Mary's Market Watch - Q3 2023

Dallas: The Times, They Are A-Changin’

• Believe it or not, housing in DFW is now more expensive than Chicago and Atlanta.

• While interest rate hikes and increases in borrowing costs have diminished the pool of home buyers, DFW still remains a seller’s market.

• Office towers in Dallas are now being converted to apartments.

Changes in the Marketplace

• Mortgage rates continue to climb, nearing almost 8%, and have risen almost two full percentage points in 2023 alone.

• Texas job growth is double that of the U.S.

• After softening through the summer, Texas housing has seen some recovery in recent months.

2024 Forecast: MOSTLY MORE OF THE SAME

• Economic drivers and fundamentals in the U.S. economy are strong relative to other decades; however, the expectation is that we will have a soft landing, but this is not assured. If a recession occurs, it is likely to be a mild one.

A Deep Dive into the Data

(Source for the following unless otherwise noted: Metrotex Association of Realtors Forecast 2024 featuring information and data presented by Anthony Murphy, Senior Economic Policy Advisor with the Federal Reserve Bank of Dallas, and Dr. Daniel Oney, Research Director with The Texas Real Estate Research Center, October 6, 2023.)

U.S. Real Estate Market

• Inflation. Inflation has declined, but is still above the Federal Reserve’s ideal target annual rate of 2%.

• Interest Rate. Forecasters expect higher rates for a longer period and that the Federal Reserve may raise rates one more time.

• Mortgage Rate. We have experienced the fastest mortgage rate increases in 50 years. According to Mortgage News Daily, more recently, mortgage rates have been bouncing around by leaps and bounds with the upper boundary at the highest level in 23 years. (Source: Graham, Matthew, “Mortgage Rates Move Lower After Rocky Start,” Mortgage Rate Watch in Mortgage News Daily, October 26, 2023.)

• Home Sales. According to the National Association of Realtors, national sales of existing homes decreased during September 2023 by 2.0% and by 15.4% year-over-year with inventory at 3.4 months, up from 3.2 months in September 2022. For perspective, a balanced market between buyers and sellers is six months of inventory. (Source: Existing-Home Sales Housing Snapshot from the Latest Housing Statistics and Real Estate Market Trends, National Association of Realtor website, October 19, 2023.)

• Home Sales Prices. National home prices are still rising. September 2023 saw the median existing-home sales price grow by 2.8% to $394,300 from the previous year. (Source: Existing-Home Sales Housing Snapshot from the Latest Housing Statistics and Real Estate Market Trends, National Association of Realtor website, October 19, 2023.)

• Jobs Market. The labor market is cooling as unemployment remains low.

• New-Construction. Home builders have turned gloomy. Permits are at normal levels, and new-home starts, which is a measure of new home construction and a key economic indicator, have peaked.

Texas Economy

• Job Performance. Texas job growth has been twice as fast as that in the rest of the country.

• Population Growth. Net migration is at an all-time high in Texas: 2,000 new Texans are added to our population per day, which includes births and migration. Texas has increased 2.7 times since 1970, experiencing persistent population growth.

• Property Tax Bill Up For A Vote. On November 7th, property owners will have the chance to vote on the biggest property tax relief package in Texas history. Proposition 4 includes changes that would reduce property taxes for both homeowners and non-homestead properties. (Source: “Vote to Lower Property Taxes—And a Lot More” on Metrotex Association of Realtors’ website.)

DFW Residential Real Estate Sales

• Home Price Growth Since 2020. Overall, since the pandemic in 2020, housing prices in Dallas have grown at an astounding rate: The median price of single-family homes has risen 44% to just over $406,000 in August 2023. (Source: Parton, Mitchell, “Economists tell D-FW real estate agents: expect another lackluster year for home sales,” Dallas Morning News, October 6, 2023).

• Median Home Price: The median home price in DFW declined by 1.2% to $395,000 in September 2023 compared to September 2022. However, several counties in DFW saw a slight increase in home prices from a year ago, including Dallas, Denton, Erath, Grayson, Johnson, Navarro, Parker, and Van Zandt Counties.

• Home Sales. Total home sales are down by 13.5% to 7,281 in September 2023 from a year ago.

• Inventory. There is a 2.9-month supply of inventory on the market, which is up from 2.3 in September 2022. Again, six months of inventory is a balanced market.

• Velocity of Sales. Total days on market is 77, which is 9 more days than September 2022. Home sales are taking a bit longer than a year ago

(Source for the above four bullet points: Metrotex’s online September 2023 Housing Report for DFW)

DFW Multifamily Market

• Apartment Rent. Apartment leasing remained strong for the last quarter, but this may change as the supply starts to outpace demand. More than 25,000 new rental units are coming on the market this year. According to RealPage, DFW apartment rents declined by 1% from a year ago to $1,592 per month. However, high interest rates and construction costs have put the brakes on the construction of new apartments, which have declined by 40% this year. (Source: Brown, Steve, “Dallas-Fort Worth apartment leasing isn’t keeping up with construction,” Dallas Morning News, October 10, 2023.)

Food for Thought:

“Ninety percent of all millionaires become so through owning real estate.”

Andrew Carnegie

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