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2024 Texas Real Estate Market Summary and Analysis

The Texas real estate market is known for its resilience and constant growth. With a strong economy, diverse cities, and a favorable business environment, Texas has become an attractive destination for homebuyers and real estate investors alike. In this comprehensive analysis, we will delve into the key aspects of the Texas housing market, including recent trends, pricing fluctuations, inventory levels, and expert predictions for the future.

Population Growth and Housing Demand

One of the driving factors behind the thriving Texas real estate market is the state’s rapid population growth. According to Texas REALTORS®, the population of Texas has been growing at a rate five times higher than the national average in the last two years. This significant population influx has created a strong demand for housing, putting pressure on inventory levels and driving up prices.

Pricing Trends and Market Conditions

Home Prices and Affordability

In recent months, the Texas housing market has experienced some fluctuations in home prices. According to data from the Texas Real Estate Research Center, the median home price in Texas decreased by 1.5% from Q3 2022 to Q3 2023. Despite this slight decline, housing prices in Texas remain relatively high, with the median price standing at $340,000 in Q3 2023. This indicates that homes in Texas are still relatively less affordable compared to the national average.

Impact of High Mortgage Rates

One of the factors influencing the Texas housing market is the impact of high mortgage rates. These higher interest rates have put downward pressure on home sales, resulting in a 5.9% decline in home sales compared to the previous year. However, despite the challenges posed by high mortgage rates, the demand for new construction has shown resilience, indicating the continued growth and development of the housing market.

Housing Supply and Inventory Levels

Increase in Inventory

In response to the growing demand for housing, inventory levels in Texas have seen a notable increase. Over the past year, available homes for sale have gone up by 15.2%, providing potential buyers with more options and choices [5]. This increase in inventory is a positive sign for buyers, as it allows for a more balanced market and potentially more negotiating power.

Months of Inventory

Despite the increase in inventory, Texas still faces a shortage of available homes, with the months of inventory standing at 3.7 in Q3 2023[5]. Ideally, a balanced market would have around six months of inventory, indicating that there is still room for growth in the housing supply to meet the high demand.

Housing Report

Regional Analysis: Major Cities in Texas

To gain a comprehensive understanding of the Texas real estate market, it is crucial to analyze the trends and conditions in major cities across the state. Let’s take a closer look at four of the largest cities in Texas: Houston, San Antonio, Dallas-Fort Worth, and Austin.

Houston

Houston, one of the largest cities in Texas, has experienced a slight decline in median home prices, with a 1.1% decrease year-over-year[6]. Despite the decline, the median price remains relatively high at 336,125 USD, indicating that Houston’s real estate market is still competitive.

San Antonio

San Antonio has also seen a slight decrease in median home prices, with a 1.6% decline compared to the previous year [6]. The median price in San Antonio stands at $319,900, making it a relatively more affordable option compared to other major cities in Texas.

Dallas-Fort Worth

In Dallas-Fort Worth, the median home price decreased by 1.2% year-over-year, reaching $400,000 [ 6 ]. Despite the decline, the real estate market in this region remains robust, driven by strong economic growth and a diverse range of housing options.

Austin

Austin, the capital of Texas, experienced a more significant decline in median home prices, with a 7.9% decrease compared to the previous year[6]. However, even with the decline, Austin’s median home price remains relatively high at $456,000, reflecting the city’s popularity and strong demand.

Market Comparison: Texas vs. National Housing Market

To understand the Texas real estate market in a broader context, it is essential to compare it to the national housing market. While the national median home price in Q3 2023 was $406,900, Texas had a slightly lower median price of $340,000[6]. This indicates that Texas offers relatively more affordable housing options compared to the national average.

Expert Predictions for the Texas Housing Market

To gain insights into the future of the Texas housing market, it is valuable to consider expert predictions and forecasts. While it is challenging to make accurate long-term predictions, experts offer valuable insights based on current trends and market conditions.

New Listings and Months of Inventory

New listings fell by 1.45 percent to 42,100 in October, with San Antonio contributing significantly to this decline. The months of inventory (MOI) grew to 3.8 months across all four major metros. The months of inventory indicate the number of months it would take to sell the current inventory at the current sales pace. A higher MOI suggests a more balanced market, while a lower MOI indicates a seller’s market.

