Articles Tagged "Downsizing"

The North Texas housing market is downshifting quickly, with Dallas-Fort Worth being the only U.S. market to see a decrease in home sale prices last month, according to a report released today.  DFW home prices are down 1.9% year over year in July, according to the latest Re/Max National Housing Report.

And what a difference a month makes.  Last month, DFW led the U.S. for home price increases, with June prices up 29.3% over the previous year.   In hard numbers, home sales prices in DFW fell to $413,900 in July from $422,000 in July 2021.   Homes in DFW spend an average of 23 days on the market before selling.

Higher interest rates and inflation, as well as record home prices, triggered a sharp drop in demand for housing, said Todd Luong, a realtor with Re/Max DFW Associates:  "Here at our Re/Max office in Dallas-Fort Worth, our listings are currently getting on average 2.7 showings per week," Luong said. "Last year, at this same time, our listings were earning on average 5.9 showings per week. That is a huge drop in buyer demand compared to the previous year. Record home prices and higher mortgage rates have forced many potential buyers out of the market, especially first-time homebuyers."

While the latest trends may disappoint some sellers, buyers now have more choices and better opportunities for good deals, Luong said.   Luong said that the DFW housing market has been challenged with low inventory for years and reached an all-time low earlier this year, with only a two-week supply. Now, however, inventory is increasing.  "Although buyers have more choices now, it is still not a balanced market as we only have about a two-month housing supply," Luong said. "In a normal market, you have about a five to six-month supply of housing."

A new report from Zillow also found falling home values, although the numbers didn't match Re/Max's precisely because of different study methods and different geographic definitions of DFW as a metro area, among other reasons.  According to Zillow's findings, the Dallas-Fort Worth metro area's typical home value is $396,904, down 1.1% since June, the first month of decline. Values are up 55.4% since July 2019.

Zillow also reported that the mortgage payment on a typical home in DFW is $2,633 a month, including taxes and insurance. That's up 77.4% compared to July 2019.

According to Zillow, inventory in DFW has risen 10.2% since June, and the share of listings with a price cut in July was 22%, compared to 15.6% in June.  Nationwide, after two years of unprecedented growth, home values fell for the first time since 2012 as competition for houses eased, according to Zillow's July market report.

The slowdown is being driven by decreased competition among buyers. Zillow's analysis says that affordability pressures have pushed many to the sidelines, and buyers are waiting in the wings to resume their search if and when prices relax a bit.  Skylar Olsen, Zillow's chief economist, called the flattening of home values "a badly needed rebalancing.  This slowdown is about discouraged buyers pulling back after the affordability shock from higher rates," Olsen said. "As prices soften, many will renew their interest, and we will continue our progress back to 'normal.'"

Luong said he sees positive signs in the market.  The interest rate for a 30-year fixed mortgage dropped below 5% after peaking in June. More than 290,000 new jobs were added in Dallas-Fort Worth last year, so North Texas has one of the strongest labor markets in the country.   "Reasonably priced homes that are in good condition and move-in ready are still selling very fast," he said. "However, the bidding wars have subsided considerably across the board."

• Dallas Business Journal, August 19, 2022

Paige Shipp, regional director with housing analyst MetroStudy Inc. fears home sales might slow next year in the ramp up to presidential and congressional elections.  "We typically have much slower selling seasons right before an election," she said. "After that happens, the flood gates open and people come out. It's not a matter of who wins."   Worries about a recession may also impact the home market.  "We spent the better part of the last decade still looking over our shoulder," said George Ratiu, senior economist with Realtor.com.  "The last recession was so bad that we are still carrying some of the scars from that."   However, Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University states that Texas economy is still expanding.  "And we are extremely unlikely to be in a recession by the end of this calendar year," he said. "We are probably pretty safe through the first six months of next year."

• Dallas Morning News, October 14, 2019

The number of homes listed for sale with North Texas real estate agents has risen by about 15% this year. But they aren't in the price range most buyers want.  "The inventory is increasing at the upper end — $750,000 and above," Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University said. "If you have a well-located $300,000 house, you can sell it tomorrow. We are seeing evidence of price fatigue in the market."  D-FW home prices are up only about 3% so far in 2019 — nothing like the double-digit percentage home price gains of a couple of years ago.  "The recent spike in mortgage rates did expose how price sensitive the market is," said Paige Shipp, regional director with housing analyst MetroStudy Inc. "Things are not quite as rosy as they seem in terms of what people can afford."  Many home sellers haven't gotten the message, she said. "They want to list their house for more than their neighbors sold for and sell it overnight."  D-FW has an undersupply of homes priced below $250.000.

• Dallas Morning News, October 14, 2019

Moving into a smaller home can be advantageous on many levels depending on your circumstances and reasons why you're choosing to do so. But it's not right for everyone, and depending on your particular situation, it may actually be more of a burden than an advantage. 

Our real estate agents have put together this list of five questions to ask before downsizing.

1. Can I afford to downsize?
   It makes logical sense that moving into a smaller home will be cheaper, whether in monthly mortgage payments or in utilities and upkeep. But doing so can be somewhat misleading, especially if you're in an area where home prices are rising.
   
   If you've lived in your home long enough to stack up some substantial equity, and you can either swap payment for payment or use the proceeds from the sale of your existing home to purchase your new home outright, then downsizing makes sense.
   
   Where downsizing can get you in trouble is when the home you're purchasing costs you far more, or your payments stretch out beyond the timeline you've established.
   
   
2. Will I pay capital gains tax?
   Along the same lines as above, selling a home you purchased two or three decades ago will likely be far more valuable now than it was when you purchased it. As a result, you may be on the hook for the proceeds from selling your existing home.
   
   The IRS allows for exemptions in capital gains of $250,000 for single filers or $500,000 for those married filing jointly. Anything above those thresholds will incur a 15% capital gains tax, plus, depending on what tax bracket you fall under, your taxable income could be far greater.
   
   It's best to consult a financial professional or accountant if you think the sale of your home could incur capital gains tax.
   
   
3. Am I using the space in my current home?
   Downsizing usually comes to mind when homeowners realize they're not using all of the space in their home. Naturally, you want a home that feels comfortable and has adequate space, but a home with cavernous living areas and empty rooms may seem like a little much.
   
   If this sounds like your situation, then it's probably time to downsize. Take into account all of the things you'll be moving and precisely what you want in a future home, then start shopping!
   
   
4. Am I ready to downsize?
   Readiness to downsize is a function mainly of emotion and willingness to start fresh in a smaller dwelling.
   
   Emotions can run high when looking to move out of a home you've made a life in, but rest assured that many more memories will be made in your new home. When it comes to willingness, you'll likely have to part with some furniture, possessions, and generally get ready to live in a smaller space. Coming to that point can take some time, but you'll grow comfortable with the idea of living in, and with, less.
   
   
5. Are my costs mounting?
   Higher utility bills, growing tax rates, and increasing home repairs may be the thing that takes you over the edge when deciding to downsize.
   
   All of these things will factor into your fixed income later in life (if you're looking to retire) and can potentially become a burden if you don't have some financial flexibility and options at your disposal. If your costs are getting to be more than you'd like, then downsizing is right for you.

If you're looking for Dallas homes for sale, then contact us to speak to one of our agents to start shopping for your perfect forever home.