Frisco Real Estate | Navigating a Hot Housing Market
Navigating a Hot Housing Market
To say that the Dallas-Fort Worth housing market is hot is an understatement. It’s standing-on-the-surface-of-the-sun hot. Over the past five years, DFW housing prices have risen an astounding 43.3 percent.
In this post we look at navigating a hot housing market, particularly for people searching for homes for sale in Frisco, TX or trying to understand the Frisco real estate market, not to mention understand what’s going on in surrounding communities.
But first, let’s look at the numbers and why the DFW market, including Frisco real estate, is so crazy hot.
DFW Real Estate Numbers
As one area real estate analyst has said, “It is stunning to see this kind of growth.” The 43.3 percent growth in North Texas home prices has never happened before.
Another milestone to note: North Texas preowned home sales topped 100,000 (101,529 actually) for the first time ever in 2016.
The gains occurred even with home prices rising to record highs. The median price of homes sold in the DFW area in December reached $232,000 — up 10 percent from 2015. Median sales prices are more than 50 percent ahead of where they were during the most recent recession.
The years of escalating home prices is a reason why North Texas wasn't ranked in the Top 10 of U.S. Metropolitan areas to watch in Realtor.com's 2017 Housing Forecast. Instead, the region ranked No. 48 out of 100 with home prices expected to increase 4.13 percent and sales growth at 5.09 percent into 2017.
With such strong housing demand in the DFW area, analysts are not looking for a cool down anytime soon, which in and of itself could cause problems.
DFW is a market where home-cost increases are getting too far ahead of income and other economic factors. It’s the biggest concern for the area housing market in 2017.
Another issue is that the pace of growth is also outstretching the infrastructure in Dallas and surrounding communities — a consideration for people looking for houses for sale in Frisco, TX and sifting through Frisco real estate. Frisco used to be a sleepy bedroom suburb but is now chockablock full of development and its aftereffects.
The Dallas area is falling out of the ranks of being an affordable growth market, which makes navigating a hot housing market even more important — and potentially perilous.
Navigating a Hot Housing Market
One of the first things for people looking for homes for sale in Frisco, TX and evaluating Frisco real estate is to determine if, in fact, the area and surrounding communities in Dallas-Fort Worth are considered a “hot housing market.” The numbers above certainly say so.
The easiest rule of thumb to figure out whether a housing market is hot is to look at months of unsold inventory currently on the market. Generally speaking, an inventory level of four to six months is considered balanced between buyers and sellers. Less than that is considered a seller’s market; more than that favors buyers.
Once determined the market is hot, consider whether it’s “overheated.” Real estate experts use a lot of criteria to understand this. One home buyer-friendly method is using Zillow’s “breakeven horizon,” which calculates how long you need to live in a home to make it less expensive than renting based on the costs of buying and renting and historical appreciation.
If you’re looking for a new home in Frisco, TX or evaluating the Frisco real estate market — and it’s certainly as hot there as it is through the rest of the Dallas-Fort Worth area — here are some tips to consider:
• Figure out the most you can afford and bid accordingly.
• Get pre-approved for a mortgage, which is not the same thing as pre-qualification. Pre-approval from a lender is a strong indicator of your ability to obtain financing for that home you love in Frisco. Without that assurance, sellers may discard your bid.
• Get a good real estate agent, someone who knows the area and market and who will work diligently. You want someone who hears about listings as soon as (or before) they hit the market. A good agent also knows how to make your offer stand out. Agents have a track record of winning more than half of their offers.
• Window shop and get the “lay of the land” to see what’s available before you get serious. Scan favorite real estate websites. Check out a listing on a real estate app while you and your spouse are driving around a neighborhood. Tour open houses. Get the feel of the game about to be played. But don’t fall in love at first sight.
• Get a pre-inspection once you find a house in Frisco you like or even form an idea of Frisco real estate you want to take a closer look at. A full inspection or even a cursory evaluation can reveal problems that would steer you away from buying or, at a minimum, impact your offer price and negotiation strategy. In a hot market, the seller is unlikely to agree to fix minor problems.
• Consider waiving mortgage contingencies. In hot markets sellers often discard offers that are contingent on the buyer’s ability to obtain financing or having to sell their home first. Just be careful. Buyers run the risk of losing a deposit or earnest money if they waive a contingency and their financing falls through. Work closely with an agent. Maybe even a lawyer.
• Decide ahead of time where you can compromise. Paint, finishes, architectural styles, appliances are all important, but are they your deal-breakers? These are easily changeable, updatable, fixable, but it’s hard to change a floor plan or location. If you don’t mind living on a busy street or with a smaller lot, you could get a great deal you otherwise would not be able to afford.
• Offer a quick closing. Some sellers are in a hurry. Find out what the standard closing time is and see if you can put in an offer that would close more quickly. It could be the tiebreaker you need. Sellers might even accept a slightly lower offer to get the deal one quickly.
• Cash is king. If you can swing it, make a cash offer.
• Be patient. The typical homebuyer in 2015 searched for 10 weeks and looked at 10 homes, according to the National Association of Realtors. In a hot market, a buyer might make 10 offers before winning one. Be open to extending the search into the fall or winter, where there is less competition.
While in a hot market, it may look like the sellers are setting the bar, but in reality it’s the buyers who are doing the bar-setting. Buyers are more educated, mobile, and prepared and are not afraid to push back against sellers.
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