Real estate trends emerging in the current market have altered the industry’s landscape. Explore expert analysis, predictions, and insights.
With various trends and changes reshaping the industry, the volatility of the current real estate market has created a shift in our mindsets. Needless to say, the COVID-19 pandemic has had the most significant impact on the industry’s landscape. From reduced months’ supply of home inventory and higher sale prices and mortgage rates to a rise in online real estate services, the real estate market is experiencing significant changes and challenges in today's economy.
As we approach mid-2023, it's crucial to analyze and predict where the market is headed next. In this blog, we'll dive deep into the current real estate market, exploring the latest real estate trends and providing expert analysis and predictions. Whether you're a first-time homebuyer or seller, a seasoned real estate investor, or someone who’s just stepped into this industry as a realtor, this blog will provide valuable insights into the ever-changing world of real estate.
The real estate trends in recent years have proven to be the biggest challenges the industry has faced in the past few decades. Below are some of the most radical ones, along with their analyses and predictions based on them.
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The Texas housing market has seen a record-breaking low of months’ supply in the last three years. Homes available for sale have been significantly fewer, with a remarkably low average of around 56 days on the market. Any property that is appealing, well-maintained, and competitively priced sells like a hot cake.
With limited time available, there is little room for indecisiveness when it comes to your home search. If you aim to secure a desirable home in the current real estate market, consider the following suggestions:
Prioritize your must-haves: If you're unable to find the exact house you desire, be prepared to compromise on some nice-to-have features. Look for the most affordable home in a desirable neighborhood within your budget, with the intention of upgrading over time.
Broaden your search: If the location you initially planned to buy in is highly competitive, you might be pleasantly surprised by the hidden gem you can discover in a less popular neighborhood. Hiring a knowledgeable real estate agent who is familiar with the area as well as the latest real estate trends will greatly assist you in finding a home that aligns with your financial means and lifestyle.
Secure pre-approval promptly: Obtaining pre-approval for a mortgage before embarking on your house-hunting journey is essential in any market, and becomes even more crucial when housing supply is limited. Failing to complete this crucial step in advance could potentially grant a pre-approved buyer the opportunity to snatch away the home you desire.
For sellers, low inventory brings the advantage of reduced competition. If your home is situated in a desirable location or possesses sought-after features, you can anticipate receiving multiple offers. However, it's important to note that higher mortgage interest rates have led some potential buyers to exit the market. Consequently, if your house lacks the same level of appeal as others in the area, you may still receive offers, but likely fewer compared to previous years.
Additionally, it's crucial to consider your future living arrangements before selling. If you plan on purchasing a new home after selling your current one, it's essential to have a clear plan in place. While it's possible to negotiate a stay arrangement with the new owner, it's not guaranteed and therefore should be addressed in the purchase agreement.
The main reason behind the reduced months’ supply in the current real estate market of Texas is population growth. Texas has experienced significant population growth in recent years, particularly in major cities like Austin, Dallas, and Houston. This influx of new residents has increased the demand for housing, putting pressure on the available inventory.
Texas's appeal as a destination for relocation and migration has increased housing demand, straining available inventory. The state's favorable business environment, lower cost of living, and job opportunities have attracted individuals and businesses from other states.
Another major reason is limited new construction. The slow pace of building new homes has failed to keep up with rising demand, resulting in reduced inventory. Regulatory factors have contributed to this problem. Zoning regulations and limitations on land use have impeded new construction as well as the conversion of properties into residential units, affecting inventory levels.
Increased investor activity has also intensified competition for properties, diminishing the months' supply of inventory. Real estate investors, both domestic and international, have shown interest in the Texas housing market due to its growth potential and favorable returns.
Furthermore, the COVID-19 pandemic has had significant effects on the current real estate market. It has disrupted construction activity, supply chains, and homeowner willingness to sell, potentially contributing to reduced inventory in the Texas housing market.
