Dallas Housing Market Update November 2022

Hi there, Dallas-Fort Worth

Did you see the news? You know, the bad stuff about the housing market?

Headlines like, “Collapse in Dallas-Fort Worth home sales worse than Great Recession,” or this one that the “average new home price in Dallas-Fort Worth down by $10,000.”

They’re headlines to get you to click and it’s working. This month I’m looking at the actual numbers and not the headlines so you can see what’s really happening in our local market right now and I’m going to compare these stats to our pre-covid era market so you can see if this price drop is or isn’t typical. So, keep watching to see where we really stand.

Hi there, I’m Jennifer Shannon. I’m a Realtor with Keller Williams and in this month’s market update I’m going to take some of these recent headlines and go into the data to show you what’s really happening. And of course, I’ll hit the October sales data so you can see where we are overall.

Let’s start with interest rates. The latest data from Freddie Mac has them as 6.95% with .8% in fees and points. Now that report was published on November 3rd, so it will be interesting to see where rates go now that the FED did, indeed increase the federal funds rate by the 75 basis points that were expected. Because the markets expected this increase, it had actually been priced into mortgage rates at the time of the meeting. What wasn’t expected was the statement from the FED that “ongoing increases in the target range will be appropriate…” So we’ll see how that affects rates this upcoming week.

 When we look at the unadjusted purchase index, which shows mortgage applications, we see that applications last week were down 41% from one year ago. Just like last month’s update, that’s a really big drop.

So we’re seeing this on a national scale but what’s actually happening here?

Well I’ll start with those two headlines that I called out at the intro.

Let’s start with this one: “Collapse in Dallas-Fort Worth home sales worse than Great Recession”

To be clear, the data point they’re referring to is the number of home sales, not the prices of homes. For October, we had 27% fewer sales than last year. When we look at the number of sales in October of this year and compare it to 2019, we are down 17.5% in the number of homes sold.

We still have a lot of people buying, it’s just not as many. In fact, we are still technically in Seller’s market territory. We only have 2.8 months of supply. In October 2019, we had 4.3 months of supply. In 2018, we had 4.1 months of supply. We just have 34% fewer homes for sale now than we did in October 2019.

So why are we selling so few homes?

Well first, we’re all aware buyers are taking a little break from the market right now. Because sellers don’t want to list their homes to an audience of crickets, they’re not listing them to sell. They also don’t want to give up their current interest rate if they don’t absolutely have to, so they’re staying put. 

So we are right back to having major inventory issues. On top of this, builders are pulling back on new construction, so we’re going to have supply issues from all sides. And that’s going to be a really big problem for us when buyers decide to enter into the market again. When rates start to go down, this inventory shortage is going put us back into the multiple offer madness we just got out of. Now, it’s possible we’ll see more listings when sellers get more comfortable with the number of buyers getting back into the market, but there’s a big gap to make up for. And this is why I’m so bullish for buyers right now and want to encourage you to get into the market. The mortgage rate you pay can change, you won’t be able to change what you paid for the house.

And the people I want to get so excited about the market of the moment are the first-time home buyers. In the last market run-up, we saw a lot of this type of buyer get priced out of the market because investors were outbidding them and coming in with all cash. The first-time home buyer couldn’t compete. Well that dynamic has changed dramatically and first time home buyers actually have a fighting chance. If that’s you, let’s talk about getting you into something now before the feeding frenzy picks back up.

And about the “collapse” in sales, prices are still up 10.7% year over year. We actually went up month over month. This isn’t always common from September to October, but that’s exactly what happened in 2019. From September to October, the average sales price went up .3%. This year, the price went up from $443,022 to $445,366, or .5%.

I actually did some digging around on the data because I was curious to see how much our prices swing in a few month period. So I looked at data from September 2017 through January 2020. If we take the months of September, October, November, December, and January, we get a very surprising range. Over that five month period, the highest sales price is in December and the lowest of that range is the next month, in January.

The drop from December 2017 to January 2018 was 8.7%

December 2018 to January 2019 went down 8.2%.

December 2019 to January 2020 went down 5.5%.

What this tells me is that big pricing swings happen all the time and it doesn’t mean the market is crashing. But that does not make for an exciting headline. So I refuse to hop on the click bait bandwagon with these scallacious headlines only to increase my audience. I’m using real, actual data for my reporting and my experience as a Realtor and broker in the industry with over 16 years of having my real estate license.

And to drive this point home even more when it comes to price swings in a typical year, let’s look at the highest and lowest amounts for this year so far. Our peak average sales price was $490,187 in June. Our lowest average sales price this year was in September at $443,022. That is a drop of 9.6%. You know what’s crazy, that’s almost identical to the swing we had in 2018. 

Back to the data.

In 2017, our best month (June) and worst month following that peak (October) had an 8% drop.

In 2018, our best month (June) and worst month following that peak (October) had a 9.4% drop.

In 2019, our best month (June) and worst month following that peak (November) had a 6.8% drop

The market isn’t really behaving any different than past markets. And those were markets that weren’t facing a recession. So the fact we’re still doing as well as we are, tells me Dallas is so insulated from what’s happening elsewhere and we are primed for a super competitive market when things turn around.

Now for that second headline I mentioned in the intro, “Average new home price in Dallas-Fort Worth down by $10,000.”

Currently, the average sales price for a new home in October 2022 was $505,649. So that means prices are down 2%. 

Okay, should we panic? Well, again, let’s look at what has happened in the past.

