The Dallas Housing Market Just Shifted

By January of this year, Dallas home prices were down to prices we hadn't seen since March of 2022. From a median sales price of $398,000, we were down to $360,000, which is a peak to trough correction of 9.5%. So I think we're all watching with bated breath to see what was going to happen next. I mean, you know, hello housing correction, are we there or are we not? Like, let's bring some affordability back to the housing market. Dallas usually has a really predictable market that follows seasonal price movement. But this year, I wouldn't say that's necessarily been the case. I mean, it has been very unpredictable at a micro market level. In some places, it has been doing exactly what we would expect seasonality to do. And in others, okay, it has gone completely off grid. So what I want to do in this video, okay, is I want to answer three questions. First of all, I want to help you fully understand the concept of seasonality. Okay, right? What is seasonality? Now, secondly, I want to explore how seasonality is functioning within the framework of our 2025 housing market. And then thirdly, possibly most important, what can we expect with Dallas home prices going into 2026? Like, are we at the start of a normal seasonal price correction? Or is this just the beginning of a sustained long term crash? All right, but I can hear you asking right now, Wendy, what is seasonality? Like, what are you talking about? Well, here in Dallas, we see some pretty big seasonal price swings. Our March to kind of like June-ish season tends to be Then things begin to taper off of it in July, then follow kind of a downward trajectory over the fall months, where they ultimately bottom out in January. So much in real estate revolves around schools. And this is no exception. Like most families want to move when their kiddos are out of school, especially if they're moving to a new school district and their kids have to switch schools for the new year. So that makes sense, right? Well, we see this play out again and again in Dallas. In June of 2018, your median sales price was $265,000. Then by January of 2019, it was $235,000. In June of 2019, your median sales price was $272,500. Then by January of 2020, it was back down to $252,500. We see the same pattern year after year in Dallas. So essentially, when we talk about seasonality in reference to the Dallas housing market, it's that idea that within the scope of home values generally progressing upward, we always have these peaks and dips. So how has this concept of seasonality fit within the framework of 2025? Well, January has always shown our lowest price of the year, and that didn't change this year. However, we typically see prices and demand really pick up as we head into the spring and summer, and that didn't really happen this year. Prices went up just a little bit, but overall, the market was really on the sluggish side. Basically, in June of 2024, your median sales price was $378,900. Then by January of 2025, it was back down to $360,000, and that is what we would expect it to do. Then by June of 2025, the median sales price was $379,000. Within the realm of predictable seasonality, we expect prices to be at their highest point by June, their lowest point by January, and then ultimately be higher year over year. So do you see how we met our first criteria but barely the second? From June to January, prices went from $378,900 to $360,000, and that's what we would expect going down like that. But then in June year over year, we went from $378,900 to $379,000. So median sales price of the Metroplex over the course of the year increased by only $100. So hopefully that makes sense when I say the season was pretty sluggish. I want to break this down a little bit to give you a historical perspective. Now, I mentioned we always see prices increase between January and June. Well, what we see going back the past 10 years is a really big spread here, anywhere from 9% to 21% from January to June. Yet in both 2024 and then again this year, that increase was only in the 5% range. Then from June to June, year over year, we also historically see an increase. The years have always shown a price increase year over year, but as you can see, it's gotten to be a smaller and smaller increase until it practically comes to a halt this year. So overall, big picture, 2025, the Dallas Metroplex operated as we'd expect in regard to prices bottoming out in January and rising in June. But what we didn't see, okay, that we typically see within seasonality is prices rising year over year, basically stayed the same. Within that context, I think we could see some pretty exciting opportunities this fall. I mean, we're coming out of an anemic summer where from a big picture, prices were basically flat into fall when we would expect to see a decline in prices. Historically, we see price declines of up to 12% between June, our seasonal peak, and then January of the following year. Last year, we saw prices decline by only 5%, and that's actually on the low side. So really, the big question we need to be asking is what can we expect this year? Well, comparing year over year, there are some similarities as well as some significant differences. So let's talk about those so we can get an idea of where our market is headed the rest of 2025. First off, market momentum. Okay, between June of 2023 and June of 2024, year over year, we saw negative momentum. Okay, we went from 382,148 to 378,900, which was a decrease of 0.85%. Then from June of 2024 to June of 2025, prices went from 378,900 to 379,000. So basically flat with just a 0.03% increase. The numbers only shifted slightly year over year, both years. So overall, the market momentum was pretty close to being the same. So beyond just looking at market momentum, we also need to factor in the job market. Okay, how did the job market affect demand and ultimately home prices last year? Like how can we expect it to affect home prices this year? Because at the end of the day, all right, if people don't have steady employment, they cannot buy houses. According to the US Bureau of Labor Statistics, Dallas-Fort