Writer: Joshua Andino
2 min read November 2022— As housing prices begin to stabilize across the country, the North Texas housing market has also shown signs of slowing down – but not by much.
While housing prices in other parts of the country have begun their long descent back to Earth after stratospheric double digit increases fuelled by low interest rates and the buying spree prompted by relocating professionals and the Millennial demographic entering into the market in force, Dallas home prices remain robust, having risen 18.2% since October of last year according to Zillow’s market data.
Further breaking down the data, Zillow’s home price index lists the price of a single family home hovering at $393,260, only slightly down from their July high of $395,806. Condominiums however have seen a more noticeable decline in prices, down to about $242,165 from their August peak of $246,826.
Tejas Joshi, a director with investment firm Yieldstreet, anticipates home prices could face a 20% decline in some regional markets where new home construction will bolster supply, forcing some builders to slash prices over the next few months, reports Forbes.
Prices are expected to continue to level off as builders catch up to demand and supply chain disruptions are resolved. “Our backlog was about 2,500 houses at its peak, so there are a lot of families that are eager to move into their new homes. The backlog is now down to 1,500 and we are delivering 200 houses a month, so we are glad to be this productive despite the many challenges,” explained Don Dykstra, chairman of Bloomfield Homes in his interview with Invest:.
Interest rates, which have already risen to a point where mortgage demand has essentially collapsed, will also play a role in the ongoing housing price correction. As it stands, mortgage rates have reached their highest point in 20 years. The current 30-year rate reached 7.08% at the end of last month, reported Freddie Mac.
“One of the challenges to the existing home supply in a rising interest rate environment is people do not really want to give up the lower rate they currently have to buy another home with a higher rate. The rising interest rates do soften demand overall but they also impact existing supply. The new builder industry will likely slow down as well because of the anticipation of slower demand,“ Aaron Graham, president of Highland Homes told Invest:, in a separate interview.
The unwillingness of buyers to relocate and lose the low rates they secured earlier in 2020 and 2021 however, may be enough to keep prices, particularly of single family homes, mostly stable in Dallas as Graham noted. As builders complete current projects and chip away at any remaining backlogs, new construction has declined, further constricting supply. Between 2021 and 2022, new construction declined 34% in the third quarter of this year to 9,603 homes, down 34% from 2021’s 14,549 starts in 3Q 2021, according to Dallas-based housing consultancy Residential Strategies Inc, reports the Dallas Business Journal
Despite the potential challenges however, Graham remains optimistic North Texas could weather any potential storm, “There may be a national recession looming; there has certainly been a lot of talk of that. Regardless of a recession’s severity or length, we feel North Texas will be insulated to some extent. We have a robust, increasingly diverse economy, one of the biggest international airports in the world, and a growing population. We have strong in-migration with the largest home buying demographic moving here. Whatever happens globally or nationally, the positive tailwinds in DFW will help us offset what headwinds might come,” he said.
