Recession and its impact on Real Estate.
- Last week’s strong employment report has made the job of Fed even more difficult in colling off the economy.
- Employers added 528K jobs and the unemployment was at pre-pandemic levels. The labor market is red hot at this time.
- Unemployment slipped to 3.5% from 3.6%
- There is also clear indication inflation has peaked and commodity prices like gasoline, copper, and lumber are clear indications of the same
What does this mean for interest rates?
St. Louis Fed President James Bullard said he expects another 1.5 percentage points or so in interest rate increases this year.
The talks of recession have gone up but given the economy that looks to be mild or next to nothing.
Impact on Real Estate
The long-term rate has gone down. Mortgage rates have started to fall. Rates peaked at 5.8% on June 23 2022 and have since fallen down.
As of August, the rates stood at 4.99% for a 30-year mortgage.
- Falling rates are good for real estate. In the last few months, the market has normalized and home prices in the DFW area have taken a breather
- According to NAR – Pending home sales declined 8.6% from May as escalating mortgage rates and housing prices impacted potential buyers.
- Pending sales retreated in all four major regions, with the West experiencing the largest monthly decline.
- According to Redfin home prices have been up 40% in the last 2 years but they have started to go down in the recent past.
- Realtors have started to adapt to the new realities of this market.
- Most agents have dropped the prices if they don’t receive the offer in the two weeks of their listing.
- The playbook has certainly changed for Listing agents who listed the home and were swarmed by buyers with multiple offers and appraisal waiver clauses.
- Buyer incentives such as closing costs have become a norm these days.
- The market slowly but surely is shifting towards a buyer market
Texas Real Estate and unemployment report salient points
Job Market in Texas is steady and strong.
- Texas added 82,500 jobs in June, an almost 0.62 percent increase over May.
- The state’s unemployment rate improved to 4.1 percent.
- The state’s labor force expanded by almost 40,000 a decline from 56K in May.
Real Estate Market
According to Texas A&M Real Estate Center
Housing Report for Dallas-Fort Worth-Arlington
- Sales volume for single-unit residential housing decreased 8.85% YoY from 10,816 to 9,859 transactions.
- The average sales price rose 18.8% YoY from $442,831 to $526,100, while the average price per square foot subsequently rose from $181.49 to $222.21.
- Median price rose 21.13% YoY from $355,000 to $430,000, while the median price per square foot also rose from $170.14 to $209.76.
- Months inventory for single-unit residential housing rose from 1.1 to 1.8 months supply, and days to sell declined from 56 to 54.