Have you read any real estate related articles, or watched any videos about the real estate market on YouTube recently?

Over the past week, I spent some time doing exactly that and, to be honest with you, it left me feeling a bit confused and convinced the market was about to implode.

The problem is the vast majority of the information being reported is based on national numbers that are a couple of months old and don’t represent what we are seeing here locally in Frisco and Prosper.

I toured several new home communities this past weekend and what I saw is not what you’d expect based on the mainstream message.

Continue reading below, or watch the following video, to learn more;

Is Now a Good Time to Buy?

The million-dollar question!

I’m certainly not, and don’t pretend to be, a fortune teller by any stretch of the imagination. I’d love to be able to tell you with certainty what the next several months have in store for the real estate market, but I can’t.

What I can do is share the latest market data and what I’m seeing on a daily basis here in Frisco and Prosper so you can make the best decision for you and your family.

Now that mortgage rates have retreated back into the 6% range, potential home buyers have turned their attention back to home prices. Are home prices going to fall further? Will they stay flat, etc.?

Supply is the Key

If you’ve read any of my blog posts over the past several months you’ll know that I’ve talked quite a lot about the relationship between supply and demand.

Home prices are directly related to the balance between supply and demand.

In order for there to be a meaningful drop in home prices we are going to need to see supply increase and demand decrease.

The massive run-up in home prices we experienced over the past couple of years was due to high demand, driven by the pandemic and artificially low mortgage rates, against very low supply.

The result was homes selling in days, if not hours, with multiple offers and bidding wars.

Rapidly rising mortgage rates last spring caused demand to drop off sharply and temporarily left us with more supply.

After peaking in April 2022, the median home price in Frisco fell 17% by the end of August. In Prosper, home prices peaked in May 2022 and the median home price fell 14% in the same period.

Since that time, prices in both Frisco and Prosper have actually remained relatively flat due to a larger than expected drop in supply.

Supply can only come from one of two places;

• Current homeowners selling

• New construction

While there will always be homeowners who have to sell due to divorce, job relocation, growing family, etc., for those selling purely by choice it no longer made sense.

95% of all homeowners have a fixed rate mortgage of 4% or less with many of those in the high 2s or low 3s. Unless someone had to sell, it didn’t make sense to trade in your low fixed-rate mortgage for one over 6%.

As a result, those homeowners took their homes off the market which reduced supply and caused prices to stabilize.

A recent survey found that only 8% of all homeowners were living in a different house than they were a year ago. That is the lowest number of homeowners living in a new home year-over-year since 1948.

Here is a look at how inventory (supply) has changed in Frisco and Prosper over the past year;

In the media, you are more than likely hearing reports of how many more homes are for sale now compared to last year, and that is true. Year-over-year, inventory in Frisco is up 213% and 486% in Prosper.

What we need to keep in mind is that 2021 and 2022 were not “normal” real estate years, but the two best years in real estate ever.

When you look further back, before the pandemic, you will see that the supply of homes on the market today is still well below what would normally see this time of year.

While there were 329 homes for sale in Frisco in December 2022, compared to 121 in December 2021, there were 729 homes for sale in December 2019 and 890 in December 2018.

New Construction

If supply isn’t coming from existing homeowners, that leaves new construction.

There were a large number of new construction homes in the pipeline due to the supply issues related to the pandemic. The builders, unsure about where the market was heading, cut prices and introduced buyer incentives last fall to make sure they moved as much inventory as possible.

That strategy worked as the vast majority of local homebuilders reported record sales to close out 2022.

This past weekend I had the opportunity to visit several new model homes. Considering recent headlines, you would have expected traffic to be light with just a few people out looking.

The exact opposite was true. Everywhere I visited was packed. Traffic was like being on DNT heading south at 8 am. Cars lined both sides of the street and in many cases, there were 15 to 20 different sets of people in the model home at the same time. The line to speak with a sales counselor was 5 or 6 people deep!

While the builders are still offering incentives on both already-built and yet-to-be-built homes, if sales remain this brisk I expect those incentives to be reduced in the months ahead.

Bottom Line

As mentioned above, home prices are directly influenced by supply vs demand. Currently, supply here in Frisco and Prosper remains tight while demand is increasing. If mortgage rates continue to trend down, and it’s believed they will (Bankrate is forecasting 5.25% by the end of 2023) then we are unlikely to see any meaningful price declines here in Frisco or Prosper.

Due to continued economic uncertainty, I currently expect to see pricing remain fairly flat for the remainder of the year.

The best way to stay up to date on the latest pricing, supply, and market activity is with my Weekly Market Report. The Weekly Market Report is available for any city code or city of interest to you and the data is updated every Monday.

Here is a link to the latest Frisco Market Report. Use the search bar at the top of the page to view and subscribe to the area of most interest to you.

If you have additional questions, please feel to Schedule a Call or send me an Email.

Frisco & Prosper New Construction Homes