November 2022 – DFW Market Update
December 10, 2022
December 10, 2022 – by Elena Garrett, Realtor and 72Sold Area Director
As DFW buyers and sellers are adjusting to the new reality of higher interest rates, new trends in home buyers’ shopping behavior are starting to normalize and become more predictable.
IMPORTANT: For the past 6 months, the home market in the DFW has undergone DRASTIC changes. Home prices declined, on average, between $40,000 and $100,000, depending on the county. Home showings plummeted. The increasing number of unsold homes created a logjam of unsold inventory that persisted until about October, when many would-be-home sellers decided NOT to sell in 2022 and to wait the market out. As a result, many of those unsold homes canceled their listings in November, dropping the inventory numbers.
These and many other facts are pointing to a stagnating market (at least for the moment).
Check out below the trends that the home market data is showing for the 4 main counties in the DFW area: Dallas County, Collin County, Tarrant County, and Denton County.
Home shoppers in December are likely to encounter a large number of home sellers who have been trying to sell their homes for months and are now facing the unpleasant possibility of showing their homes during the Christmas holidays. Many home sellers may take their homes off the market in December to avoid this inconvenience, creating an additional drop in the available inventory of homes. But I would expect that the same sellers may put their homes on the market again in January, so if the number of available homes drops, it would be temporary.
Home sellers who will be trying to sell in December will likely see fewer buyers than they would have just a couple of months ago, due to many home buyers being preoccupied with Christmas travel and overall holiday activities and waiting out to see what the interest rates are going to do next year. Since the buyer demand is already weak, those home sellers who are trying to sell in December need to be very aggressive in advertising and attracting home showings and offers.
Home Prices Are Stabilizing
Home prices have been declining since May in all 4 counties, reversing the gains made earlier this year. In Collin County, median home prices (for 3 and 4-bedroom resale homes) have fallen, on average, by $100,000 or 10% since their peak values in May. In Dallas county, homes lost on average $51,000 or 12% of their value so far. In Tarrant County, homes lost on average $40,000 or 11% of their value since May. In Denton county, they lost on average $64,000 or 13% of their value since May.
In month-over-month trends, homes in Collin county lost on average $1,000 of their value from October to November (therefore, one could say they remained flat). In Dallas county, the median prices INCREASED by $6,000 (the first increase since May). In Tarrant county, home prices dropped an average of $12,000 since October. In Denton county – an average decrease of $12,500.
Overall, the price decreases may be stabilizing, however, we will see how much they will decline in December, which is typically the slowest month of the year due to people being distracted by the holidays.
This may be an opportunity for home buyers to get a larger selection of homes with less competition from other buyers, and to be able to ask for price discounts or interest rate buy-backs from the sellers.
Sellers are Cutting Prices to Find Buyers
The graph below shows you how much in terms of percent of the asking price the house sold for. For example, “100%” means the house sold exactly for the same amount as the listing price. “110% SPLP” means the house sold higher than the listing price by 10%, while “90% SPLP” means the house sold for less than the listing price by 10%.
We can see that ALL counties in the graph show a sharp downward trend. All counties are now showing that the average home sells at 2-4% BELOW the asking price in November of 2023, compared to 5%-11% above the asking price in April, for example. This means that home shoppers can ask for price reductions, especially on homes that have been on the market for more than a month.
I would predict that as we head into December and January, this trend will stay more or less stable.
The DFW Home Market Has an Unusually High Inventory (the Number of Homes for Sale)
Based on the graph, the total number of homes for sale is FINALLY starting to decline.
The total number of homes is based on ALL homes that are available for sale, which includes both the new listings and the listings that have been on the market for a while.
The uptick in the unsold inventory that persisted from May through November indicates that the sellers who entered the market during the last months of Summer (or the first months of Fall) were slow to cut their prices, waiting for the interest rates to stabilize. Once it became apparent, that the higher interest rates were there to stay, many finally gave in and cut their prices – or canceled their listings. Also, it seems that the home shoppers started to adjust to the new interest rate environment and returned to home shopping to get into their new homes in time for the November holidays.
Overall, the overall number of homes for sale in November 2022 was comparable to the COVID months of July-August of 2020, when people were hesitant to leave homes (or to show homes) and the inventory of unsold homes was building up due to overall economic uncertainty. These November numbers of homes for sale are very unusual for this time of the year. Traditionally, the number of homes for sale drops in the colder months of the year.
The Number of New Homes Coming on the Market Are Slightly Lower Than What They Were Last Year
Based on the graph, as the total inventory of homes swelled up, the number of new homes entering the market is had declined sharply since Summer, which means that new sellers are were reluctant to put their homes on the market and preferred to wait the stormy market out.
I would predict those home sellers who planned to sell in 2022 will be more realistic about the market in 2023 and either continue to wait and see (waiting to sell until the market goes back up at some unknown future), or be a lot more ready to help the buyers out by being flexible on the price and terms in 2023.
Months of Inventory
Months of inventory measurement is meant to determine how many months’ worth of purchasing activity could the area sustain if no new homes were listed for sale. Usually, any number below 4 months is supposed to indicate a seller market, any number above 4 months is supposed to indicate a buyer market,
As you can see, all four counties are showing nearly identical trends. The months of inventory are trending higher and is currently at 2 months of supply for all four counties, which means that the market is cooling down for the sellers but is far from the buyer market yet. Right now, I would say that the market is more balanced than it has been since 2019-early 2020, with buyers having more choices, less pressure to enter bidding wars and more negotiating power.
The Number of Buyers Looking at Homes Continues to Drop
Based on the graph, the number of people looking at homes continues to drop (thanks to the high interest rates). If in January or February the average home had 20-40 showings before going under contract, then in November most homes sellers are lucky to get 4-6 people to visit their homes. That is a huge decline in shopping activity!
That means that there is less competition among the buyers, leading to buyers making less generous offers. My recommendation to home sellers would be to do what they can to make the best photos, use at least some staging, or use very aggressive marketing techniques to attract the best home shoppers to their homes. Since the number of homes on the market is high, home sellers need to stand out from the crowd to attract showings.
What should home buyers and home sellers do in this changing market? I will be writing more on this topic shortly.
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