It seems that talk of a housing market crash has reached a frenzied level over the past couple of weeks.

Some reports say a crash is imminent, while others say a crash isn’t going to happen.

While there is little doubt the housing market has shifted substantially over the past month, is this an indication of a crash or just the housing market returning to normal?

Watch the following video, or continue reading below, as I dive into what the latest data is telling us;

The COVID Crash

Let’s go back a couple of years…..

You may recall at the onset of the COVID pandemic there were countless reports and videos warning everyone that the housing market was doomed and was about to crash.

Unemployment would cause mortgage defaults on a level equal to, or greater than, we saw in 2008, and a “tsunami” of foreclosures would overwhelm the market.

Not only did none of that happen, but housing went on an unprecedented run, and as of July 2022, mortgage foreclosures are at record low levels.

Ultra-low mortgage rates fueled demand against an already under-supplied housing market causing home prices to rise rapidly.

Why do I bring that up now?

To illustrate the fact that nobody knows for sure what the future holds. Rather than offer pure speculation, my goal is simply to share the latest data and provide some perspective so you can make the best decision for your situation, whatever that decision may be.

How Did We Get Here

Home prices, like the price of any good or service, are controlled by supply and demand. Low supply against high demand and prices go up. Likewise, high supply against low demand cause prices to come down.

With that in mind, in order for home prices to fall dramatically, we would need to see a substantial increase in supply, a significant drop in demand, or a combination of both.

While that is certainly possible, especially if something goes sideways with the economy, there is nothing in the data to suggest that is going to happen currently.

Rising mortgage rates over the past couple of months have definitely impacted demand as many buyers were priced out or put their search on hold. We also saw an increase in contract cancellations and a decrease in pending home sales.

It’s interesting that even though home sales were down 5.4% in June, 88% of the homes that sold were on the market for less than 30 days. While that might feel slow compared to homes selling in days, if not hours, historically that is still a fast-moving market.

As mortgage rates have stabilized in the mid to upper 5% range we are seeing an uptick in buyer activity again.

Going back to the supply side of the equation, in 2008 and 2009 we saw housing inventory balloon to 8, 9, or even 10 months of supply depending upon where you lived. While inventory has certainly increased, we still only have a 3 month supply nationally;

Here in Frisco we currently have a 2.2 month supply and Prosper has 3.7 months. Prosper currently has quite a lot of new construction inventory listed in the MLS and is a higher price point than Frisco, so many homes are taking a bit longer to sell.

You might recall from our July 2022 Real Estate Market Update that new home construction has been below the historical average for 14 years straight while the percentage of the population reaching prime home-buying age is at an all-time high. As such, the housing market still has a way to go to find true balance.

Frisco Market Update

One of the challenges with the data reported on in the media is that the numbers are often one to two months old, and we know how much can change in a month or two.

Our real estate market updates, powered by Altos Research, track every home for sale in the area and are updated weekly. This allows us to spot trends and changes long before the numbers are reported in the news.

Click Here to see the latest full report for Frisco (you can search any city or zip code from this report)

Since we’ve been talking about supply, here is the current available inventory here in Frisco;

Even though inventory has risen sharply over the past month, notice how far below July 2019 levels we still are.

Bottom Line

Considering the local housing market has been running flat out for the past couple of years, any change is going to feel like a dramatic slowdown.

Buyers- many buyers began to experience buyer fatigue and dropped out of the market after growing tired of the constant multiple offers, bidding wars, appraisal waivers, and contingency waivers. Those times are now behind us for the most part, Buyers actually have a choice and aren’t faced with having to make a decision immediately. You can actually negotiate on many homes! The new construction waitlists have cleared and builders are bringing incentives back. You can obtain mortgage interest rate buydowns to lock in a rate in the mid 4% range and can also receive up to $30k in closing cost and upgrade incentives.

Search All Homes Currently For Sale in Frisco

Sellers - the days of listing your home and receiving multiple offers within hours are gone, but for those that need to sell the market remains competitive and homes are still selling. You should expect longer days on market and won’t get away with not taking care of those deferred maintenance items before listing in the face of increased competition. Take a page out of the new construction book, offering to buy down the interest rate on a buyer’s loan can entice buyers to consider your home and is less expensive than a price reduction in most cases.

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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