Like the rest of the country, North Texas is experiencing a slowdown in real estate activity amid ongoing interest rate tightening by the Federal Reserve. Despite the headwinds, however, home prices in the region remain substantially higher than last year.
According to the S&P CoreLogic Case-Shiller Index, between August 2021 and August 2022, Dallas-Fort Worth home prices were up 20.2%, slowing from the 25% year-over-year growth seen the month prior.
Country-wide, the rise in home prices has been more subtle. Since peaking in the spring, home price growth in the United States slowed to 13% annually in August, down from 15.6% in July.
S&P CoreLogic predicts that U.S. growth will slow further to 9% annually by December, dropping to under 1% by the end of March 2023.
Of the 20 metropolitan areas tracked by the S&P CoreLogic Case-Shiller Index, all experienced year-over-year price drops between the months of July 2022 and August 2022. All 20 regions, however, are still posting higher prices when comparing August 2022 prices with August 2021.
Nationally, Dallas-Fort Worth experienced the fourth-largest annual increase in home prices, trailing only Charlotte, Tampa, and Miami. Despite the encouraging statistic, challenges in the real estate sector persist. “As the Federal Reserve moves interest rates higher, mortgage financing becomes more expensive and housing becomes less affordable… Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to decelerate,” according to Craig Lazzara, managing director at S&P.
While it lags behind the current market by roughly two months, the S&P CoreLogic Case-Shiller Index is widely considered a more precise gauge of home sales than real estate agents’ records. For their part, agents tend to focus on specific types of properties, which can skew metrics.
For instance, according to the Texas Real Estate Research Center at Texas A&M University and North Texas Real Estate Information Systems, in September, median single-family homes in DFW stood at $404,000 — a 13% increase from the year prior, but 2.7% down from August.
Outside of North Texas, some markets are experiencing a steep decline in growth. CoreLogic deputy chief economist Selma Hepp said, “With homebuying demand recoiling rapidly, home price appreciation has slowed considerably across many markets, particularly those in the West Coast and Mountain West where high mortgage rates are crushing affordability… Nevertheless, divergences still exist, with affordable areas in South and Southeast continuing to thrive as outmigration from more expensive markets persists.”
Debates continue as to the state of the housing market presently. While chief economists for the National Association of Realtors and the National Association of Home Builders deem the current environment a recession, not all economists agree.
November’s Federal Reserve meeting will likely help clarify the direction of the economy. If the Fed implements another aggressive rate hike, continued downward pressure on stock prices and home values is expected.