Dallas Housing Market (Allen, Howe, Leonard: loans, luxury, income)

[hereticiam]

I also come here daily to follow this discussion as we will be moving to DFW area next year and purchasing a home.
Here are some Housing stats for October.

Days on the market is up.
Prices are still up over past 12 months
New Listings are flat or down but this may be seasonal.

https://www.republictitle.com/octobe...-estate-stats/

[Wittgenstein's Ghost]

I think few, if any, markets that were as hot as DFW will fare better than the national average. And I expect the national average to probably come down 10-15%. I personally wouldn't call that a crash, but in real estate, that is certainly a very real correction.

I wouldn't buy right now unless I had to. Like iamanewuser said, there are some tailwinds, including some inventory constraints driven by homeowners wanting to stay put. But I think we'll most likely enter a recession in 2023, and housing tends to turn slowly. My guess is we've probably seen 5% come off nationally, and we have another 5-10% to go.

There is certainly the possibility, though, that mortgage rates come down quicker than people think. There's a much larger than normal gap right now between treasury yields and mortgages, and if we get another good CPI report, I wouldn't be surprised to see rates continue down. Of course, this is all dependent on where the Fed ends up this cycle. I do think there's a chance a 5% terminal rate won't get it done, and if we end up much higher, mortgage rates aren't coming down.

[TheOverdog]

I think you all continue to be wrong.



The relationship between mortgage rates and home purchasing is really weak. The US home ownership rate has risen even as rates have risen, up almost half a percentage point in the past year.



At best, higher rates, higher prices, and fears of recession effect household formation, delaying buyers into the future, and that has some effect on rental rates and purchase rates. Max prices in DFW have only fallen a tiny bit, and US household formation has slowed somewhat. But people who still want to buy can afford to even with higher rates and higher prices.


Saying a recession might crash all this is pretty low stakes prognostication. It won't effect household formation much, because the majority of the people laid off in a recession are not able to afford homes in the first place.

[Leonard123]

Originally Posted by Wittgenstein's Ghost

I think few, if any, markets that were as hot as DFW will fare better than the national average. And I expect the national average to probably come down 10-15%. I personally wouldn't call that a crash, but in real estate, that is certainly a very real correction.

I wouldn't buy right now unless I had to. Like iamanewuser said, there are some tailwinds, including some inventory constraints driven by homeowners wanting to stay put. But I think we'll most likely enter a recession in 2023, and housing tends to turn slowly. My guess is we've probably seen 5% come off nationally, and we have another 5-10% to go.

There is certainly the possibility, though, that mortgage rates come down quicker than people think. There's a much larger than normal gap right now between treasury yields and mortgages, and if we get another good CPI report, I wouldn't be surprised to see rates continue down. Of course, this is all dependent on where the Fed ends up this cycle. I do think there's a chance a 5% terminal rate won't get it done, and if we end up much higher, mortgage rates aren't coming down.

I don't think a recession, or at least what I would consider a recession, is even remotely possible given the employment numbers. Also, people continue to spend like there is no tomorrow.

I don't see price averages going down, although fewer people may fall into the average. All I see is a growing gap between the most and least expensive homes and a bigger gap between the rich and the poor.

[numbersguy100]

Originally Posted by Leonard123

I don't think a recession, or at least what I would consider a recession, is even remotely possible given the employment numbers. Also, people continue to spend like there is no tomorrow.

I don't see price averages going down, although fewer people may fall into the average. All I see is a growing gap between the most and least expensive homes and a bigger gap between the rich and the poor.

Millions of Americans still aren't paying their student loans. And yet credit card balances rose last month at the fastest pace in decades. Americans are still spending, but they're definitely stretched. When/if the government ever makes people start paying on those student loans again, I worry how well the consumer economy can hold up.

[Leonard123]

Originally Posted by numbersguy100

Millions of Americans still aren't paying their student loans. And yet credit card balances rose last month at the fastest pace in decades. Americans are still spending, but they're definitely stretched. When/if the government ever makes people start paying on those student loans again, I worry how well the consumer economy can hold up.

We have far too many kids going to college and way, way too many adults pushing them into it.

I'm still baffled at the numbers for Black Friday. People lost their marbles as soon as Covid hit, and they still haven't come to their senses. Inflation is going to get even worse if they don't stop.

I don't know where so many people are getting so much money unless it's just more people spending money they don't have on things they (and their recipients) don't need.

[Wittgenstein's Ghost]

Originally Posted by TheOverdog

I think you all continue to be wrong.



The relationship between mortgage rates and home purchasing is really weak. The US home ownership rate has risen even as rates have risen, up almost half a percentage point in the past year.



At best, higher rates, higher prices, and fears of recession effect household formation, delaying buyers into the future, and that has some effect on rental rates and purchase rates. Max prices in DFW have only fallen a tiny bit, and US household formation has slowed somewhat. But people who still want to buy can afford to even with higher rates and higher prices.


Saying a recession might crash all this is pretty low stakes prognostication. It won't effect household formation much, because the majority of the people laid off in a recession are not able to afford homes in the first place.

I'm not sure who this is directed at, but we're all talking about future events here. So I'm not sure what "continue to be wrong" means.

While you are right that, in general, the relationship between mortgage rates and home prices is looser than most might expect, I am not sure that holds true when markets are quite high and buyers are stretched. Given the combination of high prices, very low rates and stretched affordability we had earlier this year, I think the move from 3% to 7% on 30 year fixed very likely translates to lower prices. We've seen the market slow down tremendously in terms of transaction volume, and prices, which tend to lag, had already fallen in Dallas by almost 5% through September per Case Shiller. I expect the October and November numbers will show more of the same.

I don't know that I would say a crash is coming, but I do think we'll see ~15% come off. We're probably about halfway there already.

And I'm honestly confused how a recession wouldn't put downward pressure on prices. I'm not sure it's true that people who are laid off in a recession couldn't afford to buy a house anyway. And the housing market can display outsized responses to small marginal changes in demand or supply.

[Wittgenstein's Ghost]

Originally Posted by Leonard123

We have far too many kids going to college and way, way too many adults pushing them into it.

People often point to the difficulty some college grads have in getting good jobs as evidence that college isn't worth it. But the proper comparison would be to look at how non-grads are faring. By any measure, college grads make more and do better in their professional lives. That doesn't mean there aren't good non-college routes, but if we're speaking generally, college is still a better bet than just a high school diploma.

[Sunbather]

Originally Posted by TheOverdog

It won't effect household formation much, because the majority of the people laid off in a recession are not able to afford homes in the first place.

I'm curious where you are pulling this data from. This would seem to be conjecture at best but I'm all ears if you have data to support this claim. It does not seem line up with what I've seen in past recessions in terms of income levels of those affected.

[Leonard123]

Originally Posted by Wittgenstein's Ghost

People often point to the difficulty some college grads have in getting good jobs as evidence that college isn't worth it. But the proper comparison would be to look at how non-grads are faring. By any measure, college grads make more and do better in their professional lives. That doesn't mean there aren't good non-college routes, but if we're speaking generally, college is still a better bet than just a high school diploma.

More money does not mean better. This is part of the problem. There is too much emphasis on material wealth. Many of the jobs making the most money are among the least useful and most harmful. Society has turned away from God, and the culture has gone to pot.