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Will Home Prices Drop in Texas in 2023

As the year goes on, rising mortgage rates, property prices, and inventory shortages are causing significant instability in the housing market. This article explores the current housing market’s conditions, the effects of rising interest rates, and the ramifications for both sellers and potential purchasers. Let us read about the possibility of a property market meltdown and discover will home prices drop in Texas in 2023?

An Increase in the Federal Funds Rate and How It Affects Mortgage Rates

Financial firms use the federal funds rate as their benchmark interest rate for overnight loans. This rate was very nearly 0% in March 2022. But to bring inflation down to 2%, the Fed started raising interest rates. The current rate range is 5.25% to 5.5%, the highest level in 22 years due to 11 interest rate rises.

Mortgage rates are indirectly affected by changes in the federal funds rate. However, analysts in the housing market are less worried about the effects of one more interest rate increase this year. The Federal Reserve’s long-term goals for interest rates are most important.

Vice President Keith Gumbinger of the mortgage website observes, “At the moment, the Fed’s actions are less important than its intentions. Although not insignificant, another quarter-point increase at this time won’t significantly alter the overall situation because much of the “harm” caused by higher interest rates has already been done or is in the process of being done.”

Market Prognosis: Mortgage Rates’ Future

Experts in the housing industry seem to be more concerned about the possible direction of mortgage rates in the upcoming years than they are about the subsequent rate increase. During its September meeting, the Federal Reserve hinted that interest rates would stay “higher for longer.” In their most recent predictions, policymakers modified policy rates by half a percentage point by 2024.

As a result, many analysts predict that mortgage rates will stay high through the rest of this year and potentially even into 2024.

When Will the Real Estate Market Turn Around?

The housing market has to rebound strongly for a few essential requirements to be satisfied. Gumbinger emphasises how critical it is to raise housing inventories significantly. The rising pressure on housing prices would be lessened by more inventory, maybe levelling off or even producing a decline from peak levels.

Interest rates should level off simultaneously, although a quick cooling may be harmful. Quick rate drops might lead to a spike in demand that offsets any inventory increases and pushes up housing prices. Thus, rates should be reduced gradually rather than abruptly and significantly.

Because of this, many analysts believe that mortgage rates will remain high for the remainder of this year and maybe even into 2024.

When Will Things Get Better in the Real Estate Market?

A few conditions must be met for the housing market to recover significantly. Gumbinger emphasises the importance of dramatically increasing housing inventories. More inventory would relieve the increasing pressure on house prices, maybe causing a fall from peak levels or perhaps a levelling off.

At the same time, interest rates ought to stabilise, however, a sharp decline would be detrimental. Rapid rate reductions may cause demand to soar, offsetting any gains in availability and driving up housing costs. Thus, rates ought to be lowered.

Scarcity of Housing Inventory: A Major Challenge

There is still a severe scarcity of available houses, especially for entry-level buyers. Due to the limited supply of available properties, demand has been high, and prices have continued to rise. Recently, new house development has receded, relieving some of this strain.

Existing Houses: The Difficulties Remain

The National Association of Realtors (NAR) reports that the existing home stock fell by 0.9% in August after a slight increase in the resale inventory in July. Month over month, unsold inventories were unchanged, indicating a pitiful 3.3-month supply at the current sales rate. Four to six months’ inventory usually indicates a balanced housing market.

The sales of existing homes have also been weak, declining by 0.7% in August and by 15.3% from last year. Since February of this year, there has been a steady fall in home sales, with year-over-year patterns indicating a distinct downward tendency. Not much better news is in store for the near future, as pending house sales—seen as a leading indication for existing-home sales—fell sharply in August, down 7.1% from the previous year and by a whopping 18.7%.

Difficulties in the New Home Market

By the end of August, the seasonally adjusted estimate of newly constructed homes for sale at the current sales rate was 436,000, representing 7.8 months’ supply at the current sales pace. The documented supply for 8.7 months was lower than this amount.

New house sales, therefore, were not exempt from the difficulties facing the housing market as a whole. August had an 8.7% decline in sales or a seasonally adjusted annual rate 675,000. Experts blame the low supply of new homes for this reduction in addition to high mortgage rates and high property prices. Due to several issues, such as labour shortages and growing expenses, builders find it challenging to satisfy the increasing demand.

Will home prices drop in Texas in 2023?

Home prices have increased for the sixth month despite the continuous rise in mortgage rates. This culmination was record-high housing prices in July, which made the affordability issues even more severe.

The national house price index, as measured by the S&P CoreLogic Case-Shiller house Price Index, showed an annual rise of 1%. Prices increased by 0.6% in June and July after accounting for seasonal variations. Significant geographical differences were also noted in the research, with certain metropolises performing better than others.

Conversely, housing values fell in other places that had a boom during the epidemic, such Las Vegas and Phoenix. Phoenix witnessed a dip of 6.6%, and Las Vegas saw a fall of 7.2%. The West (-5.9%) and Southwest (-3.6%) were the poorest regions.

The probability of a housing market crash—which would involve a sharp decline in unaffordably high home prices due to declining demand—remains low, notwithstanding regional differences. Experts note that compared to homeowners who survived the 2008 financial crisis, today’s homeowners are far more stable. Many borrowers have significant equity in their houses, which serves as a safety net.

However, there remains the possibility of a market meltdown, especially in areas where real estate speculators have amassed many homes. Co-founder and CEO of NewHomesMate, a marketplace for newly constructed houses, Dan Hnatkovskyy, acknowledges that price collapses are a possibility, particularly in these kinds of marketplaces. According to him, if outside forces were to cause the market to overheat, the results may


In 2023, the housing market will confront several obstacles, including chronic inventory shortages, rising mortgage rates, and affordability concerns. Even while there is a chance for a market catastrophe, it is still unlikely because today’s homeowners are in better financial conditions. It is essential for buyers and sellers to understand that timing the market is difficult, if not impossible, and to proceed cautiously and patiently in this complicated environment. To make wise judgements in this constantly changing housing market, it is important to act when the proper chance presents itself and to obtain competent advice.

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