The Dallas-Fort Worth area is one of the most significant areas in the United States. It is a sprawling metro area with a huge population but an affordable cost of living, making it a highly desirable place to live. The real estate market in Texas has been red hot for years now, and Dallas has certainly benefitted. Home values have risen, sales have skyrocketed, and the economy has grown.
However, concerns abound about an economic and real estate market downturn across the United States. Stratospheric growth is not sustainable, and rising interest rates and the crash of the stock market and cryptocurrency have left many with much less disposable income. Let’s look at how the Dallas-Fort Worth area is currently holding up amidst these changes.
Overview of Real Estate Trends
One of the factors that contributed most heavily to the housing surge in the United States was low mortgage rates. Mortgage rates were slashed across the country during the pandemic. This is no longer the case, making it harder for people to get the income needed to buy a home. The mortgage rate in the United States has risen from 3% to 5%, a significant difference that might be causing a slowdown in the Dallas-Fort Worth area, particularly as home prices continue to rise.
The median listing price of a home in Dallas-Fort Worth is $440,000 as of April 2022. This marked around an 18% increase year-over-year. However, the number of people that can afford that is declining due to the rise in mortgage rates. That is why there is less buyer interest than there had been previously. There were 14.3 showings per listing in April in Dallas-Fort Worth, which is above the national average. However, this was an 11% decrease from March and a 9% decrease from April 2021.
This has resulted in declining home sales in Dallas and Fort Worth. According to Redfin, home sales were down about 6% year-over-year in Dallas in May. Meanwhile, in Fort Worth, home sales were down about 5% in May. There is a significant correlation between the conditions of the real estate market and the economy. With an economic downturn looming, it is likely the market in the Dallas-Fort Worth area will begin to cool off.
The Luxury Market
The luxury market had been one of the biggest reasons for Dallas-Fort Worth’s massive real estate surge. Because there was a mass migration to Texas from other states, and the economy and stock market were doing extremely well, more buyers were qualified to purchase luxury homes in Dallas than ever before. That led to an unprecedented period for the Dallas-Fort Worth luxury market. Luxury homes make up almost 15% of real estate sales in 2021, an unmatched number for the region. However, a slowdown has arrived.
Even as Texas’s economy grows, the stock market and crypto crash have taken a lot of disposable income away from people. Combined with rising mortgage rates and an inflation crisis, fewer people are capable of buying luxury homes in Dallas-Fort Worth than before. These factors are contributors to a decline in luxury home sales.
According to the Business Wire, luxury home sales in Dallas were down 33.8% year-over-year over the three months ending April 30th. This was the third most significant decline in any major metro area, showing that the current economic conditions have impacted Dallas. Even if most market indicators remain strong, with so much change on the horizon, the luxury market has cooled.
