Dallas real estate market update November 2023

We’re seeing some interesting things worth noting in the new build sector right now. First of all, we have the second highest month of active inventory on the market right now that we’ve ever had.

The last record was set in November of last year when we had 8,735 new homes on the market. For October we had 8,652 homes on the market.

In October alone builders added 2,960 homes on the MLS. That’s in increase of 16.2% more listings from last year.

But if we switch gears a little and look at the rolling three month data, where each point shows three months of activity, we can see that we are currently outpacing the addition of new listings to the market by a lot. For the three month total, we’re outpacing last year’s growth by 21.3%. 

Then on to pending sales. And I look at that data point to show interest in the market. And pendings are an indicator for where closings will soon be. So if pendings are down, we’ll see a decrease in closings, just as if they’re up, we should see an increase in closings.

Year over year, our pending sales are up 19.9% but they’re going down month-over-month. That is typical for the season but they’re going down with new listings are going up. That tells me the gap from active inventory to sales is getting wider.

Closed sales are also down month over month but are up 35.5% year-over-year. And I think a lot of that has to do with the fact builders are incentivising more this year than they were last year.

The months of supply went up month-over-month and is now at 4.2 months of inventory. It has been slowly increasing since July.

The days on market are actually down month over month, but up yeary-over-year.

Saying all these numbers and we’re doing one thing month over month but another thing year over year, it’s a bit dizzying. 

So to simplify this information, here’s what we have:

The negative markers:

Inventory is on the rise. Overall inventory and what’s getting added monthly.

Pendings are going down.

Average Sales price is down.

Months of supply is up.

Sales price to list price gap is growing.

Closed sales are down.

But there are some positive markers:

Days on market are going down.

Wait…

That’s actually the only positive month-over-month marker.

Now some of this can be explained by seasonality. That this just the time of year that we traditionally see month-over-month negative data. 

That’s why it’s also important to look at year over year data. 

And it is important to remember that last year we had some of our worst numbers. So we’re not comparing this year to a blockbuster year. But it’s still worth noting that based on year-over-year data, our pending sales are up for new construction, closed sales are up and the months of supply is actually down.

This tells me that demand is increasing but not enough to absorb the recent increase in supply.

I was talking about this data with the VP of sales for a national builder last week and it was pointed out to me that even though we’re seeing numbers of inventory on MLS, what’s important to note is how many of those units are finished construction.

Now I actually don’t have access to that kind of data to see what the overall percentage of finished inventory is currently on our market versus unfinished inventory. But that is something I can get by individual neighborhood-by-neighborhood lookup. So, if you’re looking at buying a new home and want to know if that particular neighborhood has a lot of finished inventory (which by the way, if it does, that means your more likely to get an even better deal on a new build), then let me know. You can go to NewHomeLivingDFW.com and click on the ‘Get Started’ button. 

So now for the second part of this part about new builds - how does all of this affect the resale market. 

Well, if you’re a resale home in an area with no new builds around. Congratulations, you’re in luck and this won’t really apply to you.

But, if you’re a resale home in an area where new construction is going on, your pricing could start being affected. Especially if you’re in one of those neighborhoods with more finished inventory. 

Builders are highly reactionary. We’ve seen three months of declining builder sentiment. When builders get nervous, they start dropping prices. As prices drop, that forces down the values of resale homes in the same neighborhood. It’s already happening in neighborhoods where builders are heavily incentivising their spec homes. Buyers walk in to a resale home calculating the tradeoff. 

If a builder is offering an interest rate buy-down of 2 points (so that would be going from a 7.5% interest rate down to a 5.5% interest rate) that would give the buyer about $92,500 more in purchasing power if you’re looking at a $400,000 initial loan.

So if that buyer is looking at your 3,000 square foot home for $500,000 that you’ve lived in for a few years, or the builder’s brand new 3,000 square foot home for $600,000, they’ll almost always go for the new home because they get a brand new home for the same overall monthly payment.

See the challenge now?

Alright, now for the DFW real estate market performance for October.

The average sales price was $455,410. 

That’s a 2.4% increase from our average price last year.

New listings went down month over month but up 5.4% year over year. We’re at 12,840 new listings. 

The overall number of homes for sale has gone up six months in a row and is now at 31,746 homes. That’s a .9% increase from this time last year.

The number of closed sales went down from last month to 8,019 sales. We’re down 8.6% from last year..

We now have 3.5 months of inventory. It’s up a little from last month again and up just a little from last October where were at 3.1 months of inventory. 

The time it takes for a home to go under contract is an average of 45 days. It’s up 25% from this same time last year.

Our pending sales are down. We’re 7.3% below where we were last year and have 7,414 pending sales in the MLS. Pendings are the leading indicator for future closings, so when we see pendings are down year over year, that means our closings are going to be down next month.

Our average sales price per square foot for DFW is up 1.5% from last year and is at $202 per square foot.

 The amount homes are selling for as a percentage of the original asking price went down again. Homes are now selling at 95.2% of the original asking price. Last year at this time they were selling at 95.4%, so we’re pretty even with where we were last year.

The takeaway is that the data is showing what everyone is feeling, the market is slowing. Inventory is going up and our pendings sales are behind what was already a very slow year last year at this time. 

If you’re selling, you’re looking at having to drop prices or offer incentives to attract buyers right now. If we can get a clear indicator from the FED that they won’t increase the Federal Funds rate again, that will give the markets confidence and mortgage rates will start to go down and the tide will turn for sellers.

If you have any real estate plans for the next 12-24 months, let’s schedule a no obligation strategy session to explore the opportunities of buying or selling in today’s market. You might be surprised at some of the opportunities available.

Simply go to CrazyRealEstateMarket.com or you can reach me by phone or text at 214-803-4444 or start with an email to jshannon@kw.com. 

 Well Dallas Fort Worth, that’s all I have for this month’s update. I look forward to updating you next month on what’s happening in our real estate market.