Median Home Price Fluctuations

In October, the median home price in Texas experienced a 1.9 percent month-over-month (MOM) decrease, equating to over $6,000 less compared to the previous month. Despite this decline, half of the homes are priced between $200,000-$300,000 or $300,000-$400,000, making up 26 percent and 24 percent of total home sales, respectively.

The Texas Repeat Sales Home Price Index, which measures the appreciation of homes, moderated at a 0.1 percent MOM loss but showed a 1.5 percent year-over-year (YOY) increase. Austin experienced the lowest annual appreciation with a 5.7 percent YOY decrease, while Houston exhibited the highest annual appreciation at 2.5 percent.

Single-Family Permit Levels and Construction

Texas’ single-family construction permits rebounded by 1.1 percent month over month (MOM) to 12,619 issuances. While Houston experienced a 4.6 percent decrease, San Antonio and Dallas saw double-digit monthly percentage gains at 31 and 24 percent, respectively. Austin rebounded with an 8.7 percent increase to 1,643 units.

This rebound in single-family permit levels indicates the potential for increased construction activity in the coming months. It suggests that builders and developers are optimistic about the market’s future prospects.

Texas Real Estate Market Statistics

To gain a broader perspective on the Texas housing market, let’s examine some key statistics from Zillow as of November 30, 2023:

  • Average home value in Texas: $296,127, reflecting a marginal decline of 1.4% over the past year.
  • For Sale Inventory: 108,777 properties are available for sale, offering diverse options for potential buyers.
  • New Listings: 26,168 new listings have entered the market, contributing to its vibrancy and constant evolution.
  • Median Sale to List Ratio: The median sale to list ratio, an indicator of market competitiveness, is 0.987.
  • Median Sale Price: The median sale price for homes in Texas is $325,000, while the median list price is $361,333.
  • Percent of Sales: 20.1% of sales are recorded above the list price, while 58.8% are below the list price.

Source: FHFA

These statistics provide valuable insights into the current state of the Texas housing market, indicating a dynamic and evolving landscape.

Top Areas in Texas with Expected Price Rise in 2024

Looking ahead to 2024, certain regions in Texas are projected to experience notable growth in home prices. Based on Zillow’s forecasts, the following areas show promising signs:

  1. McAllen, TX: Anticipated growth of 2.2% in home prices by November 30, 2024.
  2. Jacksonville, TX: Expected rebound with a 2.1% increase in home prices by the end of 2024.
  3. Stephenville, TX: Moderate rise of 1.3% in home prices, showcasing a steady upward trajectory.
  4. Palestine, TX: Projected increase of 1.2%, indicating resilience and growth in the real estate market.
  5. Mount Pleasant, TX: Stability with no change in home prices initially, followed by a modest growth of 0.7% by November 30, 2024.

These regions present potential opportunities for buyers and investors, indicating positive market trends.

Top Areas in Texas with Expected Price Reductions in 2024

While certain areas in Texas are expected to experience growth, it is equally important to consider regions where home prices are projected to undergo substantial reductions in 2024. Based on Zillow’s forecasts, the following areas indicate potential challenges for sellers and opportunities for buyers:

  1. Zapata, TX: Significant decline expected, with an anticipated drop of 9.5% by November 30, 2024.
  2. Pecos, TX: Consistent decline projected, with an expected drop of 9.1% by November 30, 2024.
  3. Alice, TX: Decrease in home prices expected, with an anticipated drop of 8.9% by November 30, 2024.
  4. Sweetwater, TX: A decline in home prices foreseen, with an expected drop of 8.2% by November 30, 2024.
  5. Raymondville, TX: Significant drop in home prices expected, with an anticipated decrease of 7.8% by November 30, 2024.

These areas may offer favorable conditions for buyers looking for potential bargains in the market.

Texas Real Estate Forecast for the Next Five Years

While long-term predictions are subject to various external factors, economists generally expect home prices in Texas to experience slower growth in the next five years. Price appreciation is projected to be in the range of 2-4% annually, indicating a steady and sustainable market. As interest rates potentially decrease, inventory levels are expected to increase slightly, providing more opportunities for buyers.

