Ron Bedford thought he made out like a bandit when he sold his condo in the Dallas neighborhood of Turtle Creek at the end of April.
“I made history in the building with the highest sales price,” said Bedford, who had lived in the condo for three years and sold it in just three weeks. “I got right at double what I paid for it.”
But now he’s fretting that higher interest rates will rob him of his profits.
“The problem I have now is that I can’t find a new place, and the longer I wait, the lower my buying power goes because of higher mortgage rates,” he said.
Bedford’s quandary should be familiar to anyone in the market for a new home.
A skimpy inventory of pre-owned housing doesn’t offer buyers many choices. And with the cost of home financing at a five-year high, some of them are rethinking their strategy.
Thanks to higher interest rates and recent stumbles in the stock market, Dallas’ red-hot housing market may be headed for a slowdown.
Statistics already show a change.
The number of pre-owned homes sold by Realtors in April dropped by 4 percent — the first such decline in more than a year.
An even broader analysis of residential sales that includes “for sale by owner” transactions found more than a 21 percent drop in home sales.
“Because of the higher interest rates, you probably won’t sell as many homes this year in Dallas,” said Ted Jones, an economist with Houston-based Stewart Title Co. “The rising interest rates will reduce the pressure on what was a very tight housing market.
“I’m guessing you will see somewhere between 5 percent to 9 percent fewer sales,” Jones said.
So far, most home buyers appear to be shrugging off the higher borrowing costs.
First-time buyers Andy and Nicki Shelley just bought a house in Mansfield, a Dallas suburb. And while their mortgage rate was higher than they would have liked — 8.5 percent — they weren’t deterred from making the deal.
“I talked to friends at work that got home loans last year at 6.5 percent or 7 percent,” Shelley said. “But we still felt OK.
“My mom is a loan officer in Tulsa, and she said we had to hurry because interest rates are still rising,” he said.
The rise in borrowing costs since last spring has added more than $100 a month to payments on a $100,000 fixed-rate loan.
Bedford — who moved into an apartment after selling his high-rise condo — said he feels like he’s under pressure to find a house and lock in the mortgage rate.
“I’ve told my real estate agent that as soon as something pops up to call me quick,” he said. “But at the same time, I don’t want to be pressured into buying the wrong thing just because of rising mortgage rates.”
Most real estate agents say that their business is as good as it was last year when Realtors sold a record 60,000 pre-owned homes — a 7 percent increase from 1998, also a record year.
During the first four months of 2000, home sales in some hot suburban markets around Dallas — such as Mesquite, McKinney and Frisco — rose more than 20 percent from last year.
“Generally if a house is in good condition, even if it’s priced high for the market, it will sell very quickly and will have multiple offers,” said Bill Sabino with Remax Preston Road North Realtors. “We have not seen the interest rate scare buyers out of the market.”
But sales were down in the first four months of the year in nine of the 31 markets surveyed by the North Texas Real Estate Information System.
In North Dallas, sales dropped 9 percent through April compared with the first four months of 1999.
“Yes, I see a little bit of a slowdown,” said Jennie Ling, one of the top-producing agents who handles sales in affluent North Dallas neighborhoods. “I don’t see the frenzy like we saw last year.
“Some sellers who thought they would sell their home the first day it came on the market are finding that they have to adjust their prices,” she said.
A look at homes for sale in North Dallas and the Park Cities found that almost 30 percent of the sellers had lowered their sales prices — in some cases by more than 10 percent.
“Of course, that’s good news for buyers,” Ling said.
Agent David Griffin, whose company handles sales in several neighborhoods near downtown Dallas, says that it’s harder to predict the housing market than it was a year ago.
“Some things you expect to move quickly don’t,” Griffin said. “We’ve seen some properties that are just sitting, and they have to do price reductions.”
At the other extreme, a condo conversion project his company recently handled in Oak Lawn sold out in six weeks. “The average price was $150,000, and it flew out the door,” he said.
Agents blame the recent stock market drop for some of the slowdown.
“Some younger buyers who were really flush have now come down on what they’re willing to spend,” Griffin said. “They may have had stock options, and they didn’t materialize.”
Even with higher mortgage rates and a bumpy stock market, houses in some neighborhoods are selling as quickly as they come on the market.
In the M Streets just east of Dallas’ North Central Expressway, it isn’t uncommon for houses to fetch their asking price.
When Mr. and Mrs. Christopher Freeman put their M Street home on the market recently for $249,900, they weren’t disappointed.
“It was sold pretty quick . . . three days,” Mrs. Freeman said. “I was hoping it would take a short time because our neighbors have had that experience.”
After a brief slowdown in sales late last year, home sales in the M Streets and other neighborhoods near downtown Dallas are picking up again with the traditional spring and summer home buying season, said agent Rod Monger.
“We had one home we put on the market at 3 p.m. on a Sunday afternoon, and by 3:45 it had sold,” he said.
Thousands of buyers who are transferring into the Dallas area are boosting the competition for homes.
Even the most optimistic sales agents wonder how long brisk home sales will continue if the Federal Reserve continues to increase interest rates.
“I think the market has peaked for the year, and I don’t think prices are going to keep going up,” Griffin said. “There have been too many leveling things in the economy. I think that will put a ceiling on things.”
