Mary’s Market Watch - Q1 2024

How Are We Doing So Far This Year?

• From buying food at the grocery store to making a home purchase, everyone continues to be haunted by the specter of high inflation. During March, the U.S. inflation rate exceeded 3%. For perspective, the target rate for inflation is 2% annually.

• Interest rates remain high with mortgage rates in the 7% range. 

• Since 2024 is a presidential election year, the current administration will endeavor to lower inflation and interest rates as much as possible in an effort to buoy the housing market and the general economy. Many of the current unknowns in our economy should gel once the election results are realized.  

• The highly publicized lawsuit with the National Association of Realtors® (NAR) that continues to garner much media attention will moderately change how residential real estate sales are transacted (in my opinion).

The Elephant in the Room:  the NAR Settlement

• Brief Overview.  NAR was sued by home sellers for its commission structure, claiming it was in violation of antitrust laws. After several years of litigation, including class-action suits, NAR settled for $418 billion on March 15, 2024. This deal, which still needs Federal approval, would settle multiple lawsuits against the association and several major brokerages. As part of this settlement, NAR has agreed to change its compensation policy for buyer agents among other things. According to NAR, “the agreement would release NAR, over one million NAR members (NAR has roughly 1.5 million members), all state/territorial and local REALTOR® associations, all association-owned MLSs, and all brokerages with an NAR member as principal whose residential transaction volume in 2022 was $2 billion or below from liability for the types of claims brought in these cases on behalf of home sellers related to broker commissions.” NAR members are included in this settlement unless they are an employee of Douglas Elliman, Inc.; Douglas Elliman Realty, LLC; eXp Realty, LLC; eXp World Holdings, Inc.; Hanna Holdings, Inc.; HomeSmart International, LLC; Howard Hanna Real Estate Services; Redfin Corporation; United Real Estate; or Weichert, Realtors® OR are associated with HomeServices of America or one of its affiliates. 

• Required Changes.  According to the terms of the settlement, certain practice changes are required to take place in late July 2024. Two certainties will impact how U.S. residential real estate sales will be transacted effective late July 2024.  

1. NAR has agreed to ban all offers of compensation on the Multiple Listing Service (MLS). Buyer brokers (and thus their agents) will receive compensation through fixed-fee commission paid directly by the consumer, a concession from the seller or a portion of the listing broker’s compensation.

2. MLS participants, specifically, realtors who are working with buyers, will be required to have a signed buyer representation agreement between the broker and the buyer before touring a home.                          (Source: National Association of Realtors® NAR Settlement FAQS, updated April 26, 2024.)

A Deep Dive into the Data

U.S. Real Estate Market

• Mortgage Rate.  Inflation has continued to remain high despite the interest rate hikes by the Federal Reserve, which will continue to keep rates relatively high until inflation sustainably cools to the Federal Reserve’s 2% inflation target. If rates remain at their current levels, discretionary purchasers may postpone their next home purchase, as many already have. However, life events often spur home purchases by select buyers who are looking to move after becoming a parent, starting a new job or getting a divorce. As of April 26, 2024, the average 30-year fixed mortgage rate was 7.43%. (Source: Graham, Matthew, “Mortgage Rates Recover Some of Thursday's Weakness After Friday's Economic Data,” Mortgage News Daily, April 26, 2024.)

• Jobs Market.  U.S. job growth exceeded expectations in March, ending Q1 2024 on a strong economic note. Job gains averaged 276,000 per month during Q1 2024 compared to the average 212,000 per month during Q4 2023. The U.S. unemployment rate ticked down to 3.8% in March, which is a decrease from 3.9% in February. (Source: Mutikani, Lucia, “Strong U.S. labor market underpins economy in first quarter,” Reuters Macro Matters, April 5, 2024.)