We’ve seen much bigger price reduction percentages than that. From September to October in 2019, prices went down $9,540, or 2.6%. When we look at what happens in December to January, we see major price drops. In 2017, prices went down $18,815 or 5%. In 2018 that month to month swing was $11,676, or a 3.2% drop. In 2019, prices dropped $17,006 month to month, or 4.5%. And looking back, we’d call those normal markets.

So, please don’t get caught up in the crazy headlines. Because when you compare what’s happening now to the past, we’re actually just behaving normally. And again, I want to emphasize that these are normal price fluctuations when things are pretty dismal with the economic outlook. Which, again, is why I’m so pro-buying right now. That if things are normal now, what’s going to happen when more buyers get more confidence in the market?

Could I be wrong, sure. There are a lot of smart people trying to time the market. The problem with timing the market is you only know when a market is the best once it has passed. This is why local data is so important and not going off of anecdotal stories and general, national data.

Okay, maybe it’s time for me to get off of my soapbox and get you the rest of the numbers.

For our local numbers, I’m looking at sales data from October from our entire MLS. The average sales price went up from last month to $445,582. So, right out of the gate we have some really great news. That’s a 10.7% increase from where it was the year before. 

New listings went down for the 4th month in a row to 11,987 homes. We have 3.3% fewer new listings than last year.

The overall number of homes for sale took a big leap from last year with a 67% increase and we currently have 28,634 homes for sale. We’re still below our pre-Covid level of inventory when we had 43,454 homes for sale in October 2019.

We now have 2.8 months of inventory. In October of 2019 we had 4.3 months of inventory.

The time it takes for a home to go under contract is an average of 36 days, up four days from last month. In October 2019, it took an average of 55 days before homes went under contract.

Our average sales price per square foot for DFW stayed the same from last month and is now at $199 per SqFt. It’s up 11.2% from last year.

The amount homes are selling for as a percentage of the asking price has dropped for the sixth month in a row and is now averaging 95.5% of the asking price. This is a big drop from where we were, yes. But I think a few things are happening. First, sellers are still starting high with their pricing, hoping to be the outlier to still get a sales price close to the peak level. But, we’re also right on track with where we were in October of 2019 and 2018. Yep. Three years ago, homes were selling for 95.3% of their asking price. In October of 2018, they sold for 95.6%. 

So, again, our numbers aren’t anything to be fearful of.

Now buyers, I want to talk to you a little bit. I get it. Interest rates are higher than they’ve been in the past. And houses are more expensive so your payment is higher than it would’ve been a year ago and that’s a hard reality to face. You may be hearing something called a 2-1 buy-down. It’s becoming incredibly common right now to help buyers buy something now and give you two years of reduced mortgage payments and you just refinance when rates go down.

Here’s how it works. 

It’s not a variable interest rate. It’s today’s interest rate. For the first year, your out-of-pocket expense is as if the interest rate was 2% less. For the second year, your out-of-pocket expense is as if the interest rate was 1% less. The seller pays this difference for you.

So let’s take a loan amount of $400,000 at a 7.5% interest rate. Your principal and interest payment on that would be $2,797. To do a 2-1 Buy-Down, you’d calculate the principal and interest payments at 5.5% for year one and 6.5% for year two. Then you’d subtract those from the 7.5% payment.

So for year one, the principal and interest payment of a $400,000 loan at a 5.5% interest rate would be $2,271/month. That’s a difference of $526/month. When you multiply that times 12 months, you get $6,312. That’s the buy-down for year one.

For year two, the principal and interest payment of a $400,000 loan at a 6.5% interest rate would be $2,528/month. That’s a difference of $269/month. When you multiply that times 12 months, you get $3,228.

Then you add the buy-down from year 1 of $6,312 plus the one from year 2 of $3,228 to get a total buy-down rate of $9,540. This is the buy-down concession you’d need at closing.

This is paid by the seller at closing and the lender sets this money aside at closing into an escrow account that pays these monthly differences on the loan for you.

Now, you want to make sure you’re working with an agent who knows how to write this up in your offer so the title company doesn’t apply this concession to other closing costs and that your lender know to set up the escrow account for these payments. I have a great lender who does these and I’d love to make that connection for you if you’re considering a home purchase.

So, if you’re now thinking that buying might be in the cards for you, let’s talk. We work with buyers who are just starting out all the way to estate purchases and we have sold everything from historic homes up to new construction. Let’s hop on a call to get started and you can reach me by phone or text at 214-803-4444 or start with an email to jshannon@kw.com

If selling is on your radar, the market is back to being competitive and the presentation of your home is critical. You can no longer just put a sign in the yard, pick your price, and get listed on the MLS.

This is why we put a lot of focus into how your home is presented, promoted, and positioned. That means bringing in a home stager and even bringing in furniture for select listings if needed. Creating a website for each of our listings. Hiring a professional photographer. Producing a video. Buying digital ads and so much more.

Our team has closed 244 deals worth over $113 million this year alone. We know what it takes to get homes sold in this transitioning market and leverage all these lessons learned for the benefit of our clients.

So if you’re ready to get started on selling or buying your home, just reach out to me by phone or text at 214-803-4444 or by email at jshannon@kw.com. I’d love the opportunity to interview with you to earn your business.

Well Dallas Fort Worth, that’s all I have for this month’s update. I look forward to updating you next month on what’s happening in our real estate market. 

Bye now!