Worth added 68,000 jobs over the year in May 2024, a gain of 1.6% compared to the national increase of 1.8%. Then fast forward to this year in May, and the numbers look very different. The Metroplex only added 46,800 jobs, only a 1.1% increase. Now it was right in line with the national growth rate, but still noticeably weaker than last year. So it is clear the job market in 2025 is definitely softer. So that weakness raises some real concerns about how much demand the housing market can count on this fall. When we take it back to our comparison, okay, the job market is much worse this year than it was last year. Another aspect of the housing market that we have to consider is market uncertainty. Last year, we saw major uncertainty with the presidential election, and we're still seeing a lot of uncertainty this year, but over different issues. Tariffs have put a serious damper on consumer confidence. Even though the data shows that prices haven't increased as much this year, the market doesn't feel any more affordable. Buyer sentiment has actually been lower overall this year. An article by Builder Online states that in June, a combination of hesitant buyers, looming tariffs, and high rates drove the index to its third lowest reading since 2012. And speaking of unaffordability, let's compare mortgage rates year over year. In late summer and early fall of last year, 2024, we saw rates drop by well over a point, stay low for a few months, and then go back up again. And as a result, prices went up for a few months as well, defying what we usually see with fall seasonality. Then by December, rates had gone back up to 7%, and then we saw our predictable bottoming out of prices in January. A 5% season over season decline is actually on the low side, and it would probably, honestly, it would probably have been an even smaller decline if rates had stayed lower. We're seeing rates do the same thing this year, believe it or not. They started in August at around 7%, and as of today, you can score an FHA mortgage for around 5.75%. So given what the rates are doing, a pretty modest drop in prices this year wouldn't be out of the question. But at the same time, okay, you've got to keep in mind, we're going in with a much weaker labor market. So overall, we see a lot of similarities between the two years. The big difference we do see is the labor market. Like if people don't have jobs, they cannot buy houses. So that is an important difference. But we are knee deep into the fall. So what have prices done so far? We would anticipate a pretty big change in prices between June and August as we begin our decline towards the winter. So what have we seen so far? Well, in June, the median sales price was $379,000. And in August, it was $363,000. So that is a 4.2% decline in just two months. All right, so how does that compare to last year? Well, in June of 2024, the median sales price was $378,900. And in August, it was $370,000. So that's only a 2.35% decline over two months. So, so far, we are seeing more aggressive price declines than we saw last year. In just two months, all right, we've had almost the same percentage of decrease that last year had in seven months. Let's take a look at the rest of the fall of 2024. The drop of only 5% isn't only due to slow decline from month to month. In September, the median sales price was $366,000, a 1.08% decrease from August. Then the market threw us a total curveball and prices actually rose from September to December. The October median sales price was $369,900. November was $372,900. And December was $375,000 before things finally bottomed out at $360,000 in January of 2025. So overall, we kind of saw some weird numbers in the fall of 2024. Not really what we would expect of typical seasonality. When we think about what prices will do the rest of 2025, we can look back at the pattern we saw last year. When rates went down, we saw demand increase and prices go up. So it's unusual that prices went up in the fall, but that's about the mortgage rates improving affordability. We have enough pent-up demand in Dallas that it ends up being very rate sensitive. So anytime we see rate movement improving affordability, it brings buyers out. So the question remains, are prices going to go up again this fall or will they go down like we would typically expect with seasonality? Well, June through August has already shown signs that the shift downward could be stronger this year. Ultimately, I see two significant variables. The first is that the Fed is projected to cut rates two more times this year. The Fed's recently revised dot plot showed that a median of Fed members expect the Fed funds rate to fall to a range of 3.5 to 3.75 percent by the end of 2025. So that outlook suggests two additional quarter point cuts at the Fed's last two meetings of the year. Now, it is important we understand when the Fed cuts rates, it sends a message to the market that tends to result in mortgage rates dropping. And like we just saw in the fall of 2024, when mortgage rates go down in Dallas, prices go up. The second variable I'm seeing is our job market. The job market, like I said before, far more sluggish than it was last year. So ultimately, where our prices go the rest of the year, I think is going to be from an interplay of these factors and which factor ends up having the most effect. So that shows us how seasonality has functioned within our 2025 market and really what kind of opportunity we can reasonably expect for the rest of 2025. Some of you probably still wondering about future corrections or possibly even a crash. And you should be. You should have that in mind. So what can we expect moving into 2026? The big question we want an answer to as we move into 2026 is will seasonality continue as it always has or will we see a sustained correction? Our traditional seasonal pattern will mean prices bottom out in January and then begin to rise in February. Like big picture, okay, looking at the whole MLS, all right, that's the pattern we saw play out in 2024. Like even with the few irregularities, like prices bottomed out, then they rose. A sustained correction