The Real Estate Slowdown is Real: Don’t Panic as Buyers Bring Balance
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Some will agree, and some won’t, but data doesn’t lie — we are heading into a real estate slowdown.
First of all…R-E-L-A-X. No, we are not heading toward a recession. No, the housing market isn’t crumbling. No, it’s not time to sell your home, stock up on canned beans, ammo, and get off the grid. But the real estate market is changing … dare we call it a slowdown?
How Can You Say It’s a Slowdown?
How can I say this? We are in the midst of an historical real estate boom like we’ve never seen before and everything we hear and read says the market is hot, hotter, hottest!
Please hear me: the Dallas/Fort Worth Metroplex is still by far the absolute best place in the world to live, work, play, and own real estate. The daily, weekly, monthly growth that is happening to this part of the state is still out of this world.
But the market is experiencing a slowdown. Interest rates are rising . Municipalities are getting more and more greedy with property taxes. Home values are increasing at a rapid pace. New home construction is increasingly expensive and not meeting demand. Wages aren’t increasing as quickly as prices and that’s causing a slowdown in the real estate market.
Mix equal parts waning buyer demand, rising interest rates, Municipality greed, weak inventory = Slowdown Cocktail
In Part One we will look at those factors and how they combine to cause this slowdown. In Part Two next week, we will discuss whether or not an actual slowdown in the real estate market is a good thing, a precursor to doom-and-gloom (again, R-E-L-A-X), and what it means for buyers and sellers in this brave new world.
Just The Facts Ma’am
According to the Fort Worth Housing Report distributed by the Greater Fort Worth Association of Realtors, the median sales price of homes is going up, up, and up.
Up 9.7 percent from February 2017 to 2018 at $214,000. Up 9.3 percent from March 2017 to 2018 at $219,750. Up 7.3 percent from April 2017 to 2018 at $220,000. We see that the overall price continues to increase, but the percentage from year-to-year is falling a little bit.
Across the country home prices increased 8.7 percent over the past year according to a recent Zillow report.
Increases like this simply are not sustainable in the long run for a stable economy. While sellers enjoy their large return on their investment, fewer and fewer buyers are able or willing to pay these steep increases.
Active Listings And Days on Market
From same reports active listings were up 3.4 percent from February 2017 to 2018 at 1,668 homes. Up 6.4 percent from March 2017 to 2018 at 1,851. Up 17.1 percent from April 2017 to 2018 at 2,105.
The more listings the better right? Well, yes and no is the answer. Yes more listings on the market the better for buyers. But that’s only if they are good listings that are priced correctly.
Days on market has also increased. Homes sat for one day longer in February 2018 than 2017 at 43 days. Seven days longer in March 2018 than 2017 at 44 days. Seven days longer in April 2018 than 2017 at 37 days.
No — not time to panic — but numbers don’t lie. Buyers are gaining some control.
Word on The Street
While considering this article over the past month or more, I have talked to many agents, lenders, and title company officers in the D/FW area and 100 percent of them have mentioned how it appears that the buyers are finally pushing back at the skyrocketing prices.
Sellers have been in control for a number of years when it comes to asking price. Depending on the range, sellers have tended toward higher asking prices and buyers have very little recourse. If a buyer wants a house then they’ll meet asking price … or go higher.
Home prices are soaring at a rate that is not sustainable – one of factors causing this real estate slowdown
As inventory increases (albeit slightly) we are seeing buyers be a little pickier and price conscious. It’s not as if buyers are offering 50 cents on the dollar, but more than ever in the past year we are seeing lower offers as homes sit longer on the market.
Of course there are variables like price range and location and condition of homes — I know that — so these stats might not apply for all homes universally.
In Summary
We have been living in the longest real estate boom in the history of ever. It’s not going away, it’s just not booming like it was, and I contest that it will not boom like that again.
A slowdown is happening and will continue to happen. While this might cause panic for some, it could also be just what our overall economy needs — balance.
Come back next week and see what else I have to say.
If you disagree with this article — or if you agree — hit me up, let me know, I’d love to hear YOUR perspective.
Well that’s all from Tarrant County this week Dirty Readers. Thanks for reading and following and sharing! As always, if you have questions, comments or great ideas for a blog … hit me up!
Seth Fowler is a licensed Real Estate Sales Professional for Williams Trew Real Estate in Fort Worth, TX. Statements and opinions are his and his alone. Seth has been involved with the home sales and real estate industry in the Fort Worth area since 2004. He and his family have lived in the area for over 15 years. Seth also loves bowties! You can reach Seth at: 817.980.6636 or [email protected].
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Seth – I have been in this real estate game for 44 years, I think we will hit the
wall at the end of 2019 and all bets are off what happens in 2020. A well known
Economist was in from DC last week and spoke to the CB agents last week and this is
exactly what he is saying. He is predicting that we will have a recession
worse than the 1930’s. Right in time for elections.
