DFW Home Prices Nudged Higher in September
Though trending slightly higher, the Dallas/Fort Worth housing market is basically flat right now.
Home prices in Dallas and Fort Worth aren't going down, but they aren't going up much either. For the month of September, the Case-Shiller Index indicates that prices were up 1.07% on a year-over-year basis. Month-over-month, prices were down -0.63%. As we will see, there are both advantages and disadvantages to this kind of price action.
Prices Remain Stagnant
As you can see from the chart above, we are continuing the typical real estate price cycle that started at the end of 2022. Prices dip during the fall and winter months and then kick up again during the spring and summer months, with each subsequent peak being a little higher than the previous peak.
Many people seem surprised that home prices haven't tumbled. The truth is, home prices--like everything else--follow the rules of supply and demand, and right now there is relatively balanced supply and demand in the DFW housing market. Months Supply stood at 4.7 in September, which is the highest reading in over 10 years. This just means that the DFW real estate market is more balanced now (i.e. the number of buyers closely matches the number of sellers) than at any point in the last decade.
With this being the case, it is really no surprise that prices are stagnant. As long as we see supply and demand close to equal, we will not see drastic price action in either direction.
Mortgage Rates Decline Further in September
Ironically, concomitant to prices remaining flat in September, the average 30-year mortgage fell to just over 6%. One would think that with rates moving lower, demand might have picked up more, but for some reason it did not. Could this mean that prices were lower in October and November as mortgage rates moved higher? Only time will tell.
Summing It All Up
So, where does this leave us?
It seems that it is safe to say 2024 will end up being a flat year in terms of residential real estate prices in Dallas/Fort Worth. We will likely end the year slightly higher than we started the year, but rates of return on real estate this year will be lower than most other asset classes (i.e. stocks, bonds, etc.).
As I said at the outset, this is both good and bad for those who are in the real estate market. For buyers, the market offers many more options and much more flexibility than it did a couple of years ago. Many buyers are now able to negotiate things like title policy and survey expenses during a transaction, whereas just a few years ago they had to always assume those costs themselves if they wanted a particular house.
While this means that sellers can no longer get everything they want and then some, they do still have plenty of room to negotiate, and they can still get much of what they want if their house is in good condition when they list it.
For those who own property and are neither buying nor selling, the good news is that prices are still appreciating a little. The bad news is that your property values are not going up 25% per year like they were just a few years ago. You're not losing money, but you're also not making much either.
The most difficult situation in this market continues to be first time homebuying. If you've never owned property and you are looking to start now, the elevated prices coupled with elevated mortgage rates make this a difficult market to buy a first home. That's not to say it cannot be done. You just have to be patient and work closely with your lender or financial advisor to determine when the right time is to jump in.
The fact is, we probably won't see prices drop on a year-over-year basis, at least not by much. And unless there is some radical stimulation in the economy, we probably won't see a huge run-up in demand either. This means that prices in DFW will likely continue to ebb and flow seasonally as they have over the past two years. From an investment standpoint, cash flow is now more important than ever since returns are rather low.
Whatever your role is in the real estate market (i.e. buyer, seller, investor, etc.), keep talking with your agent, lender, and/or financial advisor. They can help you navigate your individual situation no matter what happens. And no matter what happens, there is ALWAYS an opportunity for you!