would mean we don't see those prices rise. Okay, we see them continue to drop. Now, why does this matter so much? Well, if you think about it, that variable plays such a role in a buyer deciding when they should enter the market. If prices are going to continue to drop, then it makes sense to wait it out. But if prices are going to head up in February, okay, and that's what they historically do, then in order to get your very steepest discount, you want to be going under contract in the November, December timeframe and closing in January. History tells us that is when buyers get the deepest discounts. And remember, we're talking steep discounts, okay, to the winner goes to spoils here. And to the home buyers willing to buy during Thanksgiving and Christmas, all right, they can count on like an extra 10 and sometimes up to 12% more equity by June of that year. So it is crazy to think prices fluctuate that much, okay, but historically, the numbers don't lie. And no one wants to buy a house in the busyness of the holidays, but the ones who do, okay, they absolutely win. Because that's like buying a house in June for a million dollars and getting that exact same house in January for 880,000. So seriously, adding 120,000 to your net worth just by shopping for a home in October and closing by January. But back to our question, will we see regular seasonality in 2026? Okay, a seasonal correction, or will it be a sustained one? Well, to get that answer, okay, I think we need to explore three things. Okay, you ready? Politics, the Federal Reserve, and affordability. Okay, so first up, let's talk politics, all right? President Trump has said numerous times, I mean, constantly, loudly, that he wants rates down. He has commented several times about firing Fed Chairman Jay Powell because of where rates are right now. He's had the opportunity to replace one Fed governor, and he brought in Stephen Myron as the current replacement. Well, want to guess where Myron stands on rate cuts? Well, in the September Fed meeting, Myron was the dissenting voice arguing for a more aggressive half-point rate cut. He has said he wants three half-point rate cuts, all right? Well, today's Fed funds rate is 4 to 4.25 percent. Well, Stephen Myron has been very vocal that he wants the rates to be 2 percent. So, no surprise, Trump's appointee is equally passionate about getting those rates down. Now, Fed Chairman Jay Powell, well, his term expires in May of 2026. So, what kind of person do you think Trump is going to appoint as the Well, it's not going to be anyone who won't lower rates, right? Trump wants those rates down, and he's going to have a say over the new Fed chair in May. Now, that new chair, okay, it's going to be someone intent on lowering those rates, loosening monetary policy and sending a message to the market of quantitative easing. All right, so this is not about, you know, it might happen, okay? Trump has been extremely clear that he wants those rates down. So, there's no variable here either about Jerome Powell's term expiring, okay? That's baked in. I mean, that is happening. Now, what happens when the Fed sends the message of lower Fed rates and quantitative easing? Well, the odds are high that we're going to see mortgage rates follow suit. It's not a direct correlation, and federal rates do not determine mortgage rates directly, but it's a strong enough relationship that those mortgage rates, in all probability, are going to head into a significant decline. And what do we know about rates going down, okay? When mortgage rates go down, prices go up. And if you're wondering why that is, okay, it's because most people buy based on their monthly payment. And interest rates make a huge difference in your monthly payment, all right? For example, a $400,000 mortgage at 7% will cost you $2,661 a month, all right? At 6%, that mortgage will cost you $2,398, okay? At 5%, that mortgage will cost you $2,147. So, it will cost you $514 less every month for the same exact house at 5% versus what we saw this summer at 7%. Looking at it another way, if the budget for my mortgage is $2,150 a month and rates are 7%, I can afford a $323,000 house. Now, at 5%, I can afford a $400,000 house. So, that is how much my buying power increases. In fact, MortgageReports.com states that at 7%, about 1.2 million households in Dallas can afford the median priced home. At 6%, that jumps to $1.34 million, an increase of 144,734 households, including 52,898 renters. Now, there are definitely those out there who argue that rates will not fix this, that this is about price and only price, okay? And I hear that, I do. But this is also about math. And the simple fact is that with lower rates, more people can afford a home. When more people can afford a home, you're going to have more buyers. When you have more buyers, that will balance out the market and bring price increases. So, looking into 2026, okay, the likelihood is we're going to see mortgage rates lower, more buyers enter the market, and prices increase. Now, buyers, I know that's not what we want to hear. And sellers, on the other hand, okay, hang in there, okay? We should see things get better for you. So, it's likely that spring will see a return to traditional seasonality with an even stronger growth curve. But in the here and now, okay, we can reasonably expect seasonal price declines through the fall and winter unless aggressively lower mortgage rates interfere with that. As long as mortgage rates drop, expect prices to go up in the spring. We have never seen a year where prices didn't rise from January to June. And with rates coming down, we can expect prices to go up even more. Now, we've spent a lot of time looking at Dallas' seasonal patterns overall. But like I said earlier, okay, the story changes once you zoom in. And I don't want you to miss that opportunity in the here and now. Several micro markets across Dallas have been correcting, and a few are even in crash territory. So, if you want to dig in a little deeper, you might want to check out this video. In the meantime, this is Wendy Pinnell, your Dallas REALTOR®, and I'll see you on the next video.