Are we in a real estate market shift plus our 2 week activity report

$70 Million Sales Volume YTD

Are We in a Real Estate Market Shift?

I've asked Sean Elliott, one of our top agents and best market analyst to share his opinion on the subject. Sean pays very close attention to the MLS statistics and is excellent at finding trends in the data. Here's what he thinks ...

Hello everyone. We hope the beginning of summer finds all of you well. Believe it or not, the red hot sellers market we've experienced in north Texas over the past few years is starting to change. We knew the housing market eventually had to slow down. There's no way things could continue at such a torrid pace for much longer, but we weren't really sure when the change would begin, how drastic it would be, and how long it would last. The future is always uncertain to a certain extent, but we wanted to let you know what we're seeing in the market right now, what we predict for the next 6-12 months, and how it might affect you and your family.

We knew the Fed would raise interest rates in 2022 in an effort to slow down historic inflation. When interest rates rise, it limits people's buying power. The monthly cost for a 30 year mortgage suddenly jumps a few hundred dollars. Even though the current mortgage rates of 5.5% look pretty nice historically, they are still tough to swallow when compared to a 2.75% rate from a year ago. The heightened cost of borrowing money, coupled with the cost of gas, food, property taxes, and other everyday products, has caused people to closely examine their monthly budget and "tighten the belt" a bit. After all, for most Americans, there's only so much money to go around each month.

So, how have increased interest rates affected our local housing market? Here at the Grisak Group, we've been carefully tracking Collin County housing data since late March. Each week we analyze the number of homes on the market, the number of price drops, the number of deals which terminate before closing, how long homes sit on the market, and the prices homes are selling for. There's a lot of data associated with this project, so it's tough to share all of it in a newsletter, but here are the basic conclusions from the data.

Each week there are more available homes on the market, which means buyers have more choices
The number of new listings hitting the market each week are increasing, showing signs that sellers think we've hit the top of the market and want to cash in before conditions change
Number of homes pending sale have stayed pretty level, buyers are still writing offers
Number of homes closing have stayed pretty level, deals are still closing
Total number of showings have gone down, fewer people are looking at the available homes
Average days on market before going under contract have gone up, homes aren't guaranteed to sell in the first weekend
Average sales price for closings has stayed pretty level, up about 3% from this same time last year
Number of sellers who dropped their list price has gone way up, more than double per week compared to late March
The number of buyers who terminate their contract before closing is way up, showing buyers are very tired, worried about price, and are being very picky about repairs

We've had a few listings recently which are great illustrations of what's going on in the market. One home was in Richardson, another in McKinney, and the third in Lucas. All 3 of these homes were in great condition, were priced very well with data to support appraisal, were in good locations, and we thought they'd get immense attention their first weekend on market. What actually happened with these 3 homes was surprising. We had visitors, but it wasn't nearly as many as we expected. We got offers, but it was 1 or 2 instead of 15. The final sales prices were nice, and slightly over the asking price, but they weren't phenomenal offers 10%+ over our asking price. The homes were still under contract in the first weekend, so it's clearly still a strong seller's market, but the buyer desire and frantic pace of showings just wasn't the same. These 3 homes will all sell for over their list price, and our seller's are happy, but there was just a different energy to the whole experience.

We think the real estate market will follow this trend for the rest of 2022, and likely will be similar, if not a bit slower, in 2023. We think more homes will hit the market and they'll sit a bit longer. We think homes will still sell for strong prices (probably 3-6% growth this year) but they won't sell for $100k+ over asking price with 15 offers in one day. We think sellers who get greedy, and list their home without any data to support their price, will be in for a frustrating experience. We think the days of extended free leasebacks, buyers paying every closing cost, and sellers getting whatever they want are probably behind us. Even though north Texas should still be a good seller's market leading forward, it looks like the playing field will be leveling a bit over the coming years.

We'd be honored to meet with you to discuss your own personal buying and selling needs. Feel free to give us a call for a no-cost, no-obligation discussion about the market value of your home. Have a great summer everyone and we hope to see you soon.