By the time you read this it will be “old” news – according to Steve Brown in the Dallas Morning News of Tuesday, July 10 – for the first time in two years, the number of homes sold in several counties of the DFW Metroplex declined compared to the same month last year! The decline was significant – 3% – and virtually wiped out the gains made year-to-date. For the first 6 months of 2018, Real Estate sales are now up only 1%.
So, is this simply an impact of “price – volume” variance? Is it a one-off month that means nothing? Is it an inflection point – a point of change or flattening - in the sales curve? Or is it a change in the fundamentals of the market due to changes in underlying structures? The price-volume variance simply means the volume lost may very well be offset by an increase in average price. While sales declined across the metroplex by 3%, the average price increase was 7%, further substantiating the price-volume variance theory.
Are things slowing down? Or, on a more optimistic speculation, are we beginning to see a correction in the market? There have been several changes in the market that “may” indicate an inflection point and possibly a flattening of both price and volume. Over the past several years there have been (at least, there have been rumors of) foreign investment groups that purchased large volumes of available properties between certain price points. Also, large corporate relocations such as State Farm and Toyota and affiliated vendors ignited the demand-side pressure on housing at a time when builders and developers had diminished inventory. Recently, we have seen a slight increase in home inventory at some price points. There is still a significant shortage of homes below the $250,000 price range. And quite frankly, many of the builders have moved somewhat up market and are not building “starter homes” but rather are building more expensive “trade-up” homes. But this needs to be kept in perspective, did you know that nowadays, the FHA loan limit is $386,400 and the Fannie Mae "conforming" conventional loan limit is $453,100 - so even with more properties being higher than in the past the limit has been raised to accommodate the market pricing changes.
In addition to the changes in the market, home mortgage interest rates have begun slowly creeping up for the first time in several years. An article from the Associated Press dated Friday, July 13 states the “Average 30-year jumps to 4.53 percent. . . Despite the decline in recent weeks, long-term loan rates have been running at their highest levels in seven years.” The new chairman of the Federal Reserve appears to be taking a cautionary approach when speculating on the inflationary impact of tariffs and a possible trade war. This could mean more increases in the interest rate which could further slow down the real estate market in Texas and around the United States.
So What? What does any of this have to do with why I should hire a Realtor?
It is the job of your Realtor to have a deep understanding of the drivers and add-on effects within the Real Estate market and stay abreast of changes in your area. A Realtor must have the capability to synthesize this information to supply insightful expert guidance. Perhaps home sales are slowing across the Metroplex – but a new industry is relocating to your area. It is the responsibility of the Realtor to be aware and to supply that expert knowledge to help you price your property accordingly. Naturally, the final decision on the price always belongs to the property owner – but that decision should be tempered by expert knowledge and insight. Of course, Realtor’s don’t have a “third eye” to see into the future, but a good Realtor will have a “finger on the pulse” of the areas they work. If they are truly an expert in that area, they will have relations and networks established with other professionals as well as economic and business data that will give insight to you to effectively sell, buy, or invest in a home.
What are the “average days on market” in your area? Your Realtor should know. Since your home is in competition with other homes in the area at a similar price point, your Realtor’s knowledge should guide you in not only pricing competitively but also in understanding the "market" condition of your home. Your Realtor has the privilege of seeing inside dozens or even hundreds of homes to have insight into what types of updates - not just rooms but styles - whether we are talking stone counter tops, smart homes, or curb appeal so you understand what is adding value and also what may need changes. The real estate expert should give you a marketing plan that takes you from the beginning of the transaction through the closing. Keep in mind once your home goes past the “average days on market” threshold, potential buyers and agents will expect the seller to be more motivated . . . or suspect there must be something wrong with the property. Suddenly, to get back into the game you may have to make significant drops in your pricing while at the same time continue making payments on the mortgage, taxes, insurance and upkeep. Mis-pricing a home could end up costing you thousands or tens of thousands. Don’t just hire any Realtor, hire one that has a proven background of skill, knowledge and experience to navigate you through the transaction. Give us a call today to see how we can save you valuable time and money!