IRVING — Real estate agents looking for a rosy outlook for the housing market next year were likely disappointed by the Metrotex Association of Realtors’ annual forecast with The Economist on Friday.
Economists at the local real estate group’s new headquarters in Irving said they expect mortgage rates to continue rising through 2024 and existing home sales to remain limited due to a drought in new listings.
“Single-family homes aren’t going to sell very well because there aren’t that many on the market. It’s a dead stop,” said Anthony Murphy, a senior economic policy adviser who heads the Dallas Fed’s macroeconomics and finance group.
Over the past two years, homeowners in Dallas-Fort Worth and across the country are choosing not to put their homes on the market as mortgage rates have risen along with home prices.
You might get a good profit on the sale, but then you’ll have to shop in a more expensive housing market than when you first bought, and you’ll also be paying a much higher interest rate at the expense of your current loan. You’ll be buying a new home and your monthly payments will increase significantly.
“It’s quite a shock,” said Daniel Oney, an economist at the Texas Real Estate Research Center. “If you’re budgeting for a home, or if it’s a commercial project, you’re going to go over budget because the cost of capital is higher.”
The Texas Real Estate Research Center at Texas A&M University projects that by the end of 2023, there will be 336,000 home sales in Texas, including 93,000 in the Dallas-Fort Worth area.
Oney said the state’s sales are comparable to 2017 or 2018, but Dallas-Fort Worth is closer to 2015 levels because it hasn’t seen as much growth as Texas as a whole.
As of August, single-family home sales in the U.S. were down 15% from a year earlier, according to the National Association of Realtors. Sales in Dallas-Fort Worth fell 8%, according to data from the Texas Real Estate Research Center and North Texas Real Estate Information Systems.
declining affordability;
The median single-family home price in Dallas-Fort Worth was just over $406,000 in August, up about 44% since the start of the pandemic in 2020. Rising interest rates are driving buyers away.
“Affordability is a huge issue for young people buying homes,” Murphy said. “Right now, there are no signs that the economy is slowing down.”
Homes in the Dallas-Fort Worth, Austin, San Antonio, and Houston metropolitan areas are now cheaper than Atlanta and Houston, according to a Texas Real Estate Research Center analysis of NAR and Census Bureau data that compares median home prices and household incomes It’s more affordable than Chicago.
“We’re not like San Francisco where their homes were 10 times their income level, but that’s going to impact our migration,” Oney said. “As prices go up, we become less attractive to some people.”
Lengthening of mortgage interest rates
Murphy said policymakers would lower the federal interest rate, which affects mortgage rates, if they believe inflation has fallen significantly and the labor market has cooled.
But new numbers released Friday by the Labor Department show the U.S. unemployment rate remained unchanged at 3.8% from August to September, and employers added a more-than-expected 336,000 jobs in September. It has been shown.
“if [Fed officials] They say they are reluctant to cut interest rates if they see strong labor market numbers and see inflation falling only slowly. Murphy said. “That’s why I would say that in terms of the overall housing market on a national level, it’s probably going to be pretty lackluster going forward.”
Blue Chip Financial’s forecast, presented by Murphy, predicts that the average interest rate on a 30-year mortgage will fall from the current 7.5% to just over 6% by 2025. This is still much higher than the 2% and 3% interest rates seen at the beginning of the coronavirus pandemic. 19 pandemic. Blue Chip and Oney both expect further rate hikes from the Fed.
“We still hold ourselves to very high standards,” Murphy said. “If we had shown the forecast as of January, it would have shown a significant decline in mortgage rates, but given what has happened recently in terms of inflation, a fairly strong labor market, etc., the forecast is longer-term. It’s going to go up for a long time.”