3 BIG challenges in the El Paso Texas Real Estate Market | 2023 - 2024

3 BIG challenges in the El Paso Texas Real Estate Market | 2023 - 2024

Hi and welcome to the channel. My name is John Peña with Peña El Paso Realty Group and in this episode we're going to talk about three big challenges that we are seeing in the El Paso real estate market and let's cut the fluff and let's just jump right into it. Number one and these are going to be probably no big

surprise but number one is affordability. So I've got some pretty epic graphs here I think but in a nutshell as you probably know homes are are not affordable anymore. Why? Because home prices have increased so dramatically and so let's kind of jump in this and take a look at this first graph. So

basically home prices have been growing and they've been outpacing wage growth right? So it's one thing if your wages are going up and houses are going up fine no problem but when house prices go up or any other thing groceries gas go up and your wages don't go up obviously that's a problem. So as you can see from

this graph below in 2020 home prices spiked pretty dramatically almost about 30%. This obviously made it very challenging for buyers to save up money for down payments and things like this. Now at the same time in 2020 which we all know with COVID interest rates were really really low and so so many people

could get approved for a home loan it really added a lot of fuel to the market and you can see home prices pretty much skyrocketed and so I think the graph is is pretty interesting you know home prices for the most part kind of have gradually increased for the first part of the graph but then once you hit 2020

you can see that that median home price was about 300 this is nationwide was about 320,000 and within just a couple years it spiked up to 480 and now it has come down to 420 and so homes I mean it's very fair to say are not affordable and this next graph is actually just a home price appreciation just in El Paso

I love this one so this is just looking back over the last five years you can see that 2019 the average home price was just over $150,000 now we're basically around $250,000 when I kind of came on the scene in real estate in El Paso it was 2020 and the median sales price was about $160,000 $165,000 and even in the

short amount of time that I've been here doing this home prices have gone from $160,000 all the way up to $250,000 and so that's a pretty significant change again this idea that homes are not affordable is a pretty big challenge in our market right now this next one by this is a graph by Redfin this one's

super important too so affordability basically right now 2022 last year and it really hasn't gotten much better basically one in five homes was considered affordable what does affordable mean basically a listing is considered affordable if the estimated monthly mortgage payment is no more than

30% of the local counties median income okay so last year only one in five homes were considered affordable just in 2021 at least two in five were considered affordable and in 2013 basically one of two homes or five out of ten so we've gone from 2013 where basically half of the homes for sale were considered

affordable to 2021 where two in five were affordable to last year where they're saying now one in five homes is affordable so home affordability certainly not ideal which takes us to our next big challenge which again no shocker here higher interest rates and you know when COVID hit the government

you know had to do what they had to do and one of the things that happened is that interest rates were really really low you can see from this graph here I love this graph too I'm not a big graph numbers dork but this one's pretty interesting this looks back at kind of average mortgage rates over the last 50

or so years but as we all know 2020 interest rates dropped to around 3% and you know my interest rate was 2.75 I've heard of other people getting two and a half percent things like that however in the last couple of years we know what if we had inflation which has caused the feds to raise interest rates so within

the span of a couple years essentially we've gone from 3% interest rates and now we're hovering around 7 to 7.5 percent interest rates now in the scheme of things if you if you look at this graph this isn't all that abnormal like in 19 like early 1980s you know now there was a recession a big problem at

this time but at the same time interest rates were up at 18.5 percent which is which is unheard of now for the last 10 years of so we've been at or below 5% but now we're well above that at 7.5% what happens basically when interest rates are higher it makes it much more difficult for buyers to get

qualified for home loans and if they can get qualified for a home loan that higher interest rate essentially decreases their purchasing power so they can't afford as much home as they they could when the interest rates were lower so this this is certainly a problem and let's wrap up with this third problem

and this isn't this one isn't as significant I think as the first two but it's still an issue and that is the limited supply of homes for sale so despite the population growth in El Paso in our country in general there simply aren't enough homes for sale so what happens is that when supply is really

really low even if demand is low which it is it still makes it makes it challenging in that low supply puts kind of upward pressure on on that affordability because if there's only so many houses for sale it keeps the prices at that inflated price which is exactly what we're seeing here if you take a

look at this one this is pretty amazing so the dark line is essentially housing supply and then that dashed line is actually the home prices and changes you can see that where we're at right now essentially we've got high prices and low supply now if you go back and look at around 2008-2009 during that the Great

Recession the the big housing bubble it was the exact opposite we had a high supply of homes because so many people ended up defaulting on their mortgages and having to sell their homes which then of course made prices go go much lower now I'm not saying that we're having a housing crash all right I've

said this a million times but it is it is interesting to point out that where we are right now with kind of high prices low supply it does kind of correlate to 2005-2006 there was the same kind of dynamic at play where prices were higher and inventory was lower and so again I'm not saying that we're

having a housing crash but I am saying that that a housing correction is is happening and so why a couple of factors maybe why there aren't a ton of homes one is because investors bought up a ton of homes during this last kind of kovat area era home bust so to speak investors picked up a lot of homes okay

which basically took those homes off the market for for regular buyers right said these investors accounted for more than 13% of real estate purchases in 2021 alone and so that basically you know zaps the the supply of homes for just regular buyers another issue with with supply is that new home builds aren't

keeping pace with population growth so you know I've said this before too but sometimes people think well if there if there aren't enough homes why don't builders just go crazy and build a bunch of homes and then make a lot of money the problem is that builders are tentative to to to build a lot of homes

when the economy is uncertain and let's be honest the economy is very uncertain we're in the midst perhaps of a recession or you know about to fall into one and so when you combine that with you know labor costs material costs builders aren't aren't basically picking up the slack so supply is going to

basically be be an issue for a while here so those are the three big issues that we're seeing in the housing market not just in El Paso but this is basically for most of the country homes are not affordable which makes it challenging for buyers to of course purchase them interest rates are high

which of course makes it challenging for buyers to purchase them and those higher interest rates are contributing to what we call rate locked sellers meaning if you have an interest rate of like 3% why would you sell your home now if you if you don't have to and then go buy another home for with an interest rate

of seven or seven and a half percent so it's making sellers just basically kind of stay put unless they absolutely have to sell and then that third point is there's just not a big supply of home so it's a pretty interesting situation we do kind of our I talk about this some real estate's a roller coaster and by

that I mean it's kind of up and down right it's a very cyclical market and so I think it's fair to say that we're definitely in a down market right now in our next episode Alex and I are actually going to do a live episode in another week or so and we're going to talk about what we think is going to happen

and predict a couple of different scenarios that might happen so by all means keep an eye out for that but I hope this information has been useful to you if you follow the economy in the real estate market this won't be any anything shocking for you but I do think that sometimes just talking about it

showing the graphs helps people understand the market a little bit better that's what we're here to kind of help you do of course we want to help you buy and purchase homes if that's right for you and your family but at the same time if it isn't right for you and your family right now I think it's just

good practice just to make sure that you're aware of what's going on the market so thank you so much we'll see you in the next episode