I am seeing more appraisal issues – as properties are not appraising, so stay tuned
glad you are approaching this subject – needs to be said. If you need to sell – better
get out there.
Thanks Pam for reading, sharing, following and your input. A shift/slowdown isn’t the end of the world – I am going to touch on this in next week’s blog but while some Sellers won’t like “only” making a little money vs. the ridiculous returns in previous years many Sellers realized, we need to have a more 50/50 stable market where Buyers and Sellers are on more equal footing. We still live, work, sell in the greatest area in the country – we just have to get ready for the New Normal. Keep reading, sharing, following and commenting!
Who was the economist?
I completely agree! I’ve been saying this for months. Price point and home condition make a difference. We still see multiple offers on the really good homes under 1M. It’s similar to what happened in 2007 when people overpaid for not so good homes. There’s a lot of those on the market now!
Thanks for reading, following and your input. Honestly I figured the first comment was going to be from agent calling me a fool and stupid…and while that may be true…the data doesn’t lie and it’s saying we are in a shift/slowdown. I’m going to focus a lot on what you touched on in next week’s blog…Buyers are starting to take control and becoming pickier and pickier – and rightfully so. Keep reading, following, sharing #tarrantcountytuesday
Hi Seth. I really enjoyed reading your article. I am a home stager for occupied homes. I’m hearing from some sellers they are worried their home won’t sell fast. Of course they have fears….because all they’ve been hearing is that homes are getting offers over the weekend. Poor buyers were having to make decisions unreasonably fast. I’m glad for the balance….. 🙂
Looking forward to part two!
Thanks for comments – keep ’em coming. YES – Sellers are freaking out bc they’re not getting lines of people at their door hours before going on the market — that actually still happens (not like a few years ago of course) but it’s not like we are in a recession or depression. Expectations need to be managed better by everyone – especially the Realtor to Seller – and I’ll touch on that in Part Deux…who knows, I keep getting good feedback on this post and might have to split my next one into 3 parts…appreciate reading, following, sharing!
Cast the bantling on the rocks,
Suckle him with the she-wolf’s teat,
Wintered with the hawk and fox,
Power and speed be hands and feet.
Nice article, Fowler.
Great article, broaching the elephant in the room. We have seen this coming for actually 2 plus years in the higher market, UNLESS you were undervalued already.
Curious what your take is on the luxury markets over 1.5 million in Condo and in great locations, IE: Park Cities, Southlake, Frisco, Vaquero etc
Your article is mainly referencing stats on under 500 if not max 800 thousand?
Dallas is filled with incredible values in tight luxury locations…buyers have slowed there as well. Taxes? Political soap 0peras?
Oh we have one of the top economists anywhere residing right here! Please Google John Mauldin! He has a great website. He is brilliant and lives at the Azure.
Happy Tuesday!
best
Gerald
Condos are a completely different animal aren’t they? Typically in a slowdown or down turn (notice I didn’t use that word in the blog or I’d have been tarred and feathered)…condos seem to be the ones that decline first. I would be cautious in purchasing a condo…mainly because I detest HOAs in general…but when someone else is dictating what you can/can’t do and there are many similar if not exact properties as yours – it’s hard to differentiate when needing to sell. Thanks for reading, following, sharing!
Seth – I understand that this is a Tarrant County Report but not sure the rest of the North Texas market is experiencing the same circumstances. Many areas of Tarrant County have had a sub 2 month inventory for quite some time so supply and demand is much worse than in neighboring counties. In April throughout North Texas is was one of the few times in recent memory when the increase in new listings exceeded the number of closed sales. I do agree 100% on the affordability of both new and resale. In April homes under $200k represented 16% of total listings but made up 30% of all sales (which might sound good but that price points was down almost 20% in sales compared to 2017. The only remotely balanced price point is the $200k-$500K representing 56% of listings and 60% of sales (sales up well into double figures compared to last year). Not suggesting your assessment is wrong but the incredible price increases over the past several years has been a considerable hindrance to locals moving up within their own community. I live in a respectable suburb and was lucky enough to buy when the price per sq ft was under $100. I can sell my home now for around $160 per – sounds like a great deal – I like the town, have kids in school and if I attempted to sell now and move up the “value of my new home” would would be hard to find. Even using all my equity I might purchase a slightly larger home and would probably be starting over with the upgrades. Hopefully more conservative price increases over time will increase more local sales and no slowdown (other than 4% instead of 12% pricing increases) will take place.
Certainly areas are different but I would still contend that this is happening throughout the Metroplex. I spoke to a number of agents, title companies and mortgage brokers outside of Tarrant County when researching for this. The month’s inventory in Tarrant is still very very low…but as you agreed, the skyrocketing prices have been taking Buyers out of the market for a while and combine that with rising interest rates and inventory–that much of it is just not very appealing. Many Sellers are in the same boat you mentioned…they want to sell and move but where do they move to get same or better quality of life? Unless they’re moving far far away…might not exist. So they stay put and that’s not good for any of us. Thanks for reading, following, sharing!
