Texas Housing Trends Revealed: Current Rates and Market Analysis

(0:08) Hello to all you rugged real estate risk takers out there. Welcome to the Texas Real Estate (0:12) Finance Podcast, market update for the week of May the 21st. I'm your host, Mike Mills, (0:17) a North Texas mortgage banker with Geneva Financial.
And I'm here each and every week as your real (0:21) estate Paul Revere, riding through the streets of the internet, making you aware of what's (0:25) happening out there in the world of housing. I'm here to be your eyes and ears while you're (0:30) working your butt off every single day. I've got your back covering all the news and events that (0:34) are affecting your business each week.
Sometimes it's good, sometimes it's bad, but it's always (0:38) the truth, at least how I see it. So I appreciate you guys stopping by each week to say hello and (0:43) sharing your valuable time with me. It's what keeps me hollering into this mic each week.
So (0:47) a big thank you for being here on this journey with me. All right, so what's on tap for today's (0:51) episode? Well, since I'm in North Texas, I would be remiss if I didn't mention the fact that the (0:55) Mavs and the Stars both advanced to the Western Conference Finals last week. The Mavs are going (0:59) to face the Minnesota Timberwolves and their fourth year phenom, Anthony Edwards.
People are (1:03) already throwing out the Jordan comparisons here, but legends are made in the playoffs. So we'll (1:08) see what this young star has in store for the Mavs. I'm picking the Mavs in seven because I'm a (1:11) homer and because the NBA likes seven game series.
The Stars are going to play either the Vancouver (1:15) Canucks or the Edmonton Oilers. Right now that series is tied three to three, but it will be (1:19) determined by the time this episode airs. Honestly, I'm not much of a hockey fan, at least as compared (1:24) to basketball.
So I don't have a ton of thoughts on this one, but go Stars. Either way, there's two (1:28) Metroplex teams playing in Western Conference Finals right now. And if you remember, your Texas (1:32) Rangers are coming off their first ever World Series.
So right now there are three teams in North (1:36) Texas that are playing at a very high level. Although there does seem to be one team missing (1:39) though. Supposedly it's the star of Dallas, but they haven't been to a championship game in almost (1:44) 30 years.
So I'll just leave that right there for now. But Hey, it's a great time to be a sports (1:48) fan in North Texas. So soak it up guys.
This stuff doesn't happen very often. Metroplex is going to (1:52) be lit for the next few weeks. It is a great time to be living in North Texas.
And if you don't live (1:56) here, get here as fast as you can. Okay. Enough of my personal interest.
Uh, let's get into why you (2:01) tuned into the podcast today in the first place. So today we're going to talk about where mortgage (2:04) rates are. As always, we actually had rates that started with a six for like a hot minute for the (2:10) first time since early April, but they've crept back above 7%.
And I'll tell you why I've got (2:15) updated housing data from last week. Inventory is still pretty low in most parts of the country, (2:18) but builders are pulling back on housing starts. We'll look at the reasons behind that.
I'll tell (2:22) you how one of the big boys in the online real estate portal world is working to further its (2:27) position in the market as a national broker offering healthcare, 401ks, real estate leads. (2:32) And finally, I want to tell you about a very underused, but incredibly useful loan product (2:37) that could help your clients who've been looking for a home, but just can't find the one. Yes, (2:42) there is a loan that could help your client find the home of their dreams.
And it may even be a (2:46) home that they've already seen. I'll tell you how at the end. So as always, let's start with your (2:50) After a brief step below 7% last week because of job market weakness and inflation coming in flat (2:56) as of Monday, May the 20th, the average 30 year fixed mortgage rate is about 7.125%. And the (3:02) average 30 year FHA loan is about 6.625% according to mortgage news daily.
Now the average 15 year (3:08) conventional rate is about six and a half right now. And the average jumbo rate is about 7.375. (3:14) And if job market weakness continues, you could expect to see all these rates get into the sixes (3:19) fueling more housing demand, which we could all use a little more of that right now, right? (3:22) So right now, as far as rates are concerned, we're staying pretty sticky in the low 7% range. (3:26) And with Jerome Powell coming out and saying that there's no expectations for further rate hikes, (3:30) even after many in the market have been calling for that over the last several weeks, (3:34) it just gives us even further indication that the Fed does not see the economy staying strong (3:38) and expects there to continue to be an economic pullback in the coming months.
But as I've stated (3:43) several times in the most recent updates, if you want to know where mortgage rates are going to (3:47) trend, you just need to pay attention to the job date. The economy only added 175,000 jobs in April, (3:53) missing the expectations of 250,000 by quite a significant margin. And there were significant (3:58) revisions announced last week to the third quarter job numbers showing a loss of 200,000 jobs.
