Dallas & Area Real Estate in 2017? Boring old Normal.

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2017 will most likely be a different year for North Texas real estate.

We have had a long run of a bull market. Near-record years of construction, infill, sales and increasing values have kept North Texas real estate agents head’s spinning with contracts and, frankly, the good life. To be clear, it was and, in some places still is, a seller’s market.

But this past August, top agents noted the change in the wind.

No worries, summer is always slow, they said.

Then came the reality show that was our U.S. presidential election. Most everyone expected Hillary Clinton to beat the wild card of Donald Trump, and we braced for more of the same: artificially low interest rates, more regulations out of Washington, maybe even some attempts to finance affordable housing through taxes on developers or transfer taxes.

Even worse was the talk that the mortgage interest deduction, frowned upon by liberals as a hand-out for the real estate industry, would be in even more jeopardy.

But then the November election shock came, Trump won, and the stock market reacted positively.

Then interest rates started inching up, as expected.

“We are in a normal market,” says veteran appraiser D.W. Skelton. “The three year upswing was so strong, and lasted so long, because it was distorted by the recession. There is no doubt we are entering a declining cycle.”

The number of home sales are dropping, most notably at the higher end of the market, says Skelton. Agents who answered phones and wrote contracts now have to work a bit harder to sell a home, particularly homes priced over $2 million. Maybe they will finally get creative and figure out that social media and on line advertising is what they need, not old world methods.

Record price territory is also having a moderating effect, and many sellers are going to have to come off their current pricing if they want those mansions to sell. Of course, one of my other predictions is that we will see a proliferation of new ways to sell them.

It’s going to be tough to convince sellers, since Dallas enjoyed the third largest increase in home prices in the country: 12 percent appreciation over a year earlier. November 2016 preowned home sales were up 26 percent over November 2015, and agents are expected to sell more than 100,000 properties in North Texas in 2016, a bumper crop as the late Ebby Halliday would say.

So yeah, 2017 is going to be different. But not awful: 4.5% interest rates still are not 9% or 10%, and the supply of houses for sale in North Texas is down almost 14 percent from November, 2015, which will keep prices and sellers reaching.
I’m very excited by this: millennials will make up almost of third of homebuyers next year. Demographic activity overall will have a substantial impact on housing in 2017, with boomers dwindling down to only 30% of the market. Both buying groups are going to make waves in many cities in 2017.
As for interest rates going up, that may not be so bad, either. Even though we started the year with interest rates below 4%, higher mortgage rates will result in less stringent enforcement action, which will open up credit opportunities closed off to otherwise qualified homebuyers. That was always the fallacy of low interest rates the media never seemed to mention: low interest rates, groovy, but strict underwriting guidelines from the Fed still kept many a self-employed entrepreneur from enjoying them.
Maybe in 2017, they will finally be able to!

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