It’s been an unusually busy winter so far for most real estate professionals in the Dallas/Fort Worth area, and the market isn’t showing signs of slowing down anytime soon. Changes in the market, like continued low inventory and higher competition for homes, haven’t deterred those who are determined to land their dream home. Home sales and prices continue to rise, even as mortgage rates increase.
Perhaps we have the area's low unemployment rates (around 3.7%) and improved wages to thank for that. As more people move to the area, many times for a higher paying job, the demand for housing increases. These people, generally speaking, can afford and are willing to shell out the cash for real estate in DFW. They are prepared to compete for homes in the most desirable areas and are driven to act quickly as mortgage rates rise.
North Texas Real Estate Information Systems (NTREIS) recently released their latest market statistics which showed a 0.6% increase in new listings in the North Texas area. Even so, inventory shrank 9.5 % to 20,117 units. The month’s supply of homes dropped 12% year over year to 2.2 months’ inventory. As a reminder, the Texas A&M Real Estate Center cites 6.5 months as a balanced market.
Homes for sale in Dallas/Fort Worth sold for 10.1% more than this time last year, with the median sales price jumping from $209,000 to $230,050. Even so, the average person who listed their home for sale got 96.3% of their asking price (up 0.5% more than this time last year). That number indicates a high occurrence of multiple-offer situations, as it considers those in highly sought after areas as well as the less desirable ones.
Expect homes for sale in the booming areas of Plano, Allen, Frisco, McKinney and Flower Mound to remain competitively priced. It’s also important to put your best foot forward when putting in an offer for a home in this area. Offering your best price straight away, as well as providing seller incentives like a quick closing can make a huge difference. Of course, it’s always important to make sure you’re pre-approved by a mortgage lender before you even begin your home search.
Speaking of mortgage rates, as we mentioned, they’ve gone up recently (as economists have been predicting they would for some time). While forecasts are saying that they shouldn’t rise too much higher than 5% in 2017, this could still price some people out of home ownership.
For example, in December 2016 interest rates on a 30-year-fixed-rate-mortgage sat at 4.13%. Assume someone bought a home for the DFW median price of $230,050 and put the suggested down payment of 20% down (leaving them with a loan amount of about $184,000). At the December rate of 4.13%, their monthly payment would be around $892 (this is not including taxes and insurance).
Now, let’s do that same equation with the 12 to 18-month high forecast of 5.3%. The monthly payment would jump to around $1,021. While this might not seem like a whole lot to some people, that monthly difference coupled with possible rising home prices could price those on the fence of affordability out of home ownership.
Interest rates are something to keep on your radar, but they aren’t meant to scare you. The overwhelming feeling about prospects in residential real estate for 2017 is optimism. Those who prepare accordingly and act quickly should have no problem securing their piece of the real estate pie.