Dallas-Fort Worth home prices rose the third fastest in the country in July with a 24.7% annual increase, the just-released Case-Shiller index shows.
The North Texas housing market quickly cooled down over the summer as buyers faced some of the most drastic price hikes in the U.S. on top of rising mortgage rates.
U.S. home prices grew 15.8% in July, down from an 18.1% year-over-year gain in June, according to the latest reading of the S&P CoreLogic Case-Shiller Index. Dallas-Fort Worth home prices rose 24.7% year over year in July, the third-fastest pace in the nation only behind Tampa (31.8%) and Miami (31.7%).
Still, the region’s price growth slowed down for the third straight month, a steep drop from April, when prices were up a record 31% year over year.
“Rapid home price deceleration, which is spreading beyond the West Coast markets, was anticipated given the Fed’s actions and will bring home price growth closer in line with income growth,” CoreLogic deputy chief economist Selma Hepp said in a statement. “Housing market participants have reached an impasse, and surging mortgage rates are the culprit.”
The difference between the nation’s year-over-year price growth in July compared with June marks the largest slowdown in the history of the index, S&P’s Craig Lazzara said in a statement. Prices in all 20 cities tracked by Case-Shiller grew at a slower pace in July than they did in June.
“Although U.S. housing prices remain substantially above their year-ago levels, July’s report reflects a forceful deceleration,” Lazzara said. “As the Federal Reserve continues to move interest rates upward, mortgage financing has become more expensive, a process that continues to this day. Given the prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate.”
The Case-Shiller index compares sales price changes of specific properties over time. Case-Shiller’s price estimate is considered more accurate than home sales data from agents, which can be influenced by the type of properties that are selling each month.
The median price of a single-family home in Dallas-Fort Worth was $415,000 in August, up 15% year over year, according to the Texas Real Estate Research Center at Texas A&M University and North Texas Real Estate Information Systems.
Nicole Bachaud, senior economist for Zillow, said a dip in demand from buyers priced out of the market as mortgage rates soar is causing homes to stay on the market longer and is leading to moderation of price growth. She also added that many would-be sellers are locked into low rates that make moving up to a costlier mortgage unrealistic, keeping inventory low.
“Affordability constraints have set in motion a rebalancing of power in the housing market,” Bachaud said in a statement. “This rebalancing is putting more power in the hands of some affluent buyers who can afford to stay active in the for-sale market, with more time to make crucial decisions, less competition and more negotiating power than at any time in the past several years.”
George Ratiu, senior economist for Realtor.com, said price cuts are likely to continue as mortgage rates are expected to keep rising and prices become even less sustainable for most buyers’ budgets. “Given that demand is cooling due to high borrowing costs, incomes falling behind inflation and the still-limited supply pipeline, it is becoming increasingly clear that prices have to decline to restore market liquidity and balance,” Ratiu said in a statement.
Source: The Dallas Morning News