Home News Experts weigh in on predicted recession, housing dynamics in Waco

Experts weigh in on predicted recession, housing dynamics in Waco

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Matthew McLeod, a Waco real estate agent for The McLeod Company, says buyers from more expensive markets are still coming to Waco, and despite signs of a recession, he doesn’t see it stopping. said.

This 3-bed, 2-bath mid-century home at 2300 Skyline Drive ticks all the boxes on the familiar list: gray exterior, white interior, subway tile patterned linoleum, two ovens, marble Past careers as countertops, pull-down faucets, walk-in showers, induction stovetops, crown molding, and vacation rentals.

Listed at $335,000, the home has been on the market for about three months. Waco real estate agent Matthew McLeod said he wasn’t worried about that. He said there are still buyers coming to Waco who are moving for work or relocating from more expensive markets.

“There is no mad rush of buyers,” says McLeod. “With more people moving to central Texas than ever before, there is a slight change, but the reality that is pushing prices up is the lack of choice.”

From August 2018 to September this year, median home sales prices rose from $175,000 to $270,000 in the Greater Waco Area, which includes McLennan and Falls counties. The median price he’s down from nearly $300,000 in May, but that dip is well within other fluctuations over the past four years.

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McLeod said he expects prices to rise over the next year as housing supplies are limited. He said he expects the pace of home purchases to pick up.

“The problem is that when investors start buying rental homes and robbing supply, the supply problem reappears and prices go up,” he said.

He also expects some home builders to move from single-family homes to multi-family homes in such circumstances, McLeod said.

Real estate agent Matthew MacLeod looks over the Skyline Drive home he’s putting on the market.

Jerry Larson, Tribune Herald

Adam Perdue, a research economist at Texas A&M University’s Real Estate Research Center, said home prices typically fall after the school year ends, but it’s coming earlier this year.

Unlike McLeod, we expect Texas home prices to fall in 2023 compared to 2022, but Waco’s prices haven’t risen as dramatically as in other cities, so the decline is less pronounced. right.

Interest rates started to fall at the end of 2019 and the housing market was already on track to rise in 2020, but all predictions were thrown out the window when the COVID-19 pandemic began.

“We were very pessimistic when COVID hit the housing market,” Perdue said. “There will almost certainly be a recession, and when there is a recession there will almost always be a lull and a decline in the housing market.”

Instead, the recession that arrived with the pandemic hit mainly the retail and service sectors of the economy, and those who suffered the most were those who were struggling financially before the pandemic began. Although they were not candidates to become homeowners, most homeowners were able to keep their jobs and homes.

When the Federal Reserve cut interest rates to prevent further economic woes, the ability of many people to take out larger mortgages greatly improved. It has become more achievable for those unaffected by the pandemic.

Now, with interest rates rising, many people’s purchasing power is limited.

house sales graph

Ray Perryman, an economist, analyst and founder of The Perryman Group, doesn’t expect high interest rates to slow new construction in McLennan County or significantly affect the local economy. But it will prevent some people from buying a house.

“As long as mortgage rates continue to rise, it will have a dampening effect on the housing market,” Perryman said. “Some buyers will be disqualified for loans, others will have to buy smaller homes, and some will choose not to move forward in a high interest rate environment.”

He said this situation usually comes with lower prices, but demand is still high enough in Waco to avoid that.

“When the number of eligible buyers for homes declines, there tends to be a supply response,” said Perryman. “However, in the current situation, the Waco area is still facing inventory shortages and relatively short time to market.”

According to U.S. Census Bureau data, the homeownership rate in McLennan County averaged 59% in McLennan County from 2016 to 2020, while the national average was 64%.

Perryman said he expects local homeownership rates to rise as higher-income people continue to move to the Waco area.

Real estate agent McLeod said he sees Baylor football as a major draw for Baylor graduates to return to Waco. White-collar jobs that were previously unavailable in Waco are also driving migration to the area, he said.

These groups are generally still accustomed to higher prices and don’t worry too much about spending what sounds absurd to locals who remember a time when Waco homes were more affordable. I don’t think so.

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