After plummeting to 1.0 in February last year, the months' supply of home inventory in Texas’s current real estate market is back on the rise, currently hovering around 2.6. This number is expected to further increase, alleviating competition and offering homebuyers and investors a wider range of options.
The figure below illustrates the trend of months of supply in the Texas housing market over the past five years. It is evident that after a sustained period of low supply for three years, the months of supply have begun to rise once again.
Data Source: Texas Real Estate Research Center at Texas A&M University
Despite a shortage of homes, the average home price has continued to soar year over year and sits around $410,000 today. The strong demand for housing coupled with limited inventory has created a highly competitive market where buyers often find themselves facing multiple offers and bidding wars. This scenario has further fueled the upward trajectory of home prices, as sellers are able to capitalize on the scarcity of homes by commanding higher prices.
If you are looking to buy a house, it is important to have a clear understanding of your affordability and stick to your budget no matter what. Don't succumb to the pressure of buying due to others' actions. Although it can be frustrating to wait for the right home, it pays off in the end. Avoid the burden of a hefty mortgage payment and cherish your home as a true blessing.
To approach home buying with confidence in the current real estate market, follow these helpful tips.
Firstly, ensure that your house payment doesn't exceed 25% of your income. This payment should cover principal, interest, property tax, home insurance, HOA fees, and, if the down payment you make falls below 20%, PMI.
Secondly, strive to save a substantial down payment. Ideally, aim for at least 20% to avoid PMI. However, if you're a first-time homebuyer, a smaller down payment of 5% to 10% is acceptable, but it will require PMI. Saving a significant down payment is attainable with patience and focus. Perhaps, by this time next year, you could surprise yourself by saving a down payment of five figures or more down!
Lastly, when selecting a mortgage, opt for a 15-year fixed-rate conventional mortgage. This is the only loan type we recommend due to its lower overall cost. Avoid expensive pitfalls such as the 30-year mortgage, FHA, USDA, VA, and adjustable-rate mortgages, which will burden you with excessive interest, fees, and long-term debt. Steer clear of those options and make a wise choice with a 15-year fixed-rate mortgage.
The upward trend in prices is consistently advantageous for sellers and investors, as it promises significant returns. However, numerous sellers, particularly those lacking knowledge of the current real estate market, risk selling their property below its actual value, exposing themselves to potential exploitation by certain buyers who propose significantly lower offers. By enlisting the services of a knowledgeable agent, sellers can prevent the undervaluation of their property and secure a fair and optimal price for their sale.
Similar to buyers, sellers should practice patience and refrain from rushing into decisions. If there is no urgency to relocate, it is advisable for sellers to wait for an offer that optimizes their profit potential. Sellers who approach negotiations with the least sense of urgency consistently maintain the upper hand.
The annual appreciation of home values in the Texas’s current real estate market is primarily driven by the state's robust economy. With a wide range of job opportunities across various industries, attractive tax policies, excellent amenities, and a generally low cost of living, Texas makes an appealing place to live. Consequently, this has led to significant population growth and limited housing supply relative to the increasing demand from the growing population, thus creating a competitive market and pushing prices higher.
Although the price growth rate in the current real estate market is still not as high as it was previously, it is unlikely to experience a significant decline. While there may be minor fluctuations from month to month, as is typical for seasonal price trends following a peak in early summer, home prices will generally remain higher than they were at the beginning of the year. This information is encouraging for sellers, as it suggests a favorable market environment that supports the potential for profitable sales. As for buyers, it is recommended to stay patient and seek guidance to navigate the market effectively.
The average mortgage interest rate, which represents the percentage of the loan amount charged by lenders, reached historically low levels in 2021. However, there has been a subsequent increase.
Due to the Federal Reserve's decision to raise interest rates in 2022, the average rate for a 15-year fixed-rate mortgage surged from around 3% in January of that year to around 6% in October, marking the highest point in over 15 years. In the meantime, the average rate for a 30-year fixed-rate mortgage peaked around 7% in October.
