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Is The Housing Market Slowing Down?

In recent years, the real estate market has been incredibly competitive. We have very few houses and the ones we do have sell for way above the asking price. 

However, we may have seen our first indicator that things are finally slowing down.

The First Indicator?
Mortgage applications are down 63% from last year in Texas. This brings the application rate down to the lowest that it has been since the start of the pandemic. Could this be the first indicator that the market is finally cooling off?

Unfortunately, I don’t think so.

The biggest reason that the mortgage application rate has dropped is people are not refinancing their homes. The average interest rate that banks are currently offering on loans is much higher than it has been over the past few years, currently at around 4.9%. People are not going to refinance their houses only to pay a higher interest rate.

With this in mind, here is a quick market update.

We have approximately 10,000 homes available in DFW. When we were in a more balanced market before the pandemic hit, we had approximately 36,000 homes available. We still have less than a month’s worth of inventory at any given moment. 

Because we have low inventory, we are still seeing people overpay for houses all across the metroplex. 

Will The Market Slow Down Soon?
I spoke with two people I trust to hear their thoughts on the current situation and when they think the market might slow down.

First, I spoke with our main lender who has seen the market rise and fall many times throughout his career. He said that this current situation is starting to feel somewhat similar to 2008 when houses appreciated very rapidly and then the market crashed. He mentioned that the state of the market right now is what it was like around 2005-2006, meaning it may take a couple of years to really cool off. Also, it is important to keep in mind that in 2008, houses in Texas only lost about 5% of their value. If the market were to crash again, it’s possible that Texas will not be hit too hard.

Second, a good friend of mine who understands the market said that there are three things that could cause the real estate market in Texas to slow down. He said the market will cool if people stop moving here, new houses are built very rapidly, or if a lot of people leave Texas. Unfortunately, the opposite of all three of these is happening right now.

It does not seem likely that the market will slow down any time soon. Even though mortgage application rates are down, we still have incredibly low inventory and the market is very competitive.

If you need to buy a house soon and need help navigating the competitive landscape, call or email us. We would love to help you find your next home.

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