Housing Market Correction Is Underway. So Why Do Home Prices Continue Rise?

Despite the American housing market currently being in the midst of a correction or a slowdown, home prices have steadily maintained their never-ending increase. It is going against the predictions of many experts and perhaps even conventional thinking.

In addition to rising mortgage interest rates, buyers cannot afford these higher prices on homes. Deals are still falling through. Bidding wars are drying up. This is the beginning of the end of six-figure offers over the asking price. So how is it possible that median home list prices were 15.9% higher in the week ending July 9 than they were a year ago, according to Realtor.com® data?

The disconnect seems to be that property sellers haven't gotten used to this new reality, where they cannot just set any price they want on their homes and wait for the bidding wars to start. Many consumers are now unable to afford what they could have just a few months ago due to rising mortgage rates.

According to Realtor.com June list price data, record-high home prices have increased by more than 31% over the last two years. They keep rising as well. It appears like something must give.

According to Danielle Hale, chief economist at Realtor.com, prices change very slowly. "Recent experiences shape sellers. Sellers need to stop aiming for the stars before we start to see prices start to decline.”

Furthermore, just because vendors are asking for more money doesn't necessarily mean they will receive it. Purchasers are haggling. When compared to June of last year, there were twice as many price reductions on real estate.

According to building consultancy Zonda, roughly 11% of builders lowered pricing on newly built homes last month. They were unchanged in comparison to before an additional 70%.

Summer is often when home values increase. Homes that are bigger and more expensive appear on the market, and families wanting to move in before the kids start school in the fall compete for them. Numerous millennials are also at the stage of their lives where owning a home becomes more tempting. There are now not nearly enough properties available for purchase or rental to meet demand.

Mortgage rates reached an all-time low of 2% last year, enabling purchasers to afford homes with larger prices. Because of the decreased rates, many monthly mortgage payments remained affordable, offsetting the additional money that buyers invested in their residences.

However, from just under 3% a year ago to the mid-5% range, mortgage rates have skyrocketed. That has increased many monthly mortgage payments by several hundred dollars. In addition to increased inflation, rentals, and petrol prices, buyers today must pay mortgage bills that are 58 percent higher than they were just a year ago—when prices were also at record highs. As a result, many people are no longer able to borrow nearly as much money to buy a home, and many others have been driven off the market.

According to the latest June 2022 Housing Reports by the Metrotex Association of Realtors, active listings for North Texas real estate was up 49.5% with 70,899 with a median price of $360,000 – up 16.1% from the previous month.  These active listings had an average of 26 days on market with 40 days to close and North Texas inventory was 2.1 months of inventory, compared to 1.3 months of inventory in June 2021.

In the same Metrotex report, active listings for the County of Dallas real estate was up 5.8% with 3,385 with a median price of $385,000 – up 17.3% from the previous month.  These active listings had an average of 18 days on market with 29 days to close and North Texas inventory was 1.5 months of inventory, compared to 1.3 months of inventory in June 2021. 

Active listings for the Collin County real estate was also reported to be up 67.0% with 2,693 with a median price of $575,000 – up 30.5% from the previous month.  These active listings had an average of 17 days on market with 37 days to close and North Texas inventory was 1.9 months of inventory, compared to 1.0 month of inventory in June 2021.

 Please feel free to reach out to the author discuss if you have any questions. ken@tribecagroupdfw.com | 202.256.9332