Dallas-Fort Worth recorded the smallest annual increase in home prices since 2012 as higher mortgage rates put a pause on deals for many potential buyers. But a strong spring selling season could put an end to the slump in activity.
Typical single-family home prices in the region were up just 2% in February from a year before, according to the latest reading of the S&P CoreLogic Case-Shiller Index released Tuesday. Prices peaked in June 2022 and have since fallen 8.5%.
The Case-Shiller index is a three-month moving average that compares sales-price changes of specific properties over time. While it is a couple of months behind current market conditions, the index’s price estimate is considered more accurate than home sales data from agents, which can be influenced by the type of properties that are selling each month.
Prices stayed about flat from January to February after seven months of declines. National home prices were also only up 2% from a year before but rose slightly month over month for the first time since July, which CoreLogic chief economist Selma Hepp said suggests home prices nationally have bottomed out.
The results released Tuesday predate disruptions in the commercial banking industry that began in early March, said S&P managing director Craig Lazzara in a statement. He said the Federal Reserve still seems focused on inflation-reduction targets, so interest rates may remain elevated in the near term.
“Mortgage financing and the prospect of economic weakness are therefore likely to remain a headwind for housing prices for at least the next several months,” Lazzara said.
Regional differences
Dallas-Fort Worth prices may start to head upward again, Hepp said in an interview. She doesn’t expect Dallas prices to decrease year over year.
Job and population growth have kept the D-FW market in a better place than others, she said, adding that the region didn’t see as much rapid price appreciation as others such as Austin over the past few years that would lead to a dramatic price correction.
Eight of the 20 cities analyzed by the Case-Shiller index — all Western markets — saw year-over-year declines. San Francisco prices saw the largest decrease at 10%. Seattle was just behind at 9.3%.
Meanwhile, metros in the Southeast led the nation in continued price gains, topped by Miami at a 10.8% year-over-year increase followed by Tampa (7.7%), Atlanta (6.6%) and Charlotte (6%).
“Over the past couple of years, low mortgage rates set real estate on fire everywhere so to speak, where we were seeing price gains and home-sale increases pretty much across the board,” Danielle Hale, chief economist for Realtor.com, told The News. “Now we’re seeing more differentiation depending on how local fundamentals are doing.”
Selling season
Despite elevated interest rates, homebuilders and real estate agents have reported a solid amount of spring buying activity largely due to continued low inventory in the region.
Julian Williams, a real estate agent with Compass, said many Dallas-Fort Worth buyers have settled into the changes in interest rates and have returned to the market. He said sellers are finding they have to price homes more realistically and less aggressively than they had last year.
“It’s like going 200 miles an hour in a Ferrari and then you downshift and now you’re going 140,” Williams said, describing the change in the market due to higher mortgage rates. “I mean, yeah, you’re slowed down by 60 miles an hour, but you’re still flying.”
Because Case-Shiller is months behind on data, it has yet to record an annual decline in D-FW home prices, while reports for homes listed through real estate agents already have.
The median price of a Dallas-Fort Worth single-family home declined 1% in March from a year before to $394,900, according to the Texas Real Estate Research Center at Texas A&M University and North Texas Real Estate Information Systems.
“Dallas home prices aren’t increasing as fast as they normally do for this time of year,” Hale said. “Potential sellers need to be aware of the deceleration in the housing market and be sure to price their homes appropriately.
“For buyers in the market, they may have some opportunity, but it does not mean they’re going to see huge discounts on home prices.”
Hale said while the Dallas-Fort Worth market has seen a decrease in demand since last year, a still-low supply of inventory is keeping prices up.
“The market is getting to a healthier place, and it’s possible that we could see mild declines in prices,” Hale said. “But I think steadiness is the more likely scenario for the Dallas market.”
It would take a drastic decline in home values to offset the up to $217,000 in equity D-FW homeowners made over the last decade, which economists don’t expect.
Other recent reports have shown the region’s resilience in the housing market, with it having some of the most looked-at neighborhoods in the U.S. on home-search apps and leading the nation in residential permits in 2022.
