2017 DFW Market Forecast
Nail & Key Co-Founder, Brandt Barnham, has a few predictions to share about the 2017 market in the Dallas-Fort Worth Metroplex. We think you will want to take notes, as Brandt is known for his ability to recognize trends in our area.
Hey everyone! I’d like to take a moment to explain what’s happening in the real estate market today as well as forecast what we can expect for the rest of this year and 2018. We are presently in the midst of of shift from a sellers market to a buyers market. I first noticed the shift in August 2015 in the higher price points, which is typically how it happens. When comparing sales prices from 2015 to 2016, there was no upward movement in values for most areas of Dallas. 2017 is looking like it’s going be slightly down from our 2016 values despite having a large number of people moving to Dallas from out of state. There are several factors for this downward shift:
26% of home inventory is new construction – this dilutes supply and pushes down prices, both new and preowned.
Housing is no longer affordable – prices are up 20+% in the last 2 years and salaries are only up a few percent in the same time frame. We’ve hit the proverbial ceiling.
Interest rates are on the rise – for every 1% increase in interest rate, home prices need to fall 10% to maintain the same monthly payment. Interest rates are up 0.5% over this time last year, so technically home prices should fall about 5% to get back to equilibrium
Towards the end of 2017 and into 2018, we are going to have all the of the above factors still in full effect and then there is going to be a few additional factors that will likely drop prices further.
Foreclosure starts are up 25% this year – this is the highest number of foreclosure starts since 2011. Lending practices have loosened up quite a bit in the last couple years, which has helped create more buyers, but also creating more loans to people that probably shouldn’t be buying.
ARM mortgages make up a large percentage of all outstanding mortgages – This sounds crazy but I spoke to a couple friends at Nationstar and they told me their mortgage portfolio is 70% ARM! Most of these ARMs are at about 2.5% APR and are hitting their maturity date in the next 18 to 24 months. By that time, interest rates will likely have plateaued at 5%. For the typical $250k home, this will be an increase of $520/month. This will likely trigger a sale or a foreclosure, either way, it’s additional inventory which will further dilute the existing supply.
The bandaid is coming off – This is more speculative – President Trump is likely going to cut back on several government assistance programs, which enable more low income buyers to purchase a home with little to no money down. The reduction of buyers may increase the amount of inventory on the market in the lower price points.
If you’re in the market to buy, by all means buy now since it will likely cost you the same today vs. later this year. Home prices may be slightly down but interest rates will be slightly up. If you’re thinking about selling, this is the best time to get top value. The next time you will see these values for your property will likely be around 2022. If you are looking to upsize or downsize in a couple years, it doesn’t really matter when you sell since you’ll be buying in the same market. Make sense?
Anyway, I can go on for hours about this. If you ever want to chat about what your property is worth or where the market is headed. I’m happy to give you my honest opinion. Talk to you soon!
If you have questions about whether or not you’re ready to purchase a home, contact us at 469-333-0975 or team@nailandkey.com. Brandt and the team would love to sit down and help you figure things out!