Seth Fowler: Happy summer to all our Daltxrealestate.com readers. Our staff is taking time to burn, peel, sweat, soak and recover, so for our installment of Tarrant County Tuesday this week, we wanted to repost a recent and pertinent article regarding the state of the current real estate market.
As always, feel free to reread, comment (or re-comment), and nod your head in agreement as you collectively say, “Wow, that Bow Tie Realtor sure knows what he’s talking about.” Surf’s up!
Is the Tarrant County Market Headed for a Slowdown?
This week we will take a break from highlighting new and exciting homes in Tarrant County and focus on the question everyone wants to be answered: “Is the real estate market slowing down?”
First of all — RELAX. No, we are not seeing a crash in the housing market. No, we are not headed for a recession like 2007-2013. No, the sky is not falling. No, if you’re a buyer you’re still not going to get a “great deal” on any home on the market. But there are a few signs of the market becoming a little bit more balanced.
Signs of Balancing Market
A balanced market in real estate terms is when there is enough inventory supply to meet the demands of buyers for approximately six months. Over the past few years, we have seen less than one month’s supply of inventory, which is not a good thing.
Buyers get frustrated and many quit looking to purchase a home if the inventory is too low or the selection is not deep enough to resonate with their needs.
According to the Greater Fort Worth Association of Realtors, in May 2022, there was one whole month’s supply of inventory in Tarrant County. While that might not seem like a lot, in April 2022 there was only eight-tenths of a month’s supply in Tarrant County. Small gains are still gains.
Don’t Compare 2022 to 2007
Stop. Stop. Stop.
This is not the beginning of a recession no matter how much our inept politicians try to create fear and panic and inflation. This real estate slowdown is not anything like the previous Great Recession for many reasons.
First of all the last housing recession was largely based on stupid and extremely risky loans. Lenders were giving money to people who didn’t have to prove they had any income, money to pay the loan or any sort of verification that they could do much more than breathe. Loans were heavily sub-prime (horrible credit scores) and there were over 13 million ARMs (Adjustable Rate Mortgages) in 2007, whereas there are only around 2.5 million ARMs in the market currently.
In 2007, even in Texas, there was a false demand and heavy supply which caused the bubble to burst. Currently, there is high demand and low inventory which means there is no bubble.
If anyone at a cocktail party says, “I’m waiting on the housing market to crash,” you simply walk away from that conversation because that person has zero knowledge whatsoever.
If someone says, “There are going to be a rush of foreclosures and bank-owned homes that I’m going to scoop up,” once again, walk away as that person continues to be talking about things that aren’t going to happen.
One reason why foreclosures aren’t going to flood the market like in 2007 is that homes have increased in value so much that even if an owner doesn’t pay their loan for 30, 60, or 90 days — and even if the value of their home drops from current values — they are still going to have a good amount of equity to be able to sell the home, repay their loan and still make money.
Watch For Other Signs?
Yes, the interest rate is a factor in this slowdown. Currently, 30-year conventional rates are around 5.75 percent. Talk to any Baby Boomer and they’ll tell you a story of a home they bought with 11 to 20 percent interest rates. While 5.75 percent isn’t 2.3875 percent like it was a few months ago, it’s still a very good rate.
More than the interest rate factor, this Bow Tie Realtor would argue that the overall price of homes is what is causing a slowdown. When a “starter home” starts in the $300,000 range and is still difficult to find, get under contract, and close, that automatically takes a lot of first-time buyers out of the market.
Combine high prices with absurd property tax rates with rising interest rates and you’ll get the signs of a slowdown.
What is a Price Improvement?
Another sign is that we are seeing more prices drop than we have in months. Some call it a “price improvement,” but let’s be honest — sellers want to make as much money as they can, Realtors work for sellers, and sometimes a starting list price might be a “titsch” (as my former mother-in-law would say) too high.
Fair enough. You can’t blame anyone. Everyone wants to make as much money as they can. If buyers are willing to pay a high price, or even overpay to get a home, nothing is wrong with that. But as any market will tell us, there eventually comes a price that some people won’t pay that price.
In the past week, there have been nearly 500 homes in Tarrant County that have decreased their asking price. In that same week, there have been nearly 900 new homes hitting the market.
Sellers can ask for a high price, but if buyers aren’t willing to pay that amount then the market has spoken and that’s a sign of a balancing market. And that’s good.
Final Thoughts
Once again — the sky is not falling. Home values are not going to significantly drop. It is and will still continue to be a very strong seller’s market. But the signs are there for some normalcy and balance in the real estate market.
Don’t waste your time trying to argue to someone that we are heading into another housing crash. That’s not going to happen. Not in Texas, for certain. Don’t waste your time trying to convince someone that they aren’t going to get a home for 50 cents on the dollar. Not going to happen.
If you’re a seller, keep trying to get the most money for your home. You are entitled and you deserve it. If you’re a buyer, you might not have to overpay or even pay asking price for the home of your dreams. If nothing else, at least there will be more homes on the market to choose from.
Hang in there everyone. We need normalcy and a more balanced market.
