Rising mortgage rates are taking a toll on home sales in the Dallas area, a recent report showed.
Home sales in the Dallas area decreased by almost 14% year over year in February, according to a national housing report released on March 17 by RE/MAX.
In 2022, the housing market saw an unprecedented demand for inventory as potential buyers were eager to invest in homes.
This scenario seems to have changed in 2023, with more homes hitting the market but the price tags making it difficult for people to afford them.
Rising interest rates have also played a role.
On March 2, 2023, a 30-year fixed mortgage rate jumped back above 7% for the first time since October 2022. As of April 4, it hovered a bit lower at 6.18%, according to the Mortgage News Daily rate index.
The surge seen in March began at the end of February, which saw rates for a 30-year loan at 6.04% at the start of the month and 6.85% by the end.
This is a significant increase over a short amount of time, and the rates may have contributed to the decrease seen in home sales.
Looking at the data from RE/MAX, home sales have increased by 31% between January and February in select U.S. metro areas.
But on the other hand, active inventory has decreased by 10%, which creates an imbalance between demand and supply.
This trend is also visible in the Dallas area, which had almost 217% more active inventory in February compared to February 2022.
The increase in supply may seem like a positive sign, but with the rising cost of new builds, it is becoming increasingly difficult for first-time homebuyers to enter the market.
Moreover, it is notoriously difficult to build in Dallas due to its backlogged permitting process.
The issue has become significant enough that Texas lawmakers are considering a bill targeting long wait times for construction permits by streamlining the process.
Home sales might pick up soon, as mortgage rates have dropped since the high seen last month.
This bodes well for both the Dallas area and national markets.
Buyers are also facing less competition, meaning they might not have to put down as large of a down payment as they did a year ago, per analysts from Axios.
With rent prices rising 21% in the Dallas area since 2020, the benefits of owning a home continue to outweigh those of renting.