Competitive Market In Collin County
There is simply no precedent for what we are seeing in today’s housing market. According to Redfin, the national median sales price at the end of March had risen 16.9% from a year earlier and sellers were receiving an average of 2% above their list price. As remarkable as the numbers are, they are dwarfed by the competitiveness we are seeing here in the Collin County Real Estate Market.
Compared with the 16.9% national gain in home sale prices, the sales price of Collin County homes at the end of February had appreciated 26.7% year-over-year. In the last 30 days, instead of receiving an average 2% above list price, local sellers have received an average of over 10% of what they were asking. The demand has been both staggering and uniform in our county, with McKinney (11.4% above list), Allen (11.1% above list), Plano (10.2% above list), Frisco (10.1% above list), Celina (9.8% above list) and Prosper (9.2% above list) all continuing to see intense competition.
Buyers’ Offer Criteria To Secure A Home
Not only are buyers paying significantly more, but they are also needing to act quicker than ever before to secure a home. In the past month, each of Collin County’s cities saw homes average a total Days on Market of only 4 or 5 days. Buyers are paying significantly over list price, they are submitting offers within a few days of the home hitting the market, and they are often needing to submit appraisal waivers to win the home.
In hindsight, it is easy to see why there has been such rampant appreciation in our market, and in the national housing market at large. The Federal Reserve acted aggressively to loosen monetary policy during the pandemic, which led to less risk for lenders and lower rates for borrowers. Monthly payments became cheaper at the same time that personal savings increased for many households, creating the perfect recipe to increase demand for homes across the country.
Pandemic Disrupts Work Commute
At the same time, the pandemic had folks rethink their commutes to work and reimagine how and where they wanted to live. Communities with strong economies, good schools, lower cost of living, and warm weather saw increased migration and even more demand to housing markets like ours. Lastly, investors have also become a more significant part of our market, with both institutional flippers and mom-and-pop landlords buying properties in higher numbers throughout the DFW.
New Construction Supply Chain Issues
Increased demand, however, is only part of the story as to why it has been so hard to buy a home these days. Another important factor, of course, is limited supply. Supply-chain issues with construction materials and pre-existing shortages in housing made the extra demand for homes even more significant. With many more buyers chasing fewer homes, prices shot up even further.
The million-dollar question now is: Where does the housing market go from here? The obvious and easy answer is that homes cannot continue to sustain the historical appreciation they have enjoyed over the last two years. Beyond that, not much else is certain. Mortgage rates are just below 5% now, and they threaten to go significantly higher as the Federal Reserve plots a course to raise rates throughout 2022, and potentially begins to tighten monetary policy as well. Mortgage rates will continue to rise in this environment, as the Fed feels the need to increase interest rates to combat rising consumer price inflation.
To date, however, rising interest rates have seemed to only spur even more frenzy in the housing market, as buyers race to lock in loans and prices before they rise even higher. At some point, rising prices and mortgage rates are no longer affordable for enough buyers, the bidding wars slow down, and the market normalizes or even has a correction. All of this is certain to happen, but the biggest question is ‘When?!’.