Southeast Arlington's 2023 Home Sales Were the Lowest in Two Decades
According to local MLS records, the number of homes changing hands in southeast Arlington has hit a 20-year low.
In November, I published a post detailing how homes are still selling in southeast Arlington. While this is still very much true, the number of homes being sold has clearly dropped.
For the first time in at least 20 years, the number of houses sold in southeast Arlington fell below 1,000 for an entire calendar year. This doesn't spell trouble for the Arlington housing market per se, but it is an indicator that market conditions have changed from what they were in recent years.
This is a Historic Dip in Home Sales
According to the North Texas Real Estate Information Systems, the 977 homes that sold in southeast Arlington last year represents a nearly 8% drop compared with 2022 when 1061 homes sold. 2021 saw 1279 homes change hands, and 2020 saw 1333 homes sell in spite of a pandemic. Looking back 20 years, at no time has there ever been a year with less than 1000 home sales.
Broad Comparison of Home Sales in Southeast Arlington
Broadly speaking, annual home sales in the southeast Arlington area tended to be anywhere from 1700 to 2300 during the early 2000's. Even in 2008, 2009, and 2010 when there was a major housing crisis nationwide, home sales in this area were still in the 1100 - 1500 range.
Since 2019 home sales have dropped every year. Part of this is due to the fact that during the early to mid 2000's, new homes still represented a large percentage of home sales in southeast Arlington. Now, with the area practically built out, we would expect to see slightly lower home sales. However, this drastic of a drop is indicative of other factors at work.
Explanation and Analysis
To be sure, the drop in home sales in southeast Arlington is not endemic to this area. It is a statewide and nationwide phenomenon that has been happening primarily since interest rates started to rise in early 2022. The National Association of Realtors(NAR) reports that home sales in November were down -7.3% from November of 2022 nationwide.
This drop was also seen throughout the entire Dallas/Ft. Worth Metroplex, although it wasn't as pronounced as that reported by NAR. Per the Dallas Morning News, the metroplex saw about a -4% drop in November.
There are really two main factors that have led to the vast drop off in home sales in southeast Arlington as well as the entire metroplex:
- Higher Home Prices -- Home prices in the entire DFW area had been going up each year since about 2011, but by 2018 and 2019, the rate of increase began to skyrocket. This was brought on by a huge increase in local demand for housing that resulted in the now infamous bidding wars on homes of all price levels. This overabundance of demand drove prices higher, and it also resulted in less than ideal situations for many buyers who found themselves often having to settle for less house at a higher cost than they anticipated. Consequently, many existing homeowners who were considering moving chose to stay put rather than deal with the hassle of buying a new home in such a hot market.
- Higher Interest Rates -- Then interest rates began their meteoric rise in early 2022, but home prices did not decrease commensurately. With rates continuing to climb throughout most of 2023, demand for housing decreased sharply, but the decrease in demand is relative. Prior to rates increasing, we had HUGE demand. When the rates rose, demand basically reverted closer to the norm. (Although we are still technically in a seller's market because months supply is still relatively low.)
The combination of higher home prices and higher rates has served to keep many would-be home sellers out of the market. Not only are they reluctant to sell and have to mess with buying a new home, they are reluctant to sell and be forced to obtain a mortgage that is likely twice as high as their existing one. This one-two punch is really the catalyst for the 977 number we see in home sales for 2023.
Conclusion
Where does this leave us looking forward? I want to be clear that this does NOT mean we are in for a housing crunch. As I mentioned, demand is still present, and people are still buying and selling houses. If rates continue to come down, it's likely we will see demand increase once again, and home sales should increase correspondingly.
For many people, this is actually a great time to buy and/or sell a home. It's a great time to sell because demand is still there, and if your home is in good shape, it will still sell relatively quickly as long as it is priced right. It's a great time to buy because you no longer have the crazy multi-offer situations we were seeing a couple of years ago, and you have more leverage to ask sellers for favors and/or reductions.
The key component for home sales will be interest rates. Home sales and interest rates typically have an inverse relationship: As one increases, the other decreases. Keep an eye on both the Federal Funds Rate as well as the 10-year Treasury rate. This will likely be the largest driver of home sales going forward.