Homebuyers, realtors and home sellers are adapting to the “new normal” of higher interest rates and low inventory even as demand for housing continues to remain strong.
Home prices in Fort Worth have either decreased or remained flat for the past six months, but the inventory of homes for sale remains low.
“Our inventory is at two and a half months, while it needs to be six months to be somewhat healthy,” said Tyler Kreis, owner of TK Realty in Roanoke.
Joshua Roberson, lead data analyst at the Real Estate Center at Texas A&M University, said the lack of homes for sale in Dallas-Fort Worth will continue to impact the market.
“If there aren’t homes to sell, then prices are going to remain high because the demand is there,” he said.
The higher mortgage rates are making many people remain in homes they bought when mortgage rates were lower. People who are selling their homes do so because they have some life-changing event, such as a new job in a new location, Kreis said.
“If you bought your home when interest rates were low, you have no incentive to sell because you’re going to have to pay a high interest rate if you buy somewhere else. It’s tough,” he said.
Buyers, too, can be reluctant to look for homes with current mortgage rates, which have been rising along with the Federal Reserve’s increase in interest rates.
The average rate on the benchmark 30-year home loan rose to 6.81% as of July 27, according to mortgage buyer Freddie Mac, the government-sponsored organization that supports home ownership for middle-income Americans. A year ago, the average rate was 5.3%. High inflation has caused the Federal Reserve to hike interest rates since early last year. The Federal Reserve wants to slow the economy to reduce the inflation rate. Mortgage rates are tied to those interest rates.
While the current market is frustrating, Kreis said the price increases that were occurring in 2022 were not sustainable either. In 2022, home prices increased nearly 25% year-over-year with the median price at the end of the year rising to $363,000. Now the median price is $339,000. The median sale price of a home means that half of the homes sold for a higher price and half sold for less.
“The current prices are more sustainable,” said Bart Calahan, a realtor at Roots Real Estate Co. and president of the Greater Fort Worth Association of Realtors.
But still, buyers are wary of the higher interest rates, Calahan said.
“I suggest to buyers they ‘Buy the house and date the rate,’” he said.
Potential homebuyers should purchase a home if they fall in love with it, Calahan said.
“You may not find another one you’re in love with,” he said. “Don’t regret the one that got away.”
He then says to watch those mortgage rates, and when they fall, refinance.
“Rates will fall, we just don’t know when,” he said.
One couple who did find the home they wanted in this current housing market was Tyler and Meagan Wright.
The couple were renting but decided it was time to buy and begin investing their money in their home. They spent a day looking at eight homes.
“We bought the fifth one we looked at,” he said. “Texas real estate is weird, you see something you want and it’s already gone, so we made an offer that day.”
Kreis, who helped the Wrights with their home purchase, said they found a home just above the $350,000 price mark.
“That’s a good price point because there’s a little less competition there,” he said.
Anything he has listed under $350,000 receives multiple offers and sells quickly, he said.
“If you can find a good home in that price range, it will sell in a flash,” he said.
Kreis said homes selling for over $600,000 are also selling quickly. The market that is struggling is for homes priced between $350,00 to $600,000.
“That’s usually your dual income folks, and for them, they can probably rent for less, so they may stay put,” he said.
That build-to-rent home market is increasing, Calahan said.
“For some people who can’t quite make a home payment work, it’s a good option,” he said.
Build-for-rent homes are newly constructed properties that are built expressly for the purpose of renting. They are often built together in a planned community and include amenities such as swimming pools, parks, playgrounds and community facilities. The homes are typically owned and leased by a single property owner who maintains the properties. Several new build-to-rent projects are in the works in and around the Fort Worth area.
Calahan said because of the higher mortgage rates, people are generally qualifying for a lower-priced home than they would have prior to the increase in interest rates.
“Someone who might have qualified for a $500,000 home a couple of years ago, might only qualify for a $350,000 home now because of the higher monthly payments,” he said. “That makes a big difference in terms of the home you’re in and the neighborhood and community you will live in.”
If those buyers can find a build-to-rent home in a neighborhood they want, they may rent now and hope to buy in that neighborhood when interest rates go down, Calahan said.
Traditionally, the summer months signal the hottest time of the year for home sales, but this year neither Calahan nor Kreis are seeing it.
“Our June 2023 saw the least amount of properties we’ve sold in Dallas-Fort Worth since June 2015,” Kreis said.
Potential buyers are holding off and remain skeptical of the market, said Calahan. That likely won’t change until more inventory enters the market and interest rates fall, he said.
“I think we’re in for more of the same for a while to come,” he said.
Bob Francis is business editor for the Fort Worth Report. Contact him at firstname.lastname@example.org. At the Fort Worth Report, news decisions are made independently of our board members and financial supporters. Read more about our editorial independence policy here.