Everyone I have talked to over the past couple of months that has been thinking about buying a home in the Frisco area has had two main questions, or thoughts, on their mind;

Where are home prices heading?

When will mortgage rates come back down?

Many potential buyers that took themselves out of the housing market over the past couple of years, to avoid the crazy frenzy, bidding wars, and hoping that prices would come crashing down, are finding conditions now to be just as difficult, and less affordable.

Watch the following video, or continue reading below, as I share the latest information on where home prices, and mortgage rates, are expected to go in the months ahead;

Where are Home Prices Heading

While nobody knows what the future holds, there’s certainly no shortage of opinions out there. From the news, social media, friends, co-workers, and relatives, everyone seems to have an opinion about the housing market.

Without a doubt, home prices here in the Frisco area have soared over the past few years. I’m with you, the market we were in was crazy and certainly unsustainable.

What goes up, must come down, right?

If you’re a potential buyer hoping that home prices here in Frisco will fall, the good news is they have. The bad news is they are already starting to climb again.

Here’s a graph showing how the median sales price in Frisco has changed over the past year;

After rising rapidly, home prices in Frisco peaked in April 2022 at $760,000.

As mortgage rates rose, buyer demand slowed to a trickle causing home prices to decline in the second half of the year.

By October 2022, home prices had fallen 18% from their April high to $630,000. New homebuilders saw contract cancelations skyrocket at a time when they had been ramping up construction. Not wanting to get stuck with a large number of finished homes, aggressive incentives were introduced in the form of mortgage interest rate buy-downs and closing cost assistance.

Stabilizing mortgage rates coupled with the incentives worked as the new home builders saw record sales to close out 2022.

The median sales price increased at the end of the year due to the fact the majority of closings consisted of new construction homes, which are typically priced higher than resale homes.

Likewise, the drop in the median sales price in February 2023 was largely due to the lack of new construction homes being included in that month’s data.

The median sales price in June 2023 was $677,450, which is only 4.6% lower than June 2022 and is 11% lower than the peak price from April 2022, meaning we have now recovered 7% of the total value lost since last October.

Considering how rapidly home prices fell last summer, I fully expect our number to turn positive again in terms of year-over-year appreciation within the next month.

The median percentage of list price that homes in Frisco have been selling for has been 100% since April. That means there is sufficient demand in the market currently that homes are not having to be discounted in order to go under contract.

When you consider the median list price has been trending upward for the past couple of months, as shown on the following graph, it tells us that price declines in the months ahead are unlikely;

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When Will Mortgage Rates Decline

It was widely expected that increasing mortgage rates would cause buyer demand to evaporate. While buyer demand did drop significantly when mortgage rates initially rose, buyers now seem more susceptible to changes in the mortgage rate rather than the overall rate.

What wasn’t expected was the impact mortgage rates would have on supply. Even though buyer demand has fallen, the supply of homes for sale has also fallen and the resulting imbalance between supply and demand has kept home prices from declining further.

A homeowner, unless they absolutely have to move, has little incentive to list their home with a 3% mortgage rate for sale to move to a new home with a 7% mortgage rate.

Inflation is the enemy of mortgage rates. Although still higher than desired, inflation has moderated from its peak, which is encouraging for mortgage rates.

Here’s why.

As inflation cools, mortgage rates usually fall in response. Lower inflation numbers over the past couple of months have some experts predicting mortgage rates will fall over the next few quarters to an average of between 5.5% and 6%.

Here are the latest mortgage rate projections from Fannie Mae, the Mortgage Bankers Association (MBA), and the National Association of Realtors (NAR);

Keep in mind even the experts have a hard time predicting mortgage rates because there are so many different variables at play.

Here are a few different outcomes for you to consider:

• If you buy now and mortgage rates don’t change: You made a good move as home prices are projected to increase over the months and years ahead,

• If you buy now and mortgage rates fall (as projected): You still probably made a wise move because you purchased a home before prices rise further and have the option to refinance into a lower rate.

• If you buy now and mortgage rates rise: If this happens you made a great decision as you bought before mortgage rates and home prices rise further.

Bottom Line

It’s virtually impossible to time the housing market perfectly in terms of pricing and mortgage rates. The vast majority of home purchases are made based on life circumstances and not market conditions. Hopefully, this information helps provide the data and insights you need to make the decision that’s right for you and your family.

Have additional questions or a specific situation you’d like to discuss in more detail? Schedule a Call with me as I’d be happy to talk it through with you.

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