I am watching two neighbors try to sell their homes in East Dallas. Both appear to me to be over priced for the neighborhood, let alone not 100% updated for today’s styles. A third house on my street was priced much lower but did not sell at all last year and is a rental now. I believe that people can only pay so much and there’s a sweet spot at which houses sell, especially if they are not 100% updated as my neighbors houses are not. But listing past a certain sales price limits who can buy. My opinion is buyers walk away when the price is too high. They don’t usually offer a way under asking price contract for sale. They figure seller is greedy and don’t want the hassle of dealing with a narcissist. We are just watching this and observing.
You’re exactly right – and getting a sneak into next week’s blog – Buyers are tired of being “bullied” by high prices especially if the house isn’t “perfect” (i.e. looks like Chip and JoJo’s work)…we need more balance and that’s what is happening and will continue to happen…we just have to be okay with it…stay tuned for next week’s greatness! Thanks for reading, following, sharing and commenting…keep it coming
I just sold my house in February in the Elmwood neighborhood of Oak Cliff. It sold for $11k over asking price after a bidding war before it was even listed on the MLS. The house was in tip top shape, totally updated, even with solar panels., but, to be fair, my agent did an outstanding job of getting us ready for buyers. So, I am learning a lot by reading this article and comments. We just closed on a new home last week that we plan to stay in until we can’t manage the stairs anymore (which, I hope, will be 20 years from now). So, even though I believe you are all correct about the recession we are going to hit, my theory is that we will be fine because we will be in this new house long enough to ride it out and last into the upswing again. So, my question is, how long do you think the next recession will last?
Experts say it will come in 2020 and how long? Not sure. This cycle has been way long. Let me ask you, what was the price point you sold at. The softness is hitting more at the tip top. Lee Trevino’s home on Park Lane now is still not sold, onto a new agent and lower price point. I am hearing that anything under about $600K is flying off the shelves. So def not slow there. Really depends on location and price point.
Thanks so much for reading, commenting and share, share,share and follow! First of all – congrats for selling your home! Oak Cliff is such a cool neighborhood and you hit the nail right on head (also touching on next week’s blog)….Buyers will pay and over-pay for homes that are in tip-top shape…I think Buyers are just fatigued with the “meh”homes that are on the market at high prices and just finally are saying they don’t want to pay that much anymore…and good for them! Also kudos for having a quality real estate sales professional…so many realtors these days (and in past too) are professional drivers and door openers – they make me sick and they think price per foot is a way to obtain value in a home and they just pander to their clients and don’t do our industry justice for how much work it really takes to be successful in real estate!
FINALLY – let’s not use the word “recession” because I 100% do NOT believe this is a recession at all. I think it’s more of a shift in the market and in Buyer’s willingness to pay top dollar for something less than perfect. Economic cycles come and go as you know and we are still doing great overall – but it will continue to take top notch agents, Sellers realistic on value and condition of home and Buyers who aren’t just trying to get lowest price possible in this shifting market.
Stay tuned…
Methinks your bias is showing – labeling increased taxes as “greedy” yet brushing over the fact that wages have not kept pace with inflation ALL while US corporations have experienced record profits. Unless high paid executives and investors are going to buy up entry and mid-level housing stock then we’re in trouble. I’ve been selling real estate almost 20 years and I’ve never had a buyer balk due to taxes, however many have delayed purchase due to layoffs, stagnant income and other factors NOT influenced by government policies.
Thanks for reading and commenting. Absolutely I am biased against high property taxes. I don’t know where you have sold for past 20 years but Tarrant County (where i mainly have sold since 2004) is one of the highest property taxes in the State and for that we get….uhhh…not many “good” schools, bad roads, zero public transportation…and yet taxes and valuations are going up every year. I have had numerous Buyers who have been forced to sell their homes because of the taxes on their home going up considerably from the time they first purchased – and for what? Also – if you have ever benefited from having Buyers coming from California you will agree that it’s like shooting fish in a barrel. Home prices in and around Fort Worth are incredibly low compared to what they can afford in CA…I’ve always counted it as a Done Deal when I get CA Buyers bc it’s a no brainer…until in the last 12 months I had CA Buyers who were ready, willing and able to purchase a very nice and high priced home in the TCU area…and they backed away after they saw what the annual property taxes were currently. They did the math and realized that they wouldn’t be saving any money by moving from CA to TX in the long run bc of the property taxes.
You bet I’m biased against a random entity like the appraisal district assigning value to an older home in a “hot neighborhood” simply because developers and builders have started tearing down homes and building larger, more expensive homes…why should someone be punished for buying in a good area at a good price? I understand taxes need to be collected and serve a purpose, but when I have Buyers and Sellers specifically moving AWAY from Tarrant County just to avoid higher taxes – that eventually affects all of us.
Keep reading, following and commenting. Stay Dirty
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