Mortgage rates have gone down, home prices continue to go up, buyer activity is showing signs of slowing, and seller activity is starting to pick up. It’s hard to keep track of it all….

Luckily for you, that’s what I’m here for!

In this month’s real estate market update, I go over the latest news and trends and explain what it all means to you if you’ve been in the market to buy, or have been considering selling, a home.

Watch the following video, or continue reading below, for the complete update.

Buyer Activity Starting to Fall

If you subscribe to my YouTube Channel or follow this blog, you may recall that a couple of weeks ago I introduced the concept of buyer fatigue. We have been seeing it and It's very real. Buyers have been getting tired. Let's face it, they've been dealing with multiple offers, bidding wars, losing out to all-cash offers, and it gets frustrating to say the least. Homebuyers are not only frustrated, but they’re tired, fed up, and just don't want to do it anymore. As a result, many are starting to take a step back and putting their search for a home on hold.

You can see that on this chart showing buyer activity across the country during April, May, and June of this year:

Buyer traffic refers to buyer foot traffic or showing activity in homes for sale. The darker the shade of blue, the stronger buyer traffic is.

Virtually the whole country was dark blue in April, meaning very, very strong buyer activity. That started to change in May as we had some lighter blue start to appear, and then in June, a whole swath of the country started to go lighter blue. So you're starting to see less buyer activity overall. While this won’t be the case yet everywhere, we are still seeing strong activity in Frisco and Prosper, it is a sign the market is started to shift a little.

The Headlines

Major media outlets jumped on this and coupled this information with the decline in pending sales that were reported in June to indicate trouble might be on the horizon:

While these headlines are great at grabbing attention, they're not telling the whole story. The reason the market has been seeing multiple offers and bidding wars is we have a severe lack of supply. You can't sell what isn't on the shelf, right? The decline in pending sales does not mean, or indicate, that there's about to be a correction in the housing market. The news outlets fail to mention that even though there was a decline month over month, year over year pending, and closed sales, are up!

Home Prices Continue to Rise

The continued lack of supply has caused home prices to rise rapidly over the past year, giving buyers another reason to pause. The pace of home price appreciation has continued to accelerate as we’ve moved further into 2021. Here are the latest national numbers from CoreLogic for January through May:

No surprise to anyone living here, but the pace of appreciation in Frisco and Prosper has continued to be higher than the national average. Here is the year-over-year change in median home prices locally;

• Frisco 23.5%

• Prosper 28.6%.

Sellers Starting to Return

While multiple offers, bidding wars, and rising home prices have caused buyers to take a step back, sellers are starting to reemerge after sitting out of the market for the past 16 months.

The following graph shows the change in seller traffic over the same three month period as the buyer graph did above:

In April, most of the country is shaded gray. Just like on the buyer traffic graph, for seller traffic the darker the blue, the stronger the seller traffic. The darker the gray, the weaker the seller traffic. By seller traffic, I'm referring to listings or the number of sellers that are starting to participate in the market. In April, you've got a little bit of blue. In May, you've got a couple more states appearing in blue, and by June more states have changed from gray to blue.

As home prices continue to rise, more sellers start to believe it’s a great time to sell. As buyers are starting to pull back, sellers are starting to return.

Even though listings continue to increase, the numbers are still below year-ago levels.

Here are the new monthly listing counts, nationally, in thousands:

Many listings here in Frisco and Prosper go off the market in the same month they were listed so don’t show in the new listing count, but the total number of active listings continues to improve slightly:

For the first time since October 2020, monthly inventory here in Frisco has exceeded a 1 month supply.

At the beginning of this blog post, I mentioned mortgage rates went down last week. If you happened to see my video or blog post from two weeks ago, you might recall this wasn’t expected. I shared that all the experts were expecting rates to continue to rise all the way through 2022. Instead, 30-year mortgage rates dipped to 2.77% last week, not that much above the all-time low of 2.65% we saw earlier this year:

So what happened? Why did they fall?

The fall was due to the financial market's reaction to the increase in Covid cases. We will have to see how this plays out, but the information I have currently indicates industry experts, and the major financial institutions, are expecting this drop to be temporary and believe mortgage rates will start, and continue, to climb higher.

Will this drop in mortgage rates bring more buyers back into the market? We will have to wait and see on that one. Stay tuned!

What Does This Mean to You

For a couple of months now I’ve shared information on why we are not in a housing bubble, why we won’t see a wave of foreclosures, and why the housing market isn’t going to crash like in 2008.

What we are going to see is a market shift that brings more balance. We will continue to see more sellers come to market, new construction will start to catch up with demand, and as prices and interest rates rise, some buyers will remove inevitably themselves from the market.

You will see days on market for new listings increase and bidding wars and multiple offers decrease. This doesn’t mean I expect these conditions to go away in the next couple of months. How soon you see the change will vary from market to market, but we will reach a point where the market takes and deep breath and relaxes. Which honestly, will be good for everyone.

I also expect we will start to see more price reductions on homes currently listed for sale. Don't confuse these price reductions with a depreciating market. They're not the same thing! What has been happening, and is normal in a rapidly appreciating market, is that many sellers have been pricing their homes ahead of the market, expecting it to catch up. As buyer activity slows and the pace of appreciation moderates, some of those sellers will realize they were too aggressive. They priced their home too high. If those sellers really do want to sell, those are the price reductions you will see as those list prices are brought back in the line with what market value actually is. That's not an indication that home prices are declining, because they're not. The trend line is still upwards. We usually start to see this with higher-priced homes first, then it trickles down to lower price points.

Hopefully, this information helps you as I know there is a lot of misinformation out there and everyone has an opinion, which isn’t always based on the facts or the data.

I like what Mark Hackett, the Chief Investment Research Officer at Nationwide had to say:

While there is plenty of emotion in the decision to buy or sell a home, I would rather you have the information necessary to make the best decision for you and your family rather than relying solely on emotion.

If you’ve been wondering if now is a good time for you to buy or sell a home, give me a call at 469-388-0978, and let’s talk about it.