Dallas Real Estate Forecast for 2023: Is a Big Price Drop Coming?

  • Dallas housing market forecasts suggest a price drop is coming.
  • The DFW real estate scene could cool considerably in 2023.
  • This metro area might even shift into a buyer’s market next year.
  • Higher prices, higher mortgage rates, and inventory gains play a role.
Dallas skyline sunset photo

Like many metro areas across the country, the Dallas-Fort Worth real estate market experienced a major price surge over the past two years. Tight inventory and strong demand created fierce competition among buyers, boosting house values like never before.

But much has changed since then.

Higher prices and mortgage rates have reduced the number of buyers, and more homes have become available. As a result, Dallas housing market predictions for 2023 suggest that a cooling trend could be coming. It now seems possible, if not likely, that home prices in the DFW area will drop going into 2023.

Dallas Real Estate Forecast: A Downturn in Prices?

Will Dallas home prices drop in 2023? The truth is, they already are.

According to data provided by Zillow, the median home value for the Dallas-Fort Worth metropolitan area peaked at nearly $393,000 in July 2022. The median value dropped to around $390,000 as of September. Similarly, the latest Case-Shiller home price index report showed a 2% decline in prices from July to August of this year.

Those might seem like small changes, but they could be a preview of what’s to come. As we close out the last two months of this year and move into 2023, home prices in the Dallas area could drop even further.

According to an October 2022 article from Forbes:

“…Tejas Joshi, a director at investment firm Yieldstreet, expects home prices could face 20% decline in some regional markets where new home construction will bolster supply— builders will be forced to slash prices “aggressively” in the coming months in areas like Dallas, Austin, Texas, and Boise, Idaho.”

Other analysts believe the Dallas-Fort Worth area is one of many U.S. metros that are currently overvalued. Researchers from Florida Atlantic University compared the current median home value for the DFW area to historical data dating back to 1997. Based on that, they estimated that homes were selling for 48% more than what would be expected under long-term trends.

Debatable? Sure. But when you consider this analysis alongside all of the other reports and forecasts for the Dallas real estate market, a home price drop in 2023 seems plausible.

Supply Growth One of Several Factors Involved

As usual, supply conditions have a lot to do with the current slowdown within the DFW housing market. The short version is that there are more homes on the market today than there were a year ago, and this has shifted the supply-and-demand dynamic.

According to a September report from Realtor.com, the total number of active property listings within the Dallas-Fort Worth-Arlington metro area rose by 84% compared to a year earlier. There was also a significant increase in the number of new listings (i.e., homes that came onto the market in recent days).

Toward the end of 2001, housing market supply levels within the Dallas metro area sank to record-low levels. Back then, this market had less than a one-month supply of homes for sale. That is well below what’s considered to be a normal or balanced housing market.

But since then, inventory has grown steadily, reaching two and half months of supply as of September 2022. This trend has eased competition among buyers, at a time when there are fewer buyers in the market. It could also put downward pressure on prices through the end of this year and into 2023.

Home Buyers Have More Bargaining Power

Given all of these trends, it should come as no surprise that homes are currently selling more slowly within the Dallas-area real estate market.

As of last month, the median “time on market” for DFW real estate listings was 43 days. That was an increase of eight days compared to a year earlier. This provides further evidence that the local real estate market is slowing down, a direct result of higher prices and mortgage rates.

Price reductions within the Dallas housing market have also increased over the past year. A “price reduction” occurs when a homeowner comes onto the market at one price, and subsequently lowers it due to a lack of offers.

According to the Realtor.com report mentioned earlier, 27% of homes for sale during September in the DFW area had a price cut. Reductions increased by more than 16 percentage points year-over-year, offering further evidence of a cooldown.

These trends suggest that Dallas-area home buyers might have more negotiating leverage in 2023, compared to what we’ve seen over the past two years. At the same time, the threat of falling prices could make them more reluctant to buy.

Disclaimer: This report includes predictions for the Dallas, Texas real estate market stretching into 2023. Those views are the equivalent of an educated guess and should be treated as such. The Home Buying Institute makes no claims or assertions about future housing market conditions.