Conclusion

The Texas real estate market remains robust and resilient, driven by population growth, strong demand, and a favorable business environment. While the market has experienced some fluctuations in home prices and inventory levels, experts predict stability and moderate growth in the coming years. As the state continues to attract homebuyers and investors, the Texas housing market is poised for continued success and development.

Remember, the best way to navigate the Texas real estate market is to work with a trusted and experienced real estate agent who can provide personalized advice and guidance throughout the homebuying or selling process. With their expertise and knowledge of the local market, they can help you make informed decisions and achieve your real estate goals in the Lone Star State.


Sources:

https://www.texasrealestate.com/market-research/quarterly-housing-report/

https://www.recenter.tamu.edu/articles/special-report/2024-Texas-Real-Estate-Forecast-2407

https://www.recenter.tamu.edu/articles/technical-report/Texas-Housing-Insight
https://www.redfin.com/state/Texas/housing-market

https://www.zillow.com/tx/home-values/

https://www.redfin.com/state/Texas/housing-market

https://www.recenter.tamu.edu/articles/technical-report/Texas-Housing-Insight

https://www.neighborhoodscout.com/tx/real-estate

https://www.niche.com/places-to-live/search/best-places-to-buy-a-house/s/texas/

https://www.fhfa.gov/DataTools/Tools/Pages/Four-Quarter-Heat-Map.aspx

https://www.fhfa.gov/AboutUs/reportsplans/Pages/Fannie-Mae-Freddie-Mac-Reports.aspx

https://www.recenter.tamu.edu/articles/technical-report/outlook-for-the-texas-economy



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Market Summary

Updates from Jackson Hole

The much-awaited Jackson Hole speech by Fed Chair, Jerome Powell concluded this week. Fed chair alluded to keeping rates high for longer and left the door open for raising rates based on future inflation data. Powells speech was no surprise. The market largely anticipated the rates to be kept steady. Fed watchers are assigning a probability of 45% that the rates will increase by another 25-basis points by the end of the year.

  • Powell reiterated that “Core goods inflation has fallen sharply, particularly for durable goods, as both tighter monetary policy and the slow unwinding of supply and demand dislocations are bringing it down”.
  • He also reiterated that the lagging effect of monetary policy should show through more fully over time.
  • Powell also confirmed that “Restrictive monetary policy has tightened financial conditions, supporting the expectation of below-trend growth.”
  • Chair Powell also reiterated that 2% is the target rate of inflation and the Fed is determined to bring the inflation rate down to 2%.
  • The Fed chair concluded by saying that we will keep at it until the job is done.

Mortgage Rates

30 Year Mortgage rate stood at 7.23 % and 15-year Mortgage rate stood at 6.55 %, highest in 22 years. According to Mortgage Bankers association Applications for purchase mortgages dropped to their lowest levels since 1995.


Market Stats

Collin County


Tarrant County Market Stats


Tip of the week – Seller Impersonation

The sale of real estate is one of the top transactions targeted by scammers. The latest scam affecting the public involves criminals impersonating a seller wanting to list a lot or vacant land.

  • Stay informed on the latest scams to know what to watch for
  • It’s always a good idea to use trusted title companies and attorneys for closing documents and funds.

Capital Market Updates


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Your One Source of All DFW Real Estate News from Dream Castle Realty

Why will Home Prices not fall anytime sooner?

 

Ever since mortgage rates have gone up, I have received a lot of questions on what is happening to home prices. In the following section I will cover some of those.

 

Supply and Demand are not at equilibrium

  • At the outset of pandemic more homeowners have refinanced their mortgages to a lower rate. These homeowners are in no mood to sell in this rising rate environment. The supply of homes is still historically at lower levels than it has been due to supply chain issues, lockdown, and other macro-economic factors.
  • The process of construction has slowed down tremendously due to the supply chain shortage and labor shortages.
  • Most builders are still operating with reservation list.

 

Competition is high

  • The stock market boom has also contributed to the increase in home prices. There are more cash buyers today than there have historically been. This is adding strain on first time home buyers. Most buyers are stretching to buy their dream home and a lot of contracts are written with appraisal waiver clauses. This will eventually slow down as liquidity is flushed out of the market.