And (4:04) that was a revision down by almost 700,000 jobs from the initial reported headline. So all those (4:10) big rate bumps that we experienced over the last year because of the BLS or the BS BLS numbers, (4:15) all those numbers have been revised way down, but markets move on headlines, (4:18) not on revisions. And those revisions are going to keep coming in the next few months as well, (4:23) not only to the job data, but also GDP and inflation.
You see, there's an incentive right (4:27) now for the government to show you that the economy is humming along and killing because (4:30) we're in an election year. And regardless of what the media tells you, people vote with their (4:35) dollars and wallets and how the economy is doing. It's always the number one issue.
And right now, (4:40) consumer sentiment is at six month lows because consumers are pulling back on all kinds of (4:45) purchases. According to a recent article in the Washington post, the article states that McDonald's (4:49) home Depot under armor and Starbucks are all reporting disappointing earnings. Walmart, (4:54) however, is reporting its strongest quarter this week because Walmart's recession proved, (4:58) and it's being bolstered by high income shoppers who are electing to shop at Walmart versus target (5:03) or other slightly higher end retailers and grocers.
And when things continue to contract (5:07) as they are, then jobs get affected. And when job losses continue to mount, that's when the (5:11) unemployment rate goes up. And when the unemployment rate goes up, even by just a few more ticks, (5:16) that's when you'll start to see the fed look to cut rates before the economy gets too far down (5:20) the toilet.
Meanwhile, the stock market's going to continue to climb in this weird upside down (5:24) universe that we're all living in because they know the same thing that we do. When the fed cuts (5:27) rates, the market feels like we're headed back towards cheap money. True or not, that's what (5:32) the expectation is.
So in a really weird twist, you can actually see the stock market increase (5:38) with signs of an economic downturn, which is absolutely nuts because this whole thing just (5:42) seems to be broken. But Hey, we're here for the lower rates. So as the economy continues to head (5:46) in the wrong direction, you'll see rates continue to head lower.
And if you're looking for more (5:50) activity in housing, then lower rates will certainly be a step in that direction. All (5:54) right, let's get into some housing data now. So rates are trending down, but what is the impact (5:59) on the housing market as a whole with those rates trending in that direction? Well, right now, (6:03) the demand for real estate is at some of the lowest levels that we've seen in 30 years because (6:07) rates have remained elevated over the last 18 months.
But even with that backdrop, the median (6:11) home price in the US hit a new record high in April up over 6% from this time last year. Well, (6:17) why is that? Well, let me turn my broken record back on and give you the same answer I've been (6:21) giving since I started this podcast. Low supply, not enough inventory, too few sellers, however (6:26) you want to say it.
Even with high rates and low demand, prices are still going up. Well, (6:31) Mike, you say builders most certainly know this as well and must be planning to build at record (6:36) breaking pace, right? Wrong. Right now, instead of ramping up permits and construction of single (6:41) family homes, builders are actually moving in the opposite direction.
Single family home starts (6:46) fell by half a percent in April compared to the previous month. And the number of single family (6:49) permit applications also dropped 3% month over month and 2% from this time last year. However, (6:55) single family completions are nearing highs from this time last year.
But keep in mind, (7:00) completions are houses that were already planned on being built and have been in the works for (7:05) the last 12 to 18 months. And what happened 12 to 18 months ago? Rates went up. Since then, (7:10) they've pulled back.
So you're going to see this completion number decline over the coming months (7:13) and starts and permits are declining right now. And although those numbers don't seem like big (7:17) drops, when permits are already trending significantly below household formations, (7:22) which they are, and have also been on a steady decline for the last several months, (7:26) it's just another indication that home prices are not coming down anytime soon. It's just basic (7:30) economics, simple supply and demand.
So why aren't builders planning on building more homes (7:35) even with such a low supply level right now? Well, mostly due to builders lacking confidence (7:40) in buyer demand for the next several years due to high interest rates. So to combat this anticipated (7:45) low demand, they're building fewer homes. And on top of that, they're planning on building (7:49) smaller homes in the coming years as well because fewer homes mean prices will continue to go up (7:54) and smaller homes being profit margins are maintained in the homes that are being built.
(7:59) You got to maintain those hefty margins to keep investors happy and stock prices up. I think they (8:02) call this a shrink flation for housing. But on a positive note, listings for pre-owned homes (8:08) are actually increasing.
