Welcome to your Frisco, TX real estate market update for March 2023.

There are two main challenges we currently face as we move into what is traditionally the real estate busy season;

Mortgage rates
Inventory

Both influence home prices. Mortgage rates on the demand side and inventory on the supply side of the equation.

How will home prices be impacted over the coming months and is now a good time to consider buying or selling a home?

Watch the following video, or continue reading below, to find out;

Last year, as mortgage rates were rising quickly, there was widespread speculation the housing market was heading for a crash similar, if not worse, than what we experienced in 2008.

As we know, that hasn’t happened and there is no indication from the current data that it is likely to happen anytime soon.

That speculation was largely based on the belief that rising mortgage rates would erode buyer demand, which they did, and that would be coupled with a substantial increase in inventory, which never happened.

As such, the large imbalance between supply and demand needed to crash the market never materialized.

That’s not to say home prices didn’t fall, they did, and currently sit well below the peaks we saw in April 2022, but any belief that additional, large, price declines are in our future appears to be misguided at best.

Mortgage Rates

The rapid rise in mortgage rates experienced in the first half of 2022 reached a tipping point in April, even though mortgage rates didn’t peak until early November.

Mortgage rates had risen enough by April 2022 for homebuyers to pump the brakes and pause. Demand for housing slowed abruptly, contract cancellations went through the roof, and home sellers, both resale and new construction, began to cut prices and offer incentives to keep sales moving.

Mortgage rates peaked at just over 7% in early November 2022 and buyer activity picked up quickly as mortgage rates started to fall.

Mortgage rates started to rise again in early February as the economy showed remarkable resilience and inflation remained higher than expected. High inflation is the enemy of long-term mortgage rates.

Mortgage rates have fallen sharply over the past couple of days in response to the collapse of Silicon Valley Bank and a belief that the Fed might have to pause, or slow, interest rate hikes going forward.

My preferred mortgage partner did a great video explaining how all of this is related and what the impact on mortgage rates is likely to be in the following video;

Inventory

Although higher mortgage rates caused buyer demand to drop, home prices have generally remained fairly stable due to a lack of inventory in the market.

As mentioned above, there was widespread belief that the supply of homes for sale would continue to rise as demand fell.

Ironically, one of the reasons that hasn’t happened is mortgage rates.

99% of homeowners with a mortgage have a rate of 6% or lower. 85% of homeowners have a mortgage rate of 5% or lower. 28% of homeowners have a rate of 3% or lower.

As demand fell, many would-be sellers simply decided not to sell and either took their homes off the market or decided not to list their homes for sale in the first place. Why trade in your ultra-low mortgage rate and buy a new home at a much higher rate?

Media reports of more homes for sale now than a year ago are misleading, even though factually true. Some perspective is needed as the total number of homes for sale continues to decline both nationally and here in Frisco.

Here is a look at how month-over-month housing inventory changed nationally from January to February;

The entire country, with the exception of Hawaii, saw housing inventory fall at a time when we usually start to see it increase.

Many of the year-over-year inventory comparisons are misleading because 2020, 2021, and 2022 were not exactly “normal” real estate years.

When you look at how inventory today compares with pre-pandemic levels it paints a different picture;

In February, there were 241 active listings in Frisco, which is up 100% year-over-year, but in February 2020 there were 704 active listings. 962 active listings in February 2019, and 826 in February 2018.

Home Prices

Home prices in Frisco peaked in April 2022 with a median sales price of $760,000. Prices declined fairly rapidly over the summer as buyer demand evaporated. By August the median sales price was down 17%.

The drop in home prices between April and August is pretty clear to see on the graph above.

Between September and November, home prices remained fairly flat, but we did see a jump in the median sales price in December as the new home builders ramped up incentives to close sales by the end of the year and quite a lot of buyers returned to the market in October and November as prices flattened and mortgage rates were falling.

You’ll notice on the far right side of the graph that the median sales price fell quite sharply from January to February. I personally don’t believe this is an indication of further price declines but is more due to the fact that fewer, more expensive new homes and more resale homes were included the February’s data. I expect we will see an increase in the median sales price when March numbers are released.

The experts continue to revise their home price forecasts and now see less chance of significant price declines. Here is the latest national forecast which shows a modest decline in home prices in 2023 before appreciating once again through 2027;

Our market here in Frisco, and North Texas overall, continues to be stronger and more resilient than the national average.

The latest Zillow forecast is calling for home prices in Frisco to increase by 5% in 2023.

I personally don’t believe we will see further price declines in our local market due to the fact that list prices are currently very stable and inventory remains so low.

Here is the current median list price trend for Frisco;

If you’d like to see all of the latest data and trends check out my Frisco Market Report. This report is updated weekly and allows you to see “at a glance” if the market is heating up, cooling down, or staying stable. Interested in an area other than Frisco? From the Frisco Market Report, you can search any city/zip code in the country and see the latest trends.

Is Now a Good Time to Buy or Sell a Home?

It’s the question on the mind of a lot of people right now. Only you can make the decision on when the right time for you and your family to buy or sell a home is. I’m certainly not going to try and convince you one way or the other but will share a couple of things to consider.

Two of the biggest factors that influence people’s buying decisions are home prices and mortgage rates. Should you wait and see if home prices fall? Should you wait for mortgage rates to come down?

While everyone agrees that mortgage rates will fall, most likely by the end of this year, it doesn’t appear as though home prices will. Given how few homes there are for sale currently, I am already seeing multiple offer situations once again. While we aren’t seeing crazy bidding wars at the moment, as mortgage rates fall, buyers who are currently sitting on the fence will re-enter the market increasing the likelihood that home prices will increase more in the future. While you can’t change the price you pay for a home at a later date, you can lower the mortgage rate once rates come down.

Considering home prices are expected to increase, there might not be any reason for a homeowner to list their home for sale currently. Much depends on why you are selling. If you are looking to move into a larger, more expensive home, that home will also be going up in price as your current home is. If you are downsizing, then time is probably on your side. As mortgage rates fall and home prices go up, more sellers will enter the market meaning there will be more homes for buyers to choose from.

Not sure what to do? Let’s talk about it. I’m always happy to discuss your situation in more detail and provide insights and information to help you make the best decision for you. Use this link to schedule a call with me today.