Mary’s Market Watch

Dallas is booming!

• DFW is one of the fastest-growing cities in the U.S. and has a thriving economy.

• The jobs market in DFW continues to see significant growth, which attracts in-migration to the area. People follow the jobs! Goldman Sachs, Caterpillar and Charles Schwab are examples of major corporations calling DFW their new home.

• Investor dollars keep coming to North Texas from state-side and abroad.

• All of this means people are buying and renting properties.

Changes in the Marketplace

• North Texas remains a seller’s market, but residential real estate sales are beginning to tilt more in favor of buyers with fewer home sales, lower prices, longer time on market than a year ago.

• There is significantly more demand for new-construction housing, in part, due to low housing inventory and the reluctance of homeowners to put their existing properties on the market.

• Mortgage rates hit over 7.0%, their highest level in 21 years, on August 17, 2023.

• Texas property owners are slated to receive the largest property tax cut in history assuming voters pass the respective legislation this fall.

In summary, the ever-dynamic DFW real-estate market will continue to excel in most areas relative to other markets in the country.

A Deep Dive into the Data

Below is a deeper dive into the data and trends for your review.

U.S. Real Estate Market

• Interest Rate. The Federal Reserve paused raising the federal funds rate in June 2023, which is the first break in 15 months of consecutive increases. The Federal Reserve has been raising rates to combat the red hot inflation that has been plaguing our economy. All of this negatively affects home buyers and the consumer by increasing the cost of borrowing that includes credit card rates, auto loans and home mortgages, meaning you buy less house for more money. (Source: Picchi, Aimee, “The Federal Reserve is pausing rate hikes for the first time in 15 months. Here's the financial impact." CBS News on June 14, 2023.)

• Mortgage Rate. On August 17, 2023, according to the Federal Home Loan Mortgage Corporation or FreddieMac, the average 30-year fixed loan came in at 7.09%. This is due, in part, to the recent downgrade of U.S. debt. The mortgage rate is also influenced by the federal funds rates. Generally, as the federal funds rate rises, mortgage rates will also increase.

• Rent. Rent has not calmed down and continues to be high.

• Apartment Construction. Annual apartment construction is at a 40-year high.

• Sales. Overall home sales are weaker and below pre-Covid levels, and newly constructed home sales are back to pre-Covid levels.

• Prices. Nationwide home prices declined by 2.4%, according to the latest survey by the National Association of Realtors.

• Jobs Market. The U.S. jobs market has returned to pre-pandemic levels.

• New-Construction. Constrained housing inventory is turning more prospective buyers to new construction. In fact, Berkshire Hathaway Inc. took note of this trend and recently purchased $700 million worth of shares in Arlington-based homebuilder D.R. Horton, the biggest homebuilder by volume in the country (Source: Hethcock, Bill "Warren Buffett’s Berkshire Hathaway buys over $700 million in Arlington-based D.R. Horton stock," Dallas Business Journal, August 16, 2023).

Texas Economy

• Overall Performance. The Texas economy continues to be upbeat with a strong labor force and slower inflation. Contrary to many predictions, the "housing bubble" did not burst in Texas where a decline in supply and demand struck a balance. Instead, Texas saw a slight boost in overall median housing prices with 0.3 - 0.4% growth every month during the first half of 2023. (Source: Roberson, Joshua; Yan, Weiling; and McMeans, Koby, "Texas Housing Insight," The Texas Real Estate Research Center at Texas A&M University, August 15, 2023.)

• Property Tax Relief. The Texas House and Senate struck a deal this summer on property taxes that should provide relief to Texas property owners once voters pass the plan in a constitutional election in November, which would take effect for the 2023 tax year. This would be the largest property tax cut in Texas history totaling $18 billion and includes reducing school rate taxes as well as increasing homestead and franchise exemptions. (Source: KVUE Staff, "Answering your questions about Texas lawmakers' $18B property tax relief plan," KVUE, July 12, 2023.

North Texas Market

• Population Growth. North Texas had the fastest-growing metro area in the United States from July 2021 to July 2022, with an annual growth of more than 170,000 people, Census Bureau data shows. North Texas is the fourth-most populous metro area after New York, Los Angeles and Chicago (Source: Adriano, Jose Luis, "North Texas metro areas lead nation in population growth," Dallas Morning News, May 22, 2023).

• Home Prices. Area home prices are 47% higher than they were in March 2020 before the pandemic. According to Jim Gaines, the housing economist for the The Texas Real Estate Research Center at Texas A&M University, while the area has seen declines in home prices, "Dallas-Fort Worth's population growth and high employment are keeping prices afloat" (Source: Parton, Mitchell, "D-FW housing market not seeing a bubble burst, or even much lower home prices," Dallas Morning News, August 18, 2023).

DFW Residential Real Estate Sales

• Home Prices. Median home prices in DFW are down by 3.8% to $410,000 in June 2023 compared to June 2022. However, according to a recent report from the North Texas Real Estate Information Systems and The Texas Real Estate Research Center at Texas A&M University, DFW home prices remained the same from June to July 2023 after five months of gains and haven't changed much from a year ago — the median home price for pre-existing homes only fell by 1% from July 2022 to July 2023 (Source: Parton, Mitchell, "D-FW housing market not seeing a bubble burst, or even much lower home prices," Dallas Morning News, August 18, 2023.)

• Home Sales. Home sales declined by 4.8% to 9,415 in June 2023. This number is a result of low inventory and high mortgage rates.

• Inventory. Inventory is at 2.5 months compared to 1.8 months in June 2022, which is far from a balanced market between buyers and sellers. A balanced market is considered 6 months or 180 days.

• Velocity of Sales. Days on market are up to 73 in June 2023, which is 18 days more than in June 2022. This is a relatively short period of time to sell a property.

(Source: Metrotex's online June 2023 Housing Report for DFW Metroplex)

DFW Rental & Investor Market

• Residential Rent. Residential rents in DFW rose by 9.1% from a year ago; rents remain stubbornly high. (Source: Halkias, Maria,“Dallas-Fort Worth inflation slowed, but rent and restaurant prices still rising," Dallas Morning News, June 13, 2023.)

• Apartment Rent. DFW apartment rent recently saw the smallest increase in more than a decade. According to Jay Parsons, top economist for RealPage, year-over-year apartment rent increases were close to zero in July for DFW. (Source: Brown, Steve, “D-FW apartment dwellers finally get break from rent increases in July,” Dallas Morning News, August 11, 2023.)

• Investors. Investors purchased about 30% of all single-family homes in the Dallas-Fort Worth area in 2022 (Source: Parton, Mitchell, “Investors bought 30% of homes in D-FW last year," Dallas Morning News, March 19, 2023).

North Texas Multifamily Market

• Apartment Supply. According to Steve Brown of the Dallas Morning News, “North Texas is the country’s fastest-growing apartment market with more than 65,000 units being built in year area at the end of 2022” (Source: Brown, Steve, "Exclusive residential tower on the way near Highland Park," Dallas Morning News, February 21, 2023).

I am a real-estate broker and have lived in the DFW area for more than 25 years. If you would like any information on real estate, in general or pertaining to a specific situation, please let me know. I am always happy to share my knowledge and expertise.

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