April 2024 Frisco Real Estate Market Update: What Buyers and Sellers Need to Know

Welcome to your Frisco Real Estate Market Update for April 2024. As your dedicated Frisco real estate expert, this comprehensive market update will provide the information you need to make informed buying, selling, or investing decisions.

This month’s update will focus on mortgage rates, housing supply, and home price trends. Read on or watch the accompanying video for insights and analysis you won’t want to miss.

Understanding Current Mortgage Rates and Their Impact

This spring season arrives with a complex backdrop of relatively high mortgage rates, marking a significant shift from the ultra-low rates we've enjoyed in the past.

Just last fall, it was widely believed that mortgage rates had peaked and would decline steadily throughout 2024. The consensus among the economic experts was that the Federal Reserve would cut interest rates up to 6 times this year. Although the Fed reducing the benchmark interest rate doesn't directly impact mortgage rates, those rate cuts would be in response to lower inflation, which does impact mortgage rates.

However, recent stronger than expected economic news, coupled with higher than expected inflation in the first quarter, now has those same experts predicting no more than 3 rate cuts this year. As Forbes said:

While the belief that mortgage rates would be back in the high 5s by the end of this year was common just a couple of months ago, the updated forecasts are now calling for rates in the low 6s by the 4th quarter of this year.

Considering rates have recently climbed to their highest since last Fall, nearly 7.5% as of this writing this, I wouldn't be surprised if this rate forecast is revised upwards once again in the next month or so.

Latest Trends Among Home Sellers and Inventory Levels

With a shift in market conditions, we're observing a noticeable increase in the number of home sellers entering the market. This change is crucial for maintaining a healthy level of inventory and preventing the runaway price increases we’ve seen in previous years. The availability of more homes helps to balance out demand, which is essential for keeping home prices stable.

Sellers had shown little interest in bringing homes to the market, as there was little incentive to trade their 3% mortgage rate for a new 7% mortgage rate.

This "lock-in" effect, as it came to be known, has been easing as not all sellers have the luxury of waiting for mortgage rates to fall before making a move. Families continue to grow, needs change, rent goes up, people get married.....life goes on. Both buyers and sellers seem to be adjusting to the "new normal" with regard to mortgage rates, but remain sensitive to fluctuations in the rate.

Nationally, housing inventory is up 30% year-over-year, but here in Frisco, housing supply is up 74% year-over-year. While these are the numbers the media often jumps on, it's important to keep things in perspective. While a 74% increase in inventory makes it sound like we’re swimming in houses for sale, keep in mind it's still down 40% compared to pre-pandemic levels, as shown on the following graph:

CLICK HERE to see the Complete Frisco Market Report

Home Price Trends

Unless something completely unforeseen happens, I think we can all agree that the housing market crash that has been forecast for the past several years isn't going to happen. Rather than prices declining as mortgage rates soared, they actually went up just about everywhere.

Saying that, as mentioned above, as mortgage rates rise, we do see quite a big decline in buyer activity. The magic mortgage rate seems to be 6.5%, as shown in the following graph:

The reason home prices kept increasing was the lack of supply relative to demand. Now, we have rising supply coupled with decreasing demand in the face of rising mortgage rates. What happens to home prices going forward really depends on what happens with mortgage rates.

To gauge this, I like to track the median list price. The vast majority of sellers list their homes to sell, not test the market. Here in Frisco, homes are currently selling for 99% of list price. With this information, you can start to see the price that homes will sell for in the months ahead. For the last month, the median list price here in Frisco has been relatively flat, which tells me prices are currently holding steady even as mortgage rates have risen.

CLICK HERE to see the Complete Frisco Market Report

If mortgage rates continue to rise, however, we could see home prices start to soften, but if rates fall back below 6.5%, you will most likely see buyer activity increase, and any build-up of inventory will quickly be absorbed, putting upward pressure on home prices once again.

How is your HOME VALUE trending? CLICK HERE to find out instantly!

Housing Affordability Takes a Hit

The market to buy a home the last few years has been challenging, without question. Rising home prices and rising mortgage rates have frozen many out of the market.

If you've ever wondered how home affordability today compares to years past, the following graph compares all years going back to 1990. The shorter the bar, the less affordable housing is.

As you can see, 2023 was the least affordable year by far.

Builders' Strategies and Market Adaptations

Recognizing the challenges posed by higher rates, new homebuilders in Frisco are innovating with their sales tactics by focusing their incentives on mortgage rates.

A 1% decline in the mortgage rate increases a buyer’s purchasing ability by 10%.

Knowing this, new home builders in the Frisco area are offering mortgage rates starting as low as 3.99% with buy-down programs to permanent fixed rates as low as 5.875%. These financing incentives are allowing buyers to lock in today's pricing without having to wait or hope that rates come down.

If you are looking to make a move within the next couple of months, quick move-in homes often have even more aggressive incentives available. Schedule a Call to learn more about this, and make sure you check out the quick move-in home tours I have on my YouTube Channel.

Bottom Line

The real estate market here in the Frisco area remains active, but there are opportunities available if you know where to look. For on-going updates and more detailed insights, consider subscribing to my newsletter. Just send an email to Andrew@TheAndrewSmithTeam.com with your name, and I’d be happy to add you to our list.