 

Accessing Credit is not easy today

  • Ever since the collapse of the housing market. Credit and underwriting requirements have become increasingly stringent. Most Americans are still not able to qualify for home purchases.

 

Prices are still historically high, and rents have gone up. This will prevent consumers from saving on down payments.

  • The Fed has started playing its part in raising rates and taking their foot off the gas pedal from stimulating the economy.
  • The Median prices of homes in DFW as of the latest data from Texas Real Estate Center in Dallas County has gone up by 19% compared to March 2021
  • Month of inventory is at 0.8
  • Increasing rent has prevented American consumer from saving for down payment towards purchase of their home.

 

Inventory is low – Listing of Preowned homes are drying up.

  • A lot of homeowners capitalized on sellers’ markets and sold their homes cashed in their Equity where in some of them downsized, most upsized to homes with dedicated office spaces and multiple rooms.
  • The influx of out-of-state residents from states such as California, New York, and New Jersey in search of warmer weather and larger homes has depleted the inventory further.
  • Most homeowners have preferred to stick to their homes for now as they have locked in historically low fixed mortgage rate.They are in no mood to move out and buy something at soaring prices and higher rates.
  • Builders are building less as they too are also feeling the pinch of rising rates.

 

 Inflation is eating away Affordability

  • The top-line inflation reading for May was 8.3 as inflation is going up and the affordability of homes is deteriorating. The cost of raw materials compounded with the supply chain problem has made affordability difficult

According to the NAR’s Home Affordability Index, national housing affordability fell in March compared to the previous month.

  • The Midwest was the most inexpensive area, with an index score of 170.6. The West remained the least affordable area, with a score of 97.1.
  • In March, affordability deteriorated as monthly mortgage payments rose 32.0 percent while median household income decreased 6.6 percent.
  • From the previous month, affordability was lower in all areas. At 25.7 percent of income, the West has the greatest mortgage payment to income proportion. At 14.7 percent, the Midwest had the lowest mortgage payment as a proportion of income.

 

Mortgage Payments have gone Up

The American consumer is paying more towards their mortgage than they used to pay a year ago. if they have purchased their home after the recent rate hikes.

 

The normalization in home prices especially in certain cities of DFW metro may take time.

There are four things that need to happen before normalization

 

  1. Supply and demand has to get back to normal levels.
  2. War in Ukraine and zero Covid policies in China would have to ease so supply chain can be normalized especially energy supply and other finished products that is contributing to escalating inflation.
  3. The current ongoing volatility caused by the Fed in its fight against inflation is not helping going to help the consumer in short and medium term. Fed has already given sufficient warning in its fight on inflation . Inflation would have to drop to meaningful and acceptable levels for fed to stop raising rates. 
  4. In the process to contain the inflation the Fed may cause a recession. Fed’s Softish landing is highly unlikely. I see gyration in equity and bond markets. 

 

Until these four things happen, we are not going to see a broader normalization in prices. There may be pockets where the prices may come down but not broadly. We may hear and there news snippets on decline in mortgage application, but that will not be meaningful to prices.

Last but not least, We are in for a long haul as far as normalization of prices is concerned. Each of these points will take time some are in Fed’s control especially the demand side but others are out of its control (Supply Side). Equity Markets will flush first. I hate to say this but, people will have to panic sell the equities before the housing markets starts to see the effect. We are still not at that point. All signs points to a multi-month or multiyear grind of ups and down.

 

My take of the current Market conditions 

 

  1. The Fed recent warning on getting inflation under control with softish landing of the economy currently is questionable.
  2. Equity markets have not yet priced in the recession factor which is highly likely given the acceleration in asset prices recently across the board.
  3. The effect of recession on housing prices is not yet fully understood as we have not seen something like this in a while.
  4. The 2008 financial crisis was caused due to laxity in credit and underwriting requirements leading to subprime mortgage crisis.
  5. This is not the case today. Credit is still tight, consumers are strong. Equity markets are not fully flushed.
  6. Last but not least consumer are sitting on the highest home equities in long time. We are still not at the point where there is fear or capitulation leading people to tap on some of their hard-assets. We are still far off from any meaningful correction in Housing markets.

If you have a friend or family members looking to Buy/Sell/Lease Residential or Commercial Properties. We are here to help you and and your loved ones.

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