DALLAS — This story was originally published by our content partners at the Dallas Business Journal. You can read the original version here.
Real estate agents say a half-point interest rate cut won’t immediately cure what ails the North Texas housing market. But it’s seen as a step in the right direction.
The Sept. 18 decision by a panel of Federal Reserve policymakers to cut the federal funds rate by 50 basis points should result in a "gradual rebound" in the number of homes sold in Dallas-Fort Worth, but it may not happen immediately, said Todd Luong, an agent with Re/Max DFW Associates.
"Eventually, as borrowing costs decline, it should be expected that many sidelined homebuyers will be coming back to explore their housing options again, especially first-time homebuyers who were more rate sensitive," Long said. "However, these same buyers should be cognizant that all of this could possibly result in higher demand for housing here in DFW and may even push home prices up from where they currently stand."
Mortgage rates continued to fall this week as they had in recent weeks. The 30-year fixed-rate mortgage averaged 6.09% for the week ended Sept. 19, according to Freddie Mac. That’s down from last week’s 6.20% and well below a peak of 7.79% last fall.
Christy Berry, one of the founding agents of Compass in DFW, said the bond market factored this rate cut in months ago. Mortgage rates had already adjusted to reflect the cut before the announcement by the Fed.
"This does not mean that mortgage rates are going to go down any more," Berry said. "The Fed funds rate is a short-term rate and mortgage rates are long-term borrowing costs. The bond market has always been ahead of the marketplace."
DFW home sales fell 4.6% in August year-over-year, according to a Re/Max National Housing Report released this week. Even with the drop, DFW ranked third nationally for total home sales, with 8,062 closed transactions last month. That trailed New York, with 11,147 home sales closed, and Chicago, with 9,402. It was ahead of Houston, with 7,138 closed sales, and Atlanta, with 6,561.
Homes in DFW are taking longer to sell and are on the market an average of 52 days — 11 days more than the same time last year, according to the Re/Max report. North Texas home prices were down 1.3% year-over-year to a median sale price of $395,000.
New listings in DFW were up 16% from a year earlier, with 12,721 homes added to the inventory in August, the report found.
The interest rate cut could offset recent market cooling and spur more buyers to make offers, Luong said. Also, sellers may no longer need to lower their listing prices as much as had been necessary in recent months, he said.
"Home prices in the Dallas-Fort Worth area have stabilized, which has been good news for buyers," he said. "In fact, many sellers [have been] reducing their listing prices in this market as inventory levels have soared tremendously compared to previous years."
The uptick in inventory is noticeable, but it’s still not enough, both Luong and Berry said.
"Inventory is still an issue," Berry said. "But we are seeing that increase, which is going to help things."
Even with increased inventory levels and homes sitting on the market for longer, homebuyers in North Texas still struggle to find affordable properties, Luong added.
"Home prices remain unaffordable for many buyers after Dallas-Fort Worth had some of the highest home appreciation in the nation for 2021 and 2022," he said.
