By Britt Fair
“It was the best of times, it was the worst of times.”
No, I’m not trying to give everyone nightmares about high school English class or invoke the French Revolution. Rather, that’s how I would sum up the mixed feelings about DFW’s residential real estate market during the second half of 2018. Just about every statistic can be spun to match whatever sentiment a person has about the housing market.
Consider the dollar volume of home resales in North Texas: the amount of money flowing through the MLS system in 2018 was the second highest ever, behind only 2017. To many people that would appear to be a rather positive statistic, but some people look at that as the first step in the wrong direction, especially since transaction volume really fell off in the second half of the year.
Next think about inventory of homes on the market. One lament among Realtors who serve as listing agents is that inventory has been increasing over the last year, causing their listings to take significantly longer to sell than in recent years. That is true broadly, and even more so in specific neighborhoods and price points. But on the other hand, in the few years before 2018, probably the No. 1 Realtor complaint about the Dallas-Forth Worth housing market was a shortage of inventory that was making it hard for potential homebuyers to find a house to purchase. So, in many ways this increase in inventory of homes on the market could be considered a positive trend.
So which interpretation is right? Well, it all depends on your perspective.
If you are a homeowner who is wishing to sell at a high price, you think good news is when your house is the only one for sale in your neighborhood. But for another person looking to buy a home, good news would be for there to be lots of homes on the market. To the impartial observer, the ideal market would mean an efficient market where neither buyer nor seller has too much power – buyers get to look at their options and see what’s the best value home they can afford, while sellers have the opportunity to consider their competition (other homes for sale in their neighborhood and comparable neighborhoods) to determine where to set their asking price.
Dallas-Fort Worth home inventory has moved from a seller’s market toward a more neutral market, but in very few neighborhoods has it moved so far as to become a market that favors buyers. So, this increase in inventory to a more neutral market should facilitate more transactions in D-FW, but in 2018 it did not. Why not? Because sellers have been slow to lower their asking prices to reflect their reduced negotiating power. Buyers are not willing to continue to pay ever higher prices for homes, especially as mortgage rates have slowly risen over the last couple of years, but sellers have remained stubborn in their high asking prices, leading to a stalemate and thus declines in year-over-year transactions.
How does that stalemate end?
Well, it is my belief that the sellers who are serious about selling will be the ones who will capitulate on pricing when they realize that buyers are holding firm (partly due to mortgage lenders’ insistence).
And I’m betting on it happening early this spring as the traditional selling season opens.
Britt Fair is the president of Fair Texas Title, which he founded in 2015. Previously he was both COO and President of Hexter Fair Title Company, from 2004 to 2015. A seasoned economist intimately familiar with the North Texas real estate market and landscape, Britt earned an MBA in accounting and finance at the University of Texas at Austin and earned his bachelor’s degree in economics at Princeton University