The once-hot Dallas housing market is showing signs of cooling down, with home prices in certain areas dropping back to levels last seen in the early days of the pandemic. This change is accompanied by a significant increase in housing inventory, a development that offers potential opportunities for buyers but also raises concerns for sellers.
One notable example cited by Nick Gerli, CEO of Reventure Consulting, is a property in Dallas that has experienced a 25% decline in value, bringing it back to its April 2021 price. While this is just a single instance, it reflects a broader trend emerging in Texas and Florida markets, where price drops are becoming more common. While official market statistics still indicate a modest 3-5% dip in Dallas-Fort Worth home prices from their peak, this figure is likely to become more pronounced as the market continues to evolve.
The explosion in housing inventory is expected to intensify downward pressure on prices. In June, Dallas home sales witnessed a sharp 16.8% month-over-month decline, signaling a cooling buyer demand amidst rising interest rates and persistent inflation. Mortgage lenders for the self-employed are also tightening their lending requirements, making it even more challenging for non-traditional borrowers to secure financing. This could further dampen demand within the market.
Inventory Surge Reshapes Market
The most striking development in the Dallas housing market is the surge in housing inventory. According to data cited by Gerli, there are currently 24,446 homes actively listed for sale in the Dallas area – a significant jump from 16,135 homes a year ago and nearly triple the 8,383 homes on the market just three years ago. This 50% year-over-year increase in listings marks the second-highest level Dallas has seen in the past seven years, representing a “signal of downward price pressures” to come, according to Gerli.
Texas housing market data tracked by Norada Real Estate Investments confirms the inventory surge, highlighting that the number of active listings statewide increased by 2.7% in June. While this surge provides more options for buyers, it also presents challenges for sellers, especially as Dallas leads the state’s inventory growth. In certain urban core ZIP codes, active listings have grown by a staggering 141%, according to Gerli.
Opportunities for Buyers
For buyers, the market shift presents new opportunities. With soaring inventory levels, buyers now have a wider selection of properties to choose from. This increased supply is likely to translate into more negotiating power for buyers. The median home price in Dallas fell by 1.7% in June, offering a slight reprieve from the relentless price hikes of recent years.
However, potential buyers should approach the market with caution. Data shows a 14.2% month-over-month decline in statewide home sales, with Dallas leading the decline at 16.8%. While increased inventory may favor buyers regarding price flexibility, affordability challenges remain due to high mortgage rates and inflation.
Impact on Sellers
Investors who played a significant role in driving up home prices during the pandemic are now starting to sell off properties, further contributing to the surge in inventory. With weakening buyer demand and inventory outpacing demand, some sellers may need to adjust their expectations. For those looking to sell, Gerli notes that the most substantial inventory increases are occurring within a 3-5 mile radius of downtown Dallas, where the number of homes on the market has more than doubled year-over-year.
Local Market Variations
It’s important to remember that real estate is local, and market conditions can vary significantly from neighborhood to neighborhood. While some areas in Dallas are experiencing rapid inventory growth and price declines, other parts of Texas may remain more stable. For example, Austin saw a 14.5% decline in home sales in June, but its market remains competitive, with demand still robust in certain areas.
Sun Belt Trends
Dallas’s situation mirrors trends in other Sun Belt cities, where pandemic-era price appreciation has begun to unwind. The cooling market reflects the broader economic landscape, with rising interest rates and inflation impacting affordability for both buyers and sellers. As the market continues to evolve, it’s crucial for buyers and sellers alike to stay informed about local trends and adjust their strategies accordingly.
