Mary's Market Watch - Q3 2024

Waiting…. Just Waiting… For the Election 

It can go without saying that we are all waiting for the Presidential Election to take place and for a new President to be announced. Until then, much is in flux, economically and otherwise.

Of course, real estate continues to be ever-changing. Home prices have continued to break records, but price growth is starting to slow in response to the robust increases in inventory and lackluster demand.

A Deep Dive into the Data

While it is still a seller’s market, market indicators such as velocity of sales and closing time (the time from listing a property to closing it) increasingly point to more favorable conditions for buyers, giving them more leverage when negotiating with sellers. Strangely, mortgage rates have been increasing despite a 0.5% decrease in the interest rate during September by the Federal Reserve Bank. 

Irrespective, we’re literally in a good place! Texas has a strong economy and remains a national leader on several fronts.

NAR Lawsuit Update

The settlement that was agreed to on March 15, 2024, is pending final court approval with a hearing set for November 26, 2024. If approved, this settlement would require the National Association of REALTORS® (NAR) to pay $418 million over the next four years in order to resolve pending claims.

U.S. Real Estate Market

Demand for homes has recently declined due to higher mortgage rates, the continued appreciation in home prices and an increase in inventory. Many homebuyers are simply staying in place in order to hang onto their lower mortgage rates. This phenomenon is termed the ‘lock-in effect’, which is affecting more than half of the homeowners whose mortgage rates are less than 4%. 

• Mortgage Rate. The recent hike in mortgage rates to around 7% is creating a hardship for many prospective buyers since an increase in the mortgage rate equates to an increase in monthly mortgage payments, or in English, buyers are able to buy less house for the same money. This is not good news!

Why in the world would this happen when the Federal Reserve Bank just recently lowered the interest rate in September?

First, the mortgage rate does automatically track in-step with the interest rate. There is often a lag between changes between the two.

Second, noise in the market can cause these rates to deviate from one another as is the case now. The recent confluence of variables ranging from stronger-than-expected job numbers and corporate earning reports to concerns about the election are causing the mortgage rates to be more sensitive to the market news than usual. Volatility is expected to continue as the market responds and adjusts to the new data. However, it is anticipated that the Federal Reserve will cut interest rates possibly again this year as well as into 2025; eventually mortgage rates will recede.

(Source: Swaminathan, Aarthi, “Why mortgage rates are back up to nearly 7%,” MarketWatch, October 24, 2024.)

• Home Sales, Price and Inventory. According to NAR, preowned-home sales declined by 1.0% in September to a seasonally adjusted annual rate of 3.84 million. The median preowned-home sales price increased by 3.0% to $404,500 between September 2023 and September 2024. The inventory of homes rose by 1.5% during September to 1.39 million, while the months’ supply increased to 4.3 in September 2024 from 4.2 in August 2024, and 3.4 in September 2023. (Source: Green, Troy, “Existing-Home Sales Slid 1% in September,” NAR website, October 23, 2024.)

The Texas Economy

• Job Performance. According to the Office of the Texas Governor, Texas led the nation in job growth from September 2023 to September 2024 by adding 327,400 new jobs to its workforce, which is the highest in the State’s history at 15,449,900. (Source: "Texas Economic Snapshot,” Office of the Texas Governor.) 

• Residential Real Estate. According to Metrotex, 2024 Q3 ended with a slight increase in the median home sale price in Texas of 0.3% to $339,000 compared to 2023 Q3. Active listings also increased by a whopping 30.4% to 129,268, while closed sales decreased by 1.0% to 26,189. The velocity of sales is continuing to slow with an increase in days on market of 8 to 94 total days from listing to closing over the last year. The months of inventory have also increased to 4.8 months in September 2024 from 3.6 in September 2023. (Source: "September 2024 Texas Housing Report,” Metrotex, October 2024.)

DFW Residential Real Estate Sales 

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

• Home Prices. In September, DFW saw the median home price decrease slightly by 1.3% to $390,000 compared to September 2023.

• Home Sales. The number of sales that closed during September was up by 1.3% to 7,244.

• Inventory. Active listings in Dallas were up by 41.0% to 30,046 in September 2024, and the months of inventory increased to 4.1 from 2.8 year-over-year. For perspective, a balanced market between buyers and sellers is 6 months.

• Velocity of Sales. Sales took 86 days to market and close, which is 10 days longer than in September 2023. 

Commercial and Multifamily Market

The great news is that DFW is forecasted to be the nation’s hottest real estate market for investment and development during 2025, according to the report Emerging Trends in Real Estate by PriceWaterhouseCoopers and the Urban Land Institute. This report is a compilation of data provided by 2,000 industry experts who have determined that North Texas tops the list for places to buy, build and finance property in 2025. This is due to our impressive employment growth, economic diversity and relative affordability. Additionally, North Texas is an economic powerhouse and home to 23 Fortune 500 companies. (Source: Wooten, Nick, “D-FW is expected to be hottest real estate market in 2025. Here’s why,” Dallas Morning News, October 31, 2024).)

For the first time in 10 years, no major office construction projects broke ground during 2024 Q3. This is in part due to higher mortgage rates. The good news is that this will hedge against overbuilding, which can cause a major problem in the market. When mortgage rates come down, this will encourage more development including new office construction projects. (Source: Adatia, Noor, “No major office projects broke ground last quarter in rare stat — but don't panic just yet,” Dallas Business Journal, October 9, 2024.)

New-Home Sales Market 

The market for homebuilders cooled a bit during the Q3 2024, especially when compared to Houston, which has outpaced Dallas during 2024. New-home prices are down a bit from September 2023, while the inventory in DFW has creeped up to 7,939 new homes in September 2024. Like residential real estate, inventory for new homes has seen robust growth, up by 25% from 6,277 in September 2023. Affordability is a major consideration as builders face elevated land prices and development costs. (Source: Hethcock, Bill, “Dallas cedes No. 1 new home market designation in Texas,” Dallas Business Journal, October 23, 2024.)

Food for Thought:

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” 

- Franklin D. Roosevelt, U.S. President