A sharply inflated housing market and high mortgage rates have left many homeowners looking to upgrade feeling shackled to their current residences.
More than half of Texas mortgages in repayment now sit at rates below 4%, as a result of significant home buying and refinancing activity from 2020 to 2022, according to The Dallas Morning News.
However, since last fall, the average rates for a 30-year, fixed-rate mortgage have floated between 6% and 7%. The rising rates have impacted local housing markets, with home sales in the Dallas area decreasing by almost 14% year over year in February, as previously covered by The Dallas Express.
The uncertainty of the housing market and significantly higher mortgage rates has caused some homeowners to pause before purchasing a new home that may better suit their needs.
For Taylor and Joseph Lopez of Anna, moving from their three-bedroom home purchased in August 2020 for $180,000 would mean leaving behind their 3.8% mortgage rate.
Anna has seen incredible population growth over the past few years, and this trajectory is expected to continue with the nearby multibillion-dollar expansions by GlobiTech and Texas Instruments in the greater Sherman area, as The Dallas Express reported. Much of North Texas has, in fact, received a significant influx of new residents — save for Dallas, which some people believe is losing residents due to high crime and Dallas ISD’s poor reputation.
While Taylor, a real estate manager for Wingstop, knows that they could get a good price on their current home, the trouble is getting enough of a return on the sale to be able to cope with the high cost of homes in the DFW area and afford the new higher interest rate, according to DMN.
The median price of a single-family home in North Texas saw the most rapid increase of any metro area in Texas, as previously covered in The Dallas Express.
Despite logging the first year-over-year decline in over a decade in March — a decrease of 1.2% — DFW, in particular, has seen such a sharp rise in single-family home prices that they have exceeded inflation by more than 200% since 2020, according to a recent study by real estate brokerage firm Home Bay.
For the Lopezes, the cost of a new home fitting their requirements would start at approximately $400,000. And that is before the higher interest rate is factored in.
“It doesn’t make sense when you weigh out all the pros and cons, so we’re continuing to drive about an hour each way to work,” Taylor told DMN. “We could always purchase a home at a higher interest rate, then refinance it if the interest rates go down, but that’s an if and when situation.”
“When you’re playing with that much money, it doesn’t seem like a risk I’m willing to take right now,” she added.
In a bid to fight inflation, the Federal Reserve made 10 rate hikes in just 15 months, as The Dallas Express reported. While the Fed’s board opted against any new increases in June, the inflation rate sat at 3% and thus still above the 2% target. Some experts predict there will be two more interest rate hikes before the end of 2023.
Some Texas A&M economists said that while house prices and mortgage rates should stabilize by 2024, they likely will not drop near the previous record lows, DMN reported.