Mary's Market Watch - Q4 2024

The Good, the Bad and the Ugly

With the departure of 2024, this year has seen the arrival of a new Trump administration, and Trump’s policies will inevitably impact our daily lives as well as all facets of real estate. 

With a career in real estate, Trump will likely advocate for deregulation, tax and other legislation that benefit real estate. His immigration policy and the imposition of certain tariffs, however, may negatively affect the housing market and keep borrowing costs relatively high.

That being said, Texas and the Dallas/Fort Worth area continue to be a good place for real estate. North Texas is not only on target to be the hottest real estate market in the nation for investment and development, but it also has been experiencing a recent boom in home sales despite concerns about property taxes, insurance, mortgage rates and housing affordability.

Without question, pent-up demand for housing abounds. It seems buyers are getting used to the expensive housing market. How all this plays out will depend on what the future holds for our economy, locally and nationally.

A Deep Dive into the Data

U.S. Real Estate Market

Demand for homes recently buoyed existing-home sales, which grew nationally by 2.2% in December from November 2024 according to the National Association of REALTORS® (NAR). This development is particularly noteworthy since on an annual basis existing-home sales declined to their lowest level since 1995, while year-over-year sales grew by 9.3% from December 2023.

• Mortgage Rate. As of January 23, the 30-year fixed-rate mortgage averaged 6.96%, which is down from 7.04% the previous week and up from 6.69% a year ago.

• Home Sales, Price and Inventory. The median existing-home price increased by 6.0% from December 2023 to reach a record high of $404,500 at the end of 2024, in part due to the luxury market’s relative better performance. Sales of homes priced over $1 million rose by 35% from the previous year, while sales fell for homes priced under $250,000. Inventory dropped by 13.5% to 1.15 million units at the end of the year, which translates to a 3.3 months’ supply. For perspective, a balanced market between buyers and sellers is a 6-month inventory.

• Real Estate Financing. Cash sales accounted for 28% of all sales in December, which is up from 25% in November as investors increased their share of sales by 3% to 16% from 13%. This is a natural result since investors often make cash purchases.

(Source: Green, Troy, “Existing-Home Sales Ascended 2.2% in December,” National Association of REALTORS®, January 24, 2025).

The Texas Economy

Valued at $2.6 trillion, Texas is the eighth largest economy in the world and one of the strongest and most diverse in the U.S. (Source: Texas Economic Snapshot, Office of the Texas Governor, as of January 30, 2025.) Job growth, demographic growth and the post-pandemic recovery are the main drivers of this strength.

• Job Performance. At the end of 2024, the Texas unemployment rate of 4.2% came in slightly more than the national rate of 4.1%. In Texas over 37,000 jobs were added during December, while 284,200 jobs were added from December 2023 to December 2024. This represents a growth rate of 2.0%, which outpaced the U.S. growth rate of 0.6%. The jobs and the civilian labor force continued to grow in Texas, reaching a record high in December, which is a strong indicator of strength in the Texas economy. (Source: “Texas Labor Market Growth Continues with Over 37,000 Jobs Added in December,” Texas Workforce Commission, January 24, 2025.)

  
  

• Residential Real Estate. According to MetroTex Association of REALTORS®, 2024 Q4 ended with a slight increase in the median home sale price in Texas of 1.5% to $340,000 compared to December 2023. Active listings also spiked by an impressive 25.0% to 114,973, while closed sales increased by 12.5% to 26,402. During 2024, the velocity of sales continued to slow with an increase in days on market of 6 to 103 total days from listing to closing over the last year. The months of inventory has also increased to 4.2 months in December 2024 from 3.4 in December 2023. As noted above, a balanced market is 6 months. (Source: “December 2024 Texas Housing Report,” MetroTex, December 2024.)

DFW Residential Real Estate Sales

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

• Home Prices. In December 2024, DFW saw the median home price slightly increase by 2.6% to $400,000 compared to December 2023.

  
  

• Home Sales. The number of sales that closed during December was up by 15.2% to 7,364.

  
  

• Inventory. Active listings in Dallas experienced notable growth of 33.1% to 24,973 in December 2024, and the months of inventory increased to 3.3 from 2.5 year-over-year. A balanced market has 6.0 months of inventory.

  
  

• Velocity of Sales. Sales took 98 days to market and close, which is 9 days longer than sales averaged during December 2023. 

Commercial and Multifamily Market

The Trump administration may impose tariffs that could have an inflationary effect and make changes to immigration policy that could result in labor shortages, both of which would hinder the commercial and multi-family market. Meanwhile, return-to-office mandates should enhance demand for office space, while growing office debt may translate to more delinquencies. Due to increased demand, data centers are growing and will be a stronger focus in real estate development.

Last year was characterized by a glut of multifamily and industrial real estate inventory. According to RealPage, Inc., 60% more apartments were under construction last year than during the 2010s. This robust pipeline will continue to favor multifamily renters as these new apartments continue to come online. However, this should start to taper off with fewer new developments forecasted to begin construction during 2025 as supply and demand should begin to rebalance. As a result, renters will not necessarily see the high concessions and rent cuts of 2024, which should benefit landlords. (Source: Fahey, Ashley, “Five predictions for 2025's real estate market,” Dallas Business Journal, January 2, 2025.)

New-Home Sales Market 

DFW builders started in excess of 53,000 homes last year, which is the second best in history, but started fewer homes during Q4. However, new-home closings were flat at 12,000 during the last quarter for 2024, while the year saw a slight increase of 1% from 2023. Higher mortgage rates helped cool this sector and slow new-home starts. (Source: Wooten, Nick, “D-FW home builders saw hot 2024 end on sour note. They want to give buyers money,” Dallas Morning News, January 13, 2025.) 

Nationally, the new-home market closed 2024 with a 2.5% increase over 2023 and is forecasted to continue to grow during 2025. Housing permits and starts were up in December, which bode well for this sector. The median new-home price is down to $420,100 in 2024 from $428,600 in 2023, as builders constructed smaller homes and offered more concessions. (Source: “A Strong Finish For New Home Sales in December,” MetroTex, January 29, 2025.)

Food for Thought:

“The major fortunes in America have been made in land.” 

— John D. Rockefeller, philanthropist, businessman, founder of Standard Oil Company