In 2024, the North Texas real estate market might see some improvement, but many of the problems from this year will still exist. Real estate experts believe problems with affordability, and relatively high borrowing rates will continue to make things difficult for consumers.
As demand outpaced supply, mortgage rates—which have been rising since 2022—reached their highest points in over 20 years in 2023, while home prices stayed close to all-time highs. Real estate experts believe that these factors, together with low inventory, would make things difficult for buyers in 2024.
The majority of large-city residential markets across the country, including Dallas-Fort Worth, are still plagued by a shortage of supply, according to Stephen Kotler, CEO of Douglas Elliman Real Estate’s brokerage for the Western area. Reluctant to give up their extremely low mortgage rates, many prospective purchasers are staying in their houses.
“It’s caused this friction in the market where you have decent demand but very little supply because those homeowners don’t feel that they have a place to go if they come out of the home that they’re in,” Kotler said.
Nevertheless, Douglas Elliman is noticing some indications that things could get better in the upcoming year. For starters, the average 30-year mortgage rate dropped to roughly 7% in mid-December from over 8% a month earlier.
“We’ve seen sales volume trending upward,” Kotler said. “I think it’s a feeling that inflation is slowing.”
According to a new estimate, DFW housing sales and prices would decline in 2024. The prognosis presented in late November predicts that home prices would decline by more than 8% annually and that sales will decline by about 13%.
Out of all the major U.S. metro areas, that was the fifth largest expected price fall. According to the Realtor.com estimate, Austin-Round Rock will see the worst decline in home prices of any large metro area, plunging more than 12%, while home sales will fall by about the same amount.
According to the National Association of Realtors, the most hotly anticipated housing markets for the upcoming year will be Austin and Dallas.
While the most recent market data indicates some recovery, several important uncertainties remain. Re/Max data shows that DFW home sales decreased 3.1% in November compared to the same month last year, marking the lowest year-over-year decline in 2023. Months of inventory had increased to 3.3, and active inventory had reached 21,099, up 9% from November 2022. For the supply and demand of housing to balance, most experts believe that at least six months are needed.
Inventory is particularly scarce in upscale DFW communities like Highland Park, University Park, and Preston Hollow because out-of-state buyers are flocking to Texas and snatching up houses, according to Kotler. But compared to a year ago, when some luxury properties in Dallas-Fort Worth were drawing 30 offers, the market is now better for buyers, he added.
According to Kotler, there are still several bids on properties in Plano and North Dallas that are valued at or under $1 million.
“But when you come down into Highland Park and those areas and the prices are somewhere between $2 million and $5 million or $6 million, it’s a little bit slower,” he said.
Prices for new building are still rising due to rising construction expenses and the rising cost of land in upscale North Texas districts, according to Kotler.
“If you’re a homebuilder in those markets and you bought dirt two years ago, your pro forma on that project is going to change a lot and what you’re going to potentially sell it for [will be higher] because the costs of construction have increased dramatically,” he said.
Interest rates and inflation will have a major role in 2024, with geopolitical and other events playing a smaller role, according to Kotler. In years when there is a presidential election, sales are usually lower.
“The next year is going to be bumpy,” he said. “I would definitely keep your seatbelt on.”
According to Tom Cawthon, president of the Dallas division of homebuilder Taylor Morrison, which has active communities all throughout the region, the lack of resale homes in North Texas is positively affecting sales of new homes.
Affordability is the biggest problem in the new home market in North Texas, and that’s unlikely to reverse significantly in 2024, Cawthon said.
“Between the cost of materials, land cost, entitlement cost, development cost — there’s just a real strain on affordability,” he said.
Taylor Morrison, which had an average sale price of about $680,000 this year, will sell homes priced in the low $300,000s in two North Texas communities in 2024: River Ridge in Kaufman County near Crandall and Madero in Tarrant County near Haslet.
“Those will be volume plays,” he said. “We anticipate getting volume in exchange for that price point.”
In Conclusion, the real estate market has had ups and downs in the last 3 years, and there will always be the need of a home for every family. We expect more builders to open new communities, and we also expect interest rates to get lower than the current rates.