Your July 2024 Frisco Real Estate Market Update: What You Need to Know

Welcome to your July 2024 real estate market update! You may have sensed that things in the real estate market are starting to change a bit. Have you noticed those "For Sale" signs sitting in the yards just a little bit longer? How about price reductions? These trends might make you wonder: what in the world is going on? Is this an indication of trouble ahead, and are home prices likely to fall in the coming months or years? And how does the fact that we are in an election year impact all of this?

In this real estate market update for July 2024, I'm going to do my best to unpack all of this for you and let you know how the latest data impacts you if you're planning on buying or selling a home.

National Trends and Local Insights

I’ll start with some information that impacts all real estate markets across the country before diving into the specific stats and trends in our local Frisco market. Continue reading below, or watch the following video, to learn more.

Overall Home Sales

Although the total number of annual home sales is a number that agents, like myself, probably follow more closely than potential buyers or sellers, that number does provide insights and perspective on the health of the market overall.

When home sales are down, it’s natural to believe they are down because buyers aren’t buying, but it takes two to tango, as they say. Buyers also can’t buy what isn’t for sale.

The biggest challenge we have had in the real estate market over the past several years is a lack of supply. While it’s true that home buyers pulled back, mainly due to high mortgage rates, sellers also pulled back. This became known as the “Lock-in Effect”. Sellers with a low mortgage rate have no incentive or reason to sell their home and trade that low mortgage for a new home at a much higher rate.

That is one of the primary reasons why, even in the face of high mortgage rates and lower buyer demand, home prices haven’t fallen.

Home inventory can only come from one of three different sources:

1. Resales

2. New Construction

3. Distressed Properties

Resales, mainly due to the lock-in effect mentioned above, although improving, are still not back to pre-pandemic levels in most areas. New construction, even though it’s all around us here in our local market, lagged behind historical levels for over a decade after the housing market crash, and there is absolutely no sign of a foreclosure wave happening. For additional information on these sources of supply, check out this recent video.

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Mortgage Rates are the Wild Card

One of the wild cards in this market is mortgage rates. Recent economic data suggests that inflation is cooling, and mortgage rates have dropped more in the past week, as of this writing, than they have in months. The consensus is that the Federal Reserve will start cutting interest rates in September. As inflation falls, mortgage rates are expected to follow, which could bring more buyers into the market. The real question is whether it will be enough to break the lock-in effect and cause sellers to return as well.

If buyers return faster than sellers, then you can expect additional upward pressure to be put on home prices, but I expect the rate of appreciation to be more moderate than we have seen over the past few years.

What Impact will the Election Have?

With the upcoming election dominating headlines, you might be wondering about its impact on the real estate market. Here is how total home sales, resale home pricing, and new construction pricing have faired following previous presidential elections:

For some perspective on total homes sales, look at 2005, there were 7.080.000 homes sold. Last year, there were approximately 4,000,000 home sales. This year, depending on which forecast you look at, home sales are expected to come in between 4,100,000 and 4,300,000. Those numbers are lower than the number of home sales following the housing market crash!

Resale prices have gone up every year except 2009, again immediately following the housing market crash.

Likewise, new construction home prices have also gone up in the years following a presidential election, except in 2009.

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Local Market Detail: Frisco, TX

There are three trends that I like to track to give a sense of where the local real estate market is heading:

Median List Price: Tracking list prices gives us a good idea of future home sales trends. While I realize list prices can be reduced, the vast majority of sellers in today’s market are listing to sell, not test the market. MLS data shows that homes are currently selling for an average of 98% of original list price. Prices have remained relatively flat this year, indicating a stabilizing market. The 90-day trend line has been flat since mid-April, suggesting prices are not experiencing the massive run-ups seen in previous years.

Inventory Levels: While supply has increased compared to last year, it’s starting to plateau. This trend indicates we might be at or near the peak of new listings for the year. Higher inventory compared to recent years is a sign of a more balanced market

Price Reductions: The percentage of homes with price reductions is showing signs of tapering off, indicating that sellers are becoming more realistic about market conditions. This trend helps maintain stability in home prices.

Should we see a continued rise in inventory, coupled with an increase in the number of price reductions, that could be a sign that we might see softening home prices in the months ahead.

For a more in-depth explanation of why I track these three metrics, and what they mean for our local Frisco market, I invite you to watch the complete market report video:

Bottom Line

Although the current market conditions might be unnerving for some, rather than an indication of trouble, I see a market that is starting to normalize, which is something we haven’t experienced in quite some time.

If you are considering buying or selling a home in Frisco, or the immediate surrounding areas, then I’d love to talk to you. Schedule a call today, and let’s put together a plan to help you achieve your real estate goals.

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