North Texas home prices have already been notoriously high, but they surged by 26 percent compared to the rates in May 2020. In fact, the cost of a mid-priced home reached a staggering $341,000. Home prices in the area rose 5 percent alone between April and May, a figure usually associated with the annual increases, underscoring the anomaly further.
With the surge in prices, median home prices in North Texas rose by 17 percent in the first five months of May 2021 compared to the same period in the previous year. Interestingly, despite the spike in costs, the number of North Texas homes sold in May shot up by 27 percent than 2020. It’s important to note that the comparison involves the pandemic’s beginning, which saw a sharp decline in local sales.
What’s Causing the Housing Price Inflation?
It’s normal to witness year-over-year increases, although the sharp surge in prices this year was definitely unprecedented. However, in a situation where everything shut down due to the pandemic, it’s difficult to predict what prices will be like, especially when estimating when they will go back to normal. Texas housing economist James Gaines estimates approximately a year before housing prices return to normal.
Gaines agrees with other analysts that the shortage of available homes on the markets is also responsible for the skyrocketing prices. Only 7,000 single-family homes in North Texas were listed at the end of May, which is the lowest it’s been in decades. Additionally, there aren’t enough houses on the market to last a month’s worth of searching. However, in the same month, local real estate agents sold over 10,000 homes, with another 11,709 sales pending.
The Sharp Increase in Homebuying
Homes usually don’t last long in the North Texas market. In May alone, it took an average of 24 days to sell a home. Furthermore, many homes went under contract for sale once they were listed. These instances indicate a surge in homebuying, which has steadily increased over the last few months. For the first five months of 2021, real estate agents sold 11 percent more houses. Additionally, mortgage rates have also increased, but Gaines predicts they won’t significantly affect the demand. He anticipates that the market will level out soon.
Still, the median cost of a pre-owned house in the area is 50 percent higher than what it was five years ago, which is an unprecedented rate of appreciation. The median price of homes listed for sale in the Dallas-Fort Worth area is currently at $380,000, which indicates that sellers believe it will only increase. With buyers scurrying to buy houses, they’re more likely to buy them at any cost, especially given the severe shortage.
Building More Houses to Meet the Demand
With a problem in the supply chain, many people think that building more houses will alleviate the high demand for them. However, homebuilders are completely booked, which means that the market will continue having high prices in the short term. Some also believe that rising mortgage prices will slow the market.
Regardless, real estate agents hope that sales listings will only grow this year as the pandemic starts subsiding, allowing more sellers to put up their properties on the market. When the supply of homes increases this summer, people should expect to see a decrease in prices.
The housing price inflation may deter many homebuyers from pursuing their dream of finally purchasing a home. However, with the situation expected to normalize soon and a steadier supply of homes scheduled in a few months, prices will eventually cool down.
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