Mary’s Market Watch - Q2 2024

It’s a Mixed Brew 

The current North Texas housing market is full of seemingly contradictory data. The inventory of properties on the market has recently seen notable increases, but it is still a buyer’s market. Home prices remain high with fewer home sales that are taking longer to close. Interest rates are elevated, as the inflation rate is beginning to moderate. Housing affordability continues to be a growing issue.

What’s unusual in this market is there is a supply bump at play, which appears to be fueled by more higher-priced home sales that skew the data. Yet, this bump has not yielded a downward effect on home prices.

Furthermore, investors, buyers and sellers are waiting for the Federal Reserve to lower the interest rates and the Presidential election to conclude.

To boot, other markets such as the stock market and commercial real estate are shifting a bit in anticipation of the aforementioned.

Without question, you can bank on one certainty in this market:  there are many unknowns. The silver lining is that there is plenty of pent-up demand that bodes well for the future real estate market.

The NAR Lawsuit Update

On July 29, the National Association of Realtors® (NAR) began implementing practice changes as a result of the NAR settlement agreement. Specifically, compensation can no longer be mentioned in the Multiple Listing Service (MLS). In fact, the buyer agency compensation field in MLS listings has been completely eliminated, and agents will be fined for any workaround they do to communicate compensation via the MLS. 

As of August 17, homebuyers must enter into a Written Buyer Agreement before being shown a property by a realtor. This requirement is to promote greater transparency for buyers and buyers’ agents regarding compensation.

September will see the anticipated motion in support of final approval of the NAR settlement agreement, and in late November, the hearing for final approval is anticipated to take place.

(Source: “NAR Settlement FAQs,” National Association of Realtors®, July 23, 2024.)

A Deep Dive into the Data

Interest rates are a major factor in real estate purchases, since they guide the mortgage rates, which can decelerate and accelerate sales activity. The Federal Reserve, which is meeting later this week, is anticipated to cut interest rates later this year, most likely in September, and possibly four more times in 2025. This would buoy real estate sales.

U.S. Real Estate Market

• Mortgage Rate. As of late, mortgage rates have remained relatively flat. On July 25, the average 30-year mortgage had a rate of 6.78%, which represents a decrease of 0.5% from the peak earlier this year. Once the Federal Reserve cuts the interest rates, the mortgage rates should continue their decline. (Source: “Mortgage Rates Show Little Movement,” Freddie Mac, July 25, 2024.)

• Home Sales, Price and Inventory. In June existing-home sales fell by 5.4%, as the median home price reached a record high of $426,900. Inventory is rising as homes sit on the market longer. June saw the national housing inventory increase by 23.4% from a year ago, while the average months on market increased to 4.1, up from 3.1 months from the previous year. For perspective, a balanced market between buyers and sellers is a 6-month inventory. According to NAR’s Chief Economist Lawrence Yun, “We're seeing a slow shift from a seller's market to a buyer's market." (Source: Green, Troy, “Existing-Home Sales Slipped 5.4% in June; Median Sales Price Jumps to Record High of $426,900,” National Association of Realtors®, July 23, 2024.)

The Texas Economy

• Job Performance. According to the Texas Employment Forecast, the Texas jobs market will increase by 1.9% during 2024, suggesting that 266,100 jobs will be added during this year. Texas employment growth has decelerated a bit with a 0.2% decrease in June as the labor market has started to show signs of cooling. (Source: “Texas Employment Forecast,” Federal Reserve Bank of Dallas, July 22, 2024.)

• Residential Real Estate Inventory. The number of Active Listings in Texas grew by 40.8% during Q2 2024 compared to the same period last year, and in Dallas they were up by 44.7%. This is a striking development in my humble opinion. (Source: Andrews, Jeff, “Texas housing inventory jumps 40%, but prices stay flat,” Housing Wire, July 19, 2024.)

DFW Residential Real Estate Sales 

(Source for bullet points below: Metrotex in conjunction with the Texas A&M Real Estate Research Center, “June 2024 DFW Metroplex Housing Report,” Metrotex, July 2024.)

• Home Prices. In June, DFW saw the median home price decrease slightly by 1.2% to $405,000 compared to June 2023.

• Home Sales. The number of sales that closed during June was down by 11.6% to 8,276.

• Inventory. Active listings in Dallas were up by 44.7% to 27,901 in June, and the months of inventory increased to 3.8 from 2.5 in June 2023. As noted above, a balanced market is 6 months.

• Velocity of Sales. Sales took 78 days to market and close, which is 5 days longer than in June 2023. 

Multifamily & Rental Market

The pipeline for multifamily projects in DFW is forecasted to increase due to the consistent job and population growth coupled with the need to house these residents. At the end of 2023, developers were building 69,370 units with the expectation that 50,000 new units would be delivered during 2024. A falloff is anticipated to take place from 2025 through 2027, which would, in turn, yield rent growth and minimal concessions. Commercial investment in the DFW multifamily market continues to outpace comparable national markets. (Source: "Dropoff in New Construction Will Drive Future Rent Growth in Dallas,” Multifamily & Affordable Housing Business, June 20, 2024.)

The rental market saw minimal changes in rent growth during June. In Dallas, apartment rents declined by 0.4% to $1,376 from last year, while the average US apartment has an average rent of $1,534 with rent growth of 0.7% over last year. (Source: Pirulis, Alecia, “Apartments.com Rent Report for June 2024: Rent Prices Remain Steady,” Apartments.com, July 12, 2024.)

New-Home Sales Market 

The market for homebuilders has cooled a bit during the Q2 2024. New-home starts between April and June dropped by 5.1% to 13,942 from almost 15,000 in Q2 2023 according to Residential Strategies, Inc., a Dallas market research firm that tracks the new-home industry in Texas. This slowdown mirrors the decline in new-home sales from May to June. 

In a nutshell, high interest rates, a slowdown in jobs and relocations as well as a buildup of finished inventory are driving this slowdown. Builders are hoping this will change once the interest rates come down. (Source: Wooten, Nick, “Hot start for North Texas homebuilders in 2024 has cooled slightly. Here’s why,” Dallas Morning News, July 11, 2024.)

North Texas Lake Houses 

Demand for lake houses has not cooled this summer despite the high mortgage rates since many lakeside buyers pay cash for their vacation home amidst relatively limited supply. 

According to the brokerage Lake Homes Realty, LLC, total sales in May were up from spring. At Cedar Creek Lake, home sales increased by 5.2% to $552.9 million, while Lewisville Lake saw an increase in sales of 7.8% to $830.3 million.

In DFW, the average price for a waterfront property is $1.3M according to DFW Urban Realty. It is worth noting that part of the price increases in lakefront real estate is seasonal since prices jump as temperatures rise. (Source: Rosas, Leonardo, “High interest rates haven't dampened demand for lake houses in the Dallas area,” Dallas Business Journal, July 9, 2024.)

Food for Thought:

"A funny thing happens in real estate. When it comes back, it comes back up like gangbusters." 

- Barbara Corcoran, American businesswoman and investor