• Home Sales, Price and Inventory.  Despite challenges in the housing market, pending homes sales, meaning contract signings, increased by 3.4% in March 2024, their highest level for the year. It is forecasted that home prices will moderate but will continue to remain high. As home sales steadily rise, NAR is projecting that home prices will surge to record highs, rising in line with inflation and wage growth over the next two years. (Source: Tracey, Melissa Dittman,“Contract Signings Reach a New High for 2024,” NAR Realtor® Magazine, April 25, 2024.)

• Multi-Family Market.  Nationwide, it is expected that fewer new multifamily projects will commence during 2024 due to higher interest rates, stubborn inflation and general economic uncertainty, partly due to the upcoming presidential election. This comes after 2023 saw a record number of new apartments completed, totaling 444,000 units nationwide. This represents the largest number of new apartments added in 36 years. (Source: Butler, Anna, “Fewer multifamily construction projects expected to get underway in 2024,” Dallas Morning News, February 20, 2024.)

• Home Insurance.  Due to an increased frequency and severity of natural disasters, home insurance rates may reach a record high in the U.S. this year and are expected to average an annual $2,522. Texas is projected to have the fifth-highest insurance rate in the country, averaging an annual $4,437 for home insurance. (Source: Bloomberg Wire, “U.S. home insurance premiums may hit a record this year, report warns,” Dallas Morning News, April 2, 2024.)

The Texas Economy

• Job Performance.  Texas continues to have impressive job growth, averaging a 2% annual growth rate with 19,100 new jobs added during March 2024. The unemployment rate for the State was 3.9% in March. (Source: Martin, Arcelia, “More than 19,000 jobs added across Texas in March, according to new estimates,” Dallas Morning News, April 19, 2024.)

• Population Growth.  According to the U.S. Census Bureau, Texas counties accounted for eight of the top 10 counties in the country for population growth by percentage. DFW gained about 418 new people every day, or a total of 152,598 new people from July 2022 to July 2023. (Source: Adriano, Jose Luis and Wooten, Nick, “Texas boasts eight of the nation’s top 10 counties for population growth,” Dallas Morning News, March 18, 2024.)

DFW Residential Real Estate Sales 

(Source for bullet points below: Wooten, Nick, “North Texas home sales fell 7% in March,” Dallas Morning News, April 15, 2024.)

• Home Prices.  Home prices continue to climb. The median home price in DFW slightly rose by 1.3% to $395,000 from March 2023 to March 2024.

• Home Sales.  North Texas home sales fell by 7% in March due in part to high mortgage rates. This decline in home sales also characterized 2023 with an overall decrease of 9% in North Texas home purchases. This seemed to change briefly during January 2024 when home sales significantly grew by 12.5%. However, this turned out to be a blip on the radar as sales declined again in February by 1.1%.

• Inventory.  There were a total of 22,449 active listings in March 2024, which represents a notable increase of 34.8% from March 2023. Inventory also increased to an average of 3.0 months as of March 2024, which is up from an average 2.1 months in March 2023. A balanced market has 6.0 months of inventory.

• Velocity of Sales.  Homes stayed on the market for slightly fewer days, averaging 84 days on market in March 2024, which is 8 fewer days than in March 2023. 

New Home Sales Market 

• North Texas home builders saw a robust start to 2024 as they began construction on 14,217 new units, an increase of 44.7% over the 9,828 new units begun during Q1 2023. New home sales represent 40% of the total home sales market according to Residential Strategies, a market research company that focuses on the Texas new home industry. (Source: Wooten, Nick, “North Texas home builders got a hot start to 2024. Why? And will it continue?” Dallas Morning News, April 12, 2024.)

Food for Thought:

“Texas continues to be a top place for growth and economic success with thousands of jobs added by employers in March. Our world-class workforce of talented Texans attracts employers from many expanding industries.”

          Bryan Daniel, Chairman of the Texas Workforce Commission

(Source: Martin, Arcelia, “More than 19,000 jobs added across Texas in March, according to new estimates,” Dallas Morning News, April 19, 2024.)