In fact, overall housing inventory grew by almost 10,000 units last week, (8:12) up 7,000 units compared to this time last year. And we set a new recent peak for weekly inventory (8:18) added this week at 578,000 units. So bottom line is even though overall demand is certainly down (8:25) because of these higher rates, that has not and most likely will not translate to lower prices.
(8:30) In fact, any decline in the median new home prices over the next several months will more (8:35) likely be because of smaller homes coming to the market, driving the median price down, (8:40) not because of overall prices decline. So prices keep rising and it isn't because of demand. It's (8:45) has always been a supply issue since we got started down this road.
Just highlighting my point that (8:50) home affordability doesn't look to be easing anytime in the near future. So get it while you (8:54) can. All right, now let's talk about a big player in the online real estate space that's been (8:58) shifting its focus over the last several months.
With sales volume on the decline, (9:01) realtors are jumping brokerages at a greater pace right now as compared to 2023. They're looking for (9:07) better splits and brokerages who can offer more bang for their buck. And while there is a battle (9:11) going on with the big real estate websites out there for search supremacy between Zillow, Redfin, (9:16) Realtor.com, Vovodo, and Homes.com, Redfin has actually turned its sights on all you agents out (9:22) there and they've decided to go all in on the brokerage champ.
They're positioning themselves (9:26) to have a much larger national footprint and become a place where agents hang their licenses. (9:30) And they're doing it in a way that most brokerages cannot or will not. So in an announcement on (9:35) Friday, Redfin said that they were expanding their Redfin Next payment plan, rolling it out on (9:40) August 11th in the following markets.
Austin, Boise, North Carolina, Columbus, Denver, Fort Myers, (9:47) Grand Rapids, Indianapolis, Inland Empire, Kansas City, Memphis, Minneapolis, Nashville, New Mexico, (9:55) Palm Springs, Portland, Raleigh, Sacramento, Salt Lake City, San Antonio, Seattle, Spokane, (10:01) St. Louis, and Virginia. First launched in October of 2023 in San Francisco and Los Angeles, (10:06) agents who work in the Redfin Next markets can earn commission splits of up to 70% for (10:12) transactions that they generate on their own and up to 40% for client leads that they receive via (10:18) the Redfin's website. Agents on the Redfin's Next payment plan are W-2 employees who receive benefits (10:23) including healthcare, 401k matches, mileage, dues, technology tools, and team support.
They'll also (10:30) have all marketing expenses for listings paid, including photography, staging, yard signs, (10:35) and other collateral materials. In December, the Glenn Kelman Helmed firm announced it was (10:41) expanding the pay structure to its San Diego and Orange County, California markets. That was (10:46) followed by a second expansion in March of 2024 to launch Redfin Next in seven additional markets, (10:52) including Chicago, Connecticut, Dallas, Miami, New York City, Washington DC, and the growing (10:59) South Florida hub of Palm Beach.
Now, since launching this new platform, Redfin says that (11:04) it's recruited over 140 top producing agents in these markets. So, Redfin's making realtors W-2 (11:11) employees. How do you feel about that? Do you think it's a good thing or a bad thing? Let me (11:15) know in the comments.
Well, I think it all just depends on your point of view. If you're an (11:18) established agent with a good book of business, I wouldn't think that this would be a very (11:22) attractive model for you to work for. However, if you're just starting out or if your business has (11:26) been struggling a little bit and could use a little income and stability, then this might be (11:30) a really good fit.
Redfin's the third most trafficked real estate search site behind (11:34) Zillow and Realtor.com. So, having a built-in system to generate leads and get full benefits (11:39) could be a very attractive thing for many agents who are looking to find their footing in this (11:44) market. And with commission splits pretty similar to some of the national brokerages that we all (11:48) know and love, it looks like Redfin may be finding its lane in this new age of real estate. And that (11:53) lane is not to be the national listing service, but instead the national real estate brokerage.
(11:59) Time will tell if this actually works out, but I, for one, am going to be paying close attention (12:03) to how they do. Because come August, real estate and what it means to be a realtor is going to (12:08) start to change. It might be a slow change, but change nonetheless.
And right now, everyone's (12:12) trying to find their place in this new era of real estate. And this is just the play that Redfin (12:17) is making. But I'm pretty sure there's going to be plenty more moves to come and we'll be here (12:20) keeping an eye out for you.
Okay, finally, I want to tell you about a very underused home loan (12:25) product that could be the key to helping those picky clients with very little inventory to choose (12:30) from find the home of their dreams. And it might even be a home that they had previously passed on. (12:35) How you say? Well, right now, even with low inventory, there's still quite a few homes out (12:40) there that have been on the market for a little while and that are having a really hard time moving.
