With Mortgage Rates Closing in on 7%, DFW Home Prices Rose in February
As winter drew to a close in DFW, housing prices began to accelerate once again.
The latest numbers from Case-Shiller, which shows home prices as of two months ago, indicate that DFW home values were starting to accelerate by the end of February. Year over year prices in DFW were up 3.5%, even while mortgage rates were knocking on 7%'s door. Additionally, inventory remained low.
DFW Home Prices Rise But Remain Relatively Stable
Looking at the graph above, you can see that while home prices are rising in the metroplex, they appear to be rising at a much slower pace than in recent years. It almost appears that prices have plateaued. However, we have to remember context here. From 2020 through mid 2022, the valuation gains were uncharacteristically high. The 3.5% increase that we see now is more in line with historical price gains in the DFW area.
As a reminder, even though the graph suggests that prices are currently lower compared to last summer, we are primarily interested in year over year numbers, as this is the best indicator of true home price action. Prices fluctuate month to month, with winter months typically being lower than summer months. Just because there is a dip in this month-by-month graph doesn't mean that home prices have decreased. In fact, on a year over year basis, prices have risen in DFW every month since last September.
Interest Rates Remain in Upward Trajectory
An interesting storyline to the current housing market is home prices continue to rise despite increasing mortgage rates. To reiterate, these Case-Shiller numbers represent the price of homes at the end of February. At that time, the 30-year mortgage rate was approaching 7% according to Freddie Mac. As of this writing, mortgage rates are at almost 7.25% with no real signs of relief in sight.
It would appear that some homebuyers have simply given up on rates coming down and are deciding to move anyway. Or, it could be that the majority of people buying homes in this market are being forced to due to job transfers or some other compelling reason. Whatever the case, home prices are definitely continuing to rise alongside interest rates.
Volume Remains Low
The third data point that is always interesting these days is volume. The number of homes trading hands is continuing a downward trend. In February, for the entire metroplex, the number of closed homes was down -2.0%. In Mansfield it was a more pronounced -22.0%.
How much lower can volume go before we see prices start to drop? At what point will there be more sellers than buyers in the market?
The truth is, we still have a long way to go before sellers outnumber buyers. As strange as it may seem, months supply is still well within seller's market range. In February, both Mansfield and DFW had a months supply of around 3.2. 6.0 is considered a truly balanced market where buyers and sellers are equally matched. Clearly, we are still a long way from seeing a balanced market. Based on these figures, it would seem that there is still quite a bit of room left for prices to rise and volume to decrease.
Conclusion
It almost seems that I sing the same song each month with this post. Prices are up, rates are up, and volume is down. In my opinion, there really isn't much to stand in the way of these current trends in DFW. Population growth is still happening at a good clip, and there just aren't that many homes being built. I continue to say that if you are considering buying a home but feel hesitant because of market conditions, you are probably not going to get a better opportunity any time soon. Buying a home today is probably better than buying next month (all things being equal), and buying next month will probably be better than waiting until the following month.
Of course, people buy and sell homes for many reasons, and there is more to buying a home than simply considering current prices and interest rates. The main thing you need to be aware of is that from a market perspective, there don't seem to be any major changes coming. Rates are always the wildcard. They could come down a little, but it's unlikely that they will with inflation remaining stubbornly high. Assuming rates don't change much, prices should continue moving up in DFW for the foreseeable future.