On a tangential yet important note, there is a reason why we strongly recommend opting for 15-year mortgages: they typically offer lower rates compared to 30-year mortgages. Also, since they mature 15 years earlier, they result in reduced interest payments over time. This combination provides a double benefit when it comes to saving money.
Increased interest rates can impact affordability, so there's no need to rush into purchasing a house if you're not prepared. However, don't let it intimidate you either. Even with a higher interest rate, it is still feasible to afford a house within your means in the current real estate market.
It's important to recall our recommendations regarding the monthly payment limit, down payment amount, and mortgage type (refer to Real Estate Trend #2). By adhering to this guidance, you'll be in an excellent position.
Higher mortgage rates can have a significant impact on sellers. When mortgage rates rise, it becomes more expensive for buyers to borrow money for purchasing a home. This increase in borrowing costs may result in a smaller pool of potential buyers, as some individuals may no longer qualify for the higher mortgage rates or may need to adjust their budget and purchase expectations.
With fewer qualified buyers in the market, sellers may experience longer listing periods and increased competition among properties. Moreover, higher mortgage rates can put downward pressure on home prices, as buyers' purchasing power is reduced.
To mitigate the impact of higher mortgage rates, sellers may need to consider adjusting their pricing strategies and enhancing the appeal of their properties through staging or renovations, or exploring alternative marketing techniques to attract more potential buyers.
Several factors have contributed to higher mortgage rates in the current real estate market. The state of the economy, including factors such as inflation and economic growth, has played a significant role. Central bank policies, such as interest rate adjustments and changes in economic stimulus, have also influenced mortgage rates.
Furthermore, market dynamics, investor sentiment, and global economic conditions have added to the upward pressure. Note that borrower creditworthiness, including credit scores and loan-to-value ratios, is another main reason behind higher rates offered by lenders.
After a significant increase last year, mortgage rates in the Texas housing market are expected experience a decline down the road. This is good news for both buyers and sellers, as it will increase home sales. However, the downward trend is too vague to make any precise predictions.
Another one of the most significant real estate trends in the current real estate market is the growth of online real estate services. With the growth of online real estate services, buyers and sellers now have access to a wide range of tools and resources at their fingertips.
They can easily search for properties, view virtual tours, compare prices, and even complete transactions online. This convenience has streamlined the buying and selling process, allowing individuals to achieve their real estate goals with greater ease and efficiency.
Following are some of the latest real estate trends:
iBuying: This is where third-party buyers purchase your house, invest in renovations, and handle all the necessary procedures such as inspections and repairs. While these companies promise convenience and charge similar fees to agent commissions, there are drawbacks to consider.
Some iBuyers may add an additional service fee, reducing your profit, and you may miss out on the expertise of a knowledgeable agent who can maximize the selling price based on the current real estate market conditions.
Use of Hybrid Services: Another option gaining popularity is the use of hybrid services, which provide online assistance at a lower cost than traditional agents. These platforms offer a middle ground between working with an agent and selling independently.
However, when it comes to selling your largest asset, it is essential to consider the value of having a dedicated real estate agent throughout the entire process. The peace of mind and expertise they provide are worth the extra investment and can help you avoid potential complications. The experience of working with a real person far surpasses the convenience offered by virtual services.
Use of Digital Technology for Closing a Deal: In addition to changing the selling process, digital technology has also impacted the closing procedure. Mobile or online closings have become more prevalent, allowing for virtual document handling, electronic signatures, and remote online notarization.
This means you can buy or sell a house no matter where you are. While these digital services offer convenience, it's important to exercise caution and not get carried away by every new trend. By using your judgment, considering your budget, and enlisting the assistance of a professional real estate agent, you can ensure you make the best decisions and secure the right house at the best possible terms.
Whether you're looking to buy or sell a house, HAR offers unmatched opportunities to capitalize on emerging real estate trends. As one of the top-ranking MLS sites, we ensure access to the finest options in the current real estate market. Secure the best deal possible and stay ahead of the curve with us.
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