(12:43) Now, it could be because of the location, but more often than not, it's because of the price. And not (12:48) that the house couldn't be worth the price that it's listed at, but that in its current condition, (12:52) the price just simply isn't attractive enough to buyers willing to pay it. And that is where we (12:57) come in, your friendly neighborhood lenders.
So are you familiar with the FHA 203k loan, (13:03) the Fannie Mae Homestyle Renovation Loan, or the Freddie Mac Choice Renovation Loan? If you are, (13:09) great. Let me refresh your memory real quick. And if you aren't, then I'm about to open up a whole (13:14) new world for you.
So how do these rehab loans work and how can they transform the not quite (13:18) or almost perfect home into your client's dream home? Well, it's not as complicated as you might (13:23) think. Rehab loans are just mortgage loans that combine the purchase price with renovation costs (13:28) into a single loan at the time of purchase. And the requirements to get these loans for your buyer (13:33) are no different than a regular purchase loan.
Credit, income, debt, assets are all measured (13:39) the same as a regular FHA or conventional loan. The benefit of these loans is that they let your (13:44) buyer borrow against the future value of the home once the upgrades are completed. So let's (13:49) use the example of a Fannie Mae Homestyle loan.
Now the home in question is listed currently at (13:54) $300,000 let's say. But with a few upgrades, it could be closer to say $375,000 based on the (14:00) square footage and the recent sales in the area. However, the house hasn't been well-maintained or (14:05) it was owned by one of those awesome iBuyers who didn't do anything to the property when it was (14:09) listed for sale and it just looks and shows terribly.
But your buyer loves the location, (14:15) the schools, and the neighborhood. They just don't love certain aspects about the house. (14:19) But you know if the house had about $50,000 of repair work and upgrades added to it, (14:24) it would check all the boxes.
Well, with a Fannie Mae Homestyle loan, as long as the expected value (14:30) as determined by a licensed appraiser after the repairs is still 5% more than the loan amount, (14:36) then boom, you got yourself a contract. And if your buyers are first-time homebuyers, (14:40) then they can go up to 97% of the value of the home and renovations plus the agreed-upon sales (14:44) price. Now the repairs and upgrades have to be done by an agency-approved licensed and bonded (14:50) contractor.
And that contractor has to put together a detailed bid outlining the cost of the job that (14:56) must also be approved. But as long as the appraiser can support the expected value with the added (15:00) costs, then you can close on the loan and start the work after the loan is closed. (15:05) So the timeline for closing is very similar to that of a standard purchase.
(15:09) Now each loan product does have its own requirements and will vary a little bit (15:13) depending on the size of the rehab. So talk to your lender about what you need to look out for. (15:17) But if you have a buyer that hasn't even considered this when looking at homes, (15:21) especially right now with there being so few homes on the market, putting this loan on their radar (15:25) might open up a whole bunch of properties that they otherwise would never have even considered.
(15:29) And they get to make it the home that they want before they even move in. (15:32) And oh by the way, if you have a seller who just isn't willing to put any work into the (15:36) home and you're having a really hard time moving it, then put this option in the listing description (15:40) to make potential buyers and agents aware of what your property could be. (15:45) Look, these loans have been around forever, but often buyers and agents lack of understanding (15:49) of the options available to them can limit their choices when it comes to homes that (15:54) they would even consider offering.
So this is just a friendly reminder that (15:58) there are all kinds of loans out there that can solve all kinds of problems. (16:01) You just have to ask. And if you want to know more about these loans, give me a call.
(16:05) I'm happy to walk you through how they work in detail so you can add (16:08) one more weapon to your real estate arson. Well, my friends, that is all for today. (16:12) Thanks for spending a few hot minutes with me to stay informed about what's happening in this (16:16) crazy business that we all know and love.
I hope I was able to add a little bit of (16:19) information to your real estate brain. Join me on Thursday for a very special episode (16:24) where I welcome a local realtor that's going to help you create your value proposition (16:28) as a listing agent. You see, the changes coming our way in August are going to make what you do, (16:33) how you do it, and what it's worth via the utmost importance when it comes to grabbing (16:37) that next listing.
So we're going to give you the tools to help you create and write down (16:42) that value proposition so you're ready for your next listing in this new normal. (16:46) And joining me for this listing masterclass is none other than my lovely wife, Susan Mills. (16:51) This will actually be our second time doing the podcast together.
So tune in and get a little peek (16:55) into what my life outside of real estate in this podcast is really like, and hopefully get some (16:59) insight on how to build that value proposition for this new era of real estate. Until then, (17:03) be great humans and keep grinding because life is what you make it. So make it great.
(17:07) See you next time.