Oct 22 vs 21: Sales down 42%, median price up 23%, DOM 26, down 37%
Sep 22 vs 21: Sales down 17%, median price up 15%, DOM 29, down 19%
YTD 22 vs 21: Sales down 22%, median price up 11%, DOM 31, down 37%
Overall Townhome Market (North Texas):
Nov 22 vs 21: Sales down 16%, median price up 17%, DOM 57, up 68%
Oct 22 vs 21: Sales down 37%, median price up 18%, DOM 43, up 26%
Sep 22 vs 21: Sales down 21%, median price up 23%, DOM 40, up 18%%
YTD 22 vs 21: Sales down 16%, median price up 19%, DOM 34, down 11%.
Single Family Home Sales Trends:
Nov 2022: 5791 houses, $194/sf avg, 95% sold to asking
Nov 2021: 8283 houses, $177/sf avg, 101% sold to asking
Nov 2020: 8134 houses, $143/sf avg, 98% sold to asking
Condo Sales Trends:
Nov 2022: 196 homes, $228/sf avg, 96% sold to asking
Nov 2021: 382 homes, $207/sf avg, 98% sold to asking
Nov 2020: 320 homes, $184/sf avg, 96% sold to asking
Townhomes Sales Trends:
Nov 2022: 223 homes sold, $214/sf avg, 97% sold to asking
Nov 2021: 267 homes sold, $187/sf avg, 100% sold to asking
Nov 2020: 257 homes sold, $162/sf avg. 97% sold to asking
Here is a look at Single Family home sales by selected Cities for October YTD 2022 vs 2021:
Dallas: Sales 537 vs 755, Median Price $227/sf vs $209/sf, Sold vs Asking 95%
Richardson: Sales 48 vs 100, Median Price $210/sf vs $196/sf, Sold vs Asking 96%
Plano: Sales 145 vs 251, Median Price $207 sf vs $194/sf, Sold to Asking 96%
Frisco: Sales 155 vs 199, Median Price $237/vs $205/sf, Sold to Asking 93%
Highland Park: Sales 6 vs 10, Median Price $676/sf vs $524/sf, Sold to Asking 96%
University Park: Sales 12 vs 16, Median Price $525/sf vs $447/sf, Sold to Asking 93%
Southlake: Sales 25 vs 23, Median Price $318/sf vs $274/sf, Sold to Asking 90%
Colleyville: Sales 20 vs 33, Median Price $245/sf vs $233/sf, Sold to Asking 95%
Coppell: Sales 33 vs 41, Median Price $242/sf vs $203/sf, Sold to Asking 95%
Carrollton: Sales 68 vs 118, Median Price $204/sf vs $188/sf, Sold to Asking 95%
Farmers Branch: Sales 23 vs 27, Median Price $242/sf vs $212/sf, Sold to Asking 97%
Allen: Sales 48 vs 108, Median Price $220/sf vs $192/sf, Sold to Asking 97%
If you would like information for another city, call, email or text me!
Bob Edmonson, Allie Beth Allman & Associates, 214-563-8540