You’d be crazy to consider buying a home in Frisco, or the surrounding areas, right now, wouldn’t you?

With mortgage rates remaining stubbornly high and home prices not falling like many had hoped they would, confusion about what do to is everywhere.

Should you jump into the market before rates and home prices go higher? Can you even afford to jump into the market right now? Should you wait until 2024 in the hope that both mortgage rates and home prices fall?

In this blog post, I’ll discuss the impact both mortgage rates and home prices have on affordability and share a unique opportunity available to prospective buyers in today's real estate market.

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

Where are Home Prices Heading?

The Frisco area real estate market has been on a wild ride over the past 18 months. We all knew the virtually vertical trajectory we were on with home prices couldn’t last, and it didn’t. Soaring mortgage rates made sure of that. But prices haven’t crashed like many had predicted, so where does that leave us?

We are currently dealing with an essentially frozen real estate market. Affordability has been challenged by both mortgage rates and home prices. Something has to give, doesn’t it?

When it comes to affordability, both home prices and mortgage rates play a role. While much of the focus has been on home prices, mortgage rates actually impact housing affordability more than home prices do. A 1% drop in mortgage rates is roughly equivalent to a 10% drop in home prices. We would need to see local home prices fall by at least 20% in order to create the level of affordability many are hoping for.

Is that likely?

Not according to the latest data.

The graph below is showing how the median list price has changed in Frisco over the past year.

Why am I showing you the median list price and not the median sales price?

List prices are a better predictor of where home prices are likely to be in the months ahead than sales prices are.

Bear with me here.

It’s pretty safe to assume there aren’t many sellers putting their homes up for sale to “test the market” currently. The overwhelming majority of homes coming to market now are from homeowners that need to sell.

Based on the latest data, homes have been selling for 98.2% of the original list price. In other words, the vast majority of homes are not selling for a large discount, and many are still selling at or above list price.

Days on market is currently running around 42, and once under contract, homes usually close in 30 to 45 days. As such, the list price trends we are seeing today are representative of where sale price numbers will be at the end of the year or the beginning of 2024.

Likewise, the median sales price data most often reported is based on market conditions from 3 or 4 months ago.

The graph above shows the median list price in Frisco over the past year. The median list price on January 1, 2023, was $699,900, and the median sales price for March 2023 was $699,950.

The median list price now is also $699,900, which tells us we will essentially end the year flat from a pricing perspective.

You will start to see reports showing that sales prices are up year-over-year; September 2023 is 9.8% higher than September 2022. But that isn’t because prices are rapidly rising now; it’s because prices were falling at this time last year.

We are seeing a much more normal, seasonal pattern this year, and the latest forecasts show that Frisco home prices are expected to rise over the next 5 years but at a slower pace than we saw over the previous few years.

Unless something unexpected happens, which it could, there is nothing in the data currently to show or suggest that we are going to see the type of home price declines previously predicted.

Mortgage Rates and Affordability

As mentioned above, it’s easier to move the needle in terms of affordability with mortgage rates than it is with home prices.

While most, including myself, expected mortgage rates would have declined by now, like home prices, they are proving to be quite sticky.

The latest comments from the Federal Reserve did little to bring hope of imminent rate declines, and the likelihood of higher rates for a longer period of time seems inevitable.

While nobody knows when rates will drop or what they will eventually drop to, I think it’s safe to assume we are unlikely to see rates in the 3% or 4% range again. The vast majority of forecasts I have seen predict that mortgage rates around 5.5% will be the new normal.

Unique Market Opportunity

What if I told you there was a way to lock in today’s home prices and obtain a mortgage rate of 5.5% or lower now? 😃

There is!

The uncertainty that exists in the market today has created a unique opportunity. I’m seeing this opportunity start to appear with both new construction and resale homes.

New home builders and sellers have realized that mortgage rates impact whether a potential buyer buys or not more than the actual price of the home. For most, it all comes down to the monthly payment.

Previously, new home builders were offering temporary mortgage rate buydowns, and buyers were buying on the assumption they would be able to refinance before the temporary rate buydown expired. As mentioned, mortgage rates have stayed higher for longer than expected, and it doesn’t look like there will be any meaningful rate declines in the near future.

With that in mind, new home builders and some savvy sellers are starting to offer buyers permanent mortgage rate buydowns. This means you can buy a home today and lock in a mortgage rate of 5.5% or lower, in some cases, for the life of the loan.

For more information on how this program works and what builders are currently offering it, schedule a call, and I’d be more than happy to provide additional details.

Bottom Line

Only you can make the decision on when the right time to buy or sell a home is for you and your family. My goal is not to convince you one way or the other, but to provide the information and data you need to make the decision that’s best for you.

If you haven’t done so already, I invite you to subscribe to my YouTube Channel. I release new videos each and every week detailing the latest market news and updates, model home tours, and community showcases.

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