Rates on homes in the area are hovering between 6% and 7% on 30-year and 15-year loans, compared to around 3% to 4% in 2021 and 2022. This means a home bought with a $500,000 30-year loan in Flower Mound, Highland Village or Argyle could command close to $1,000 a month in interest alone, depending on the buyer’s down payment.
Local rates are much higher than the benchmark rate, which sits between 5% and 5.25%, said Brian Rybowicz, a local agent with Fathom Realty. That number is still the highest benchmark of the past 16 years, he said.
“Right now, the number of sales for 2023 appears to be headed for the lowest level of the last 10 years,” he said.
Low inventory, high prices
The market presents a unique challenge to agents, buyers, sellers, title agents and anyone involved in real estate, said Shelby Buehler, an agent with The Buehler Group in Flower Mound and Lewisville.
“In 2022, you were seeing 3.5%, 4%, 5% interest rates,” Buehler said. “It’s a year later and those same rates have almost doubled.”
Buehler said their agency is encouraging sellers to lower their asking prices.
“We don’t want sellers to put their house on the market, get zero or below-asking bids, and then have to keep lowering and lowering,” she said.
As an example, the saga of a particular house recently on the market in Lewisville opened eyes among Buehler and her colleagues.
A home Buehler described as “perfect” went on the market earlier this year and had only three bidders for it—a number that would have seemed unfathomable just one year earlier, she said.
“We had one buyer bid only $415,000 on that house, and by the time it closed, the winning bidder only got it by $2,000 [over the other bidders],” Buehler said. “We’re talking about a super-cute home in Lewisville with little to no maintenance needed, and only three people bid on it. That’s why we’re asking sellers to go ahead and lower their initial asking price.”
There also aren’t as many homes on the market to choose from, as sellers are having second thoughts about putting their homes up for sale. It’s a triple-threat of issues: high home prices, high interest rates and not many homes to choose from, Rybowicz said.
“Rates keep buyers from buying because they can’t afford homes,” he said. “Sellers don’t want to sell because they have low rates already. Sellers also don’t want to sell because there is less inventory to choose from if they’re buying a different home.”
‘A bad time for the market’
The Buehler Group generally dissuades their clients from putting a home on the market during a holiday weekend, such as Memorial Day. But inevitably, a client or two will make the decision to officially put their “For Sale” sign out front during that time, Buehler said.
“We didn’t get any interest in a home that went up on Memorial Day, but we didn’t think too much about it,” she said. “But then the next weekend came and went, and we still didn’t have any interest. That was when we looked at each other and said, ‘Whoa.’”
In 2022, and even as late as the beginning of 2023, a home on the market for nearly two weeks anywhere in the Dallas-Fort Worth area would be inundated with offers, Buehler said. The state of homebuying and selling is drastically different now, she said.
“People are being more careful with their money in general right now,” Buehler said. “Inflation is bad. It’s [almost a Presidential] election year, which means there’s a lot of wait-and-see before wanting to move, and just generally things are more expensive now.”
The rise in interest rates is the catalyst, according to multiple agents. Residents and would-be buyers can realistically expect to pay nearly double the amount of money on interest alone as they would have in 2021 and 2022.
“The only times lately we’ve seen a house go on the market is if the seller had a death in the family, is moving due to a divorce or separation, or they are moving out of state,” Buehler said. “It’s a bad time for the market, and it’s a tough time to be a real estate agent.”
A look ahead
Joe Boggs, branch manager with mortgage-lending company Supreme Lending, said relief is on the horizon—in 2024.
National legislatures are proposing bills that would “significantly lower” property taxes, Boggs said, which, if passed, would decrease monthly house payments for buyers around the first quarter of 2024. This would be especially important for the first-time buyers, Boggs said.
“This could spur a resurgence in first-time homebuyers,” Boggs said. “Also, most mortgage lenders offer down-payment assistance programs, so if the buyer [is able to] qualify for monthly house payments but [cannot pay the] down payment, these programs can help offset those initial costs.”
The Federal National Mortgage Association, or Fannie Mae, also reported in May that interest rates could begin to decline toward the end of 2023 and into the first quarter of 2024.
But buyers should not expect a return to the days of 3% and 4% rates right away, Boggs said.
“Without wages increasing or house affordability returning, it may take a while for [the housing market] to stabilize,” he said. “One of the largest disappointments is that with inflation significantly raising home prices—coupled with high mortgage rates—current house affordability issues have almost cut out entry-level or first-time homebuyers. When these factors cut out that demographic of buyers, it worsens our economy.”
When rates do lower, Rybowicz said he expects the Dallas-Fort Worth market—including Flower Mound, Highland Village and Argyle—should return to being busy even if a small rate decrease occurs.
“I think as soon as [rates] go down it’ll be back to crazy town again [with buyers and sellers],” he said. “Albeit, never quite like peak pandemic times.”
