According to a recent article in Fortune Magazine, 73% of housing markets in the country are considered “overvalued” and at risk of price declines in the next 12 months!

Is the DFW market one of them?

Are we poised to see a major correction in home prices?

Watch the following video, or continue reading below, to learn more.

We have definitely seen our housing market here is Frisco cool noticeably over the past couple of weeks. Traffic at open houses is way down, showing activity is down, and days on market are up.

Increasing talk of a recession and mortgage rates over 6% have given buyers plenty of reason to pause and left sellers wondering what’s going on.

Perspective is always important at times like these. While the media is full of stories about declining home sales, mortgage applications, and price appreciation, it’s important to remember that 2021 was a record year for real estate activity, including mortgage refinances. Current activity is moving closer to pre-pandemic levels in all areas.

Home prices in Frisco have risen 42% over the past 3 years and 48% in Prosper. With appreciation like that, it’s no wonder DFW is considered one of the overvalued housing markets.

Here is a map showing which markets are considered the most overvalued; (Click Here to view the interactive map)

While it can be unnerving to see that much red on the map, the article explains that there’s no reason to panic;

While it's fair to call this shift a housing correction, it's far too early to call this a housing bust or housing crash. Right now, we're watching the U.S. housing market try to find an equilibrium amid spiking mortgage rates.

CoreLogic, the source of this information, is still predicting home prices to increase 5.9% nationally over the next 12 months.

Personally, I think that figure will be revised down as the latest data (the CoreLogic forecast is from April) leads me to believe prices will be relatively flat over the coming year due to the lack of supply we have relative to demand.

Even though inventory is increasing, here in Frisco we still have 66% fewer homes for sale now than we had at this time in 2019.

Overvalued Doesn’t Equal Declining Prices

What’s interesting is that even though housing in a large percentage of the country is considered to be overvalued, there are very few areas considered “high risk” for price declines in the coming year;

DFW falls in the dark teal color on this map indicating the chances of home price declines in the next 12 months are very low, which equates to between a 0% and 20% chance.

Click Here for the interactive map.

How can markets be overvalued but not at high risk for price declines?

Corelogic explains;

Simply being "overvalued" doesn't guarantee a price correction; however, it's troublesome if home prices become too detached from underlying economic fundamentals. Home price growth can't outrun income growth forever. Not to mention, "overvaluation" is one of two key elements required in a housing bubble, the other being speculation.

Speculation is not something we have seen a great deal of in our local market. While there has definitely been investor activity, the vast majority of people buying homes over the past couple of years have been end-users.

To stay up to date on the latest activity in our local market check out our Market Report and subscribe to have updates delivered straight to your inbox each week.

Bottom Line

While the housing market here in Frisco has definitely slowed it’s important to remember that when you’ve been going 100 mph and slow to 80 mph it feels like a crawl, even though it’s still above the speed limit.

If you have additional questions, or a specific situation you would like to discuss in more detail, please give us a call at 469-296-5230 or email Contact@S2RealEstateTeam.com