The Denton County rental market is still running hot in 2018. April closings of rentals in Denton County show a 20 percent increase so far compared to the same time last year. Year-to-date figures for the DFW housing market also show strong activity in the rental market.
Your typical rental home in Denton County cost a little over $1900 per month in April. That translates to a cost per square foot of $94, in line with the average price per square foot for the DFW area. While total rent prices may be higher, the price per square foot of homes rented in the DFW area appears to be leveling off. This should not be surprising considering the past few years of dramatic home price increases.
Zumper’s national rent report for May shows that prices for DFW apartments have cooled off as well. Dallas saw those expensive apartment prices drop by 1.5% and 3.3% respectively for 1-bedroom and 2-bedroom apartments. Surrounding areas like Plano, Irving, Arlington and Fort Worth (places with lower average rents) saw apartment prices climb in the latest report.
Single-family inventory levels are still very low in much of the DFW area, and this is providing a boost to both home prices and rentals. That being said, it appears the near-term peak for the DFW housing market could well have been last summer. Now that the Fed is raising interest rates, leveraged assets are going to become more expensive. We could be looking at a nasty case of stagflation if the Federal Reserve’s plans to gently deflate the latest asset bubbles don’t go according to plan.
Home sales in the DFW area could see continued softness at the expense of rising rental activity. This certainly appears to be the case in Denton County Texas where average prices are higher than the DFW area. As we head into the thick of the summer selling season, affordability is still name of the game. The rental market should remain quite active, largely because the Fed has obliterated price discovery in the housing space yet again.
After all, if your two choices are buying a home at record high prices or renting a decent substitute to buy some time, renting doesn’t look like a bad option. Throw in the new SALT tax deduction caps kicking in for 2018, and renting is going to look even more appealing to many DFW home shoppers.
It is very telling (and concerning) that Freddie Mac just announced a new 3% down payment mortgage product, HomeOne, designed for qualifying more low and moderate income buyers to buy homes at currently elevated prices. The Fed has pushed affordable homes to the brink of extinction, and now that they are raising rates Freddie Mac is loosening lending underwriting restrictions.
“HomeOne is a great solution for aspiring homebuyers to grab that first rung of the property ladder and enjoy the financial and social benefits of participating in homeownership.” Danny Gardner – Freddie Mac