Denton County home sales experienced a spring revival in March as plunging mortgage interest rates helped to offset continued affordability constraints. Home sales jumped 5 percent in the area while pending sales edged 6 percent higher for the month. The big decline in mortgage rates boosted home sales activity. Average home prices in Denton County also edged higher in March, rising almost 2 percent compared to March of last year to nearly $365,000.
New home sales in the Denton area experienced the biggest boost from the recent interest rate swan dive. Sales of existing single-family homes were holding their own in terms of closed sales, but pending sales activity for March shows a bigger jump in contract activity for new construction. This is not surprising considering there is nearly double the months supply of new homes (4.8 months) in the Denton area compared to the supply of existing properties (2.4 months).
Home sales within the City of Denton were down about 11 percent during March, but pending sales moved into positive territory for the the month. The average price of a home in the City of Denton rose almost 5 percent during March, reaching nearly $273,000. Average prices in Denton continue to edge higher due to the limited supply of homes in general. As of March, the City of Denton was sitting on 2.1 months of supply compared to 2.9 months of supply for Denton County.
With a limited amount of resale properties on the market, many sellers are still a bit reluctant to price their homes at market. This is keeping a lid on contract activity as the tug-of-war between supply and demand in the real estate market continues. For Denton County and the greater DFW area, the real estate market is still in a state of flux. We are still experiencing a top-down market correction in terms of prices. The stick save provided by the plunge protection team and a huge jump in corporate stock buybacks during the first quarter of 2019 has provided a temporary reprieve, but the larger issues with the economy remain unsolved. As we saw at the end of 2018, home sellers get a little more motivated when the S&P tanks 20 percent in a single month. That kind of volatility could return.
The recent jobs report for March confirmed that the U.S. economy is still slowing, and Denton County is no different in this regard. There is a reason the Federal Reserve is on hold in terms of normalizing rates. In Laymans terms, they can’t unless they want to risk crashing the economy. The president has even called for a cut in the Fed funds rate and more quantitative easing. That should tell you everything you need to know. DC officials are still using the stock market as a gauge of their economic prowess, and that is a dangerous game.
With mortgage rates down to almost 4 percent, the local housing market is getting a much-needed shot in the arm. That being said, the Fed really isn’t in a position to cut rates absent a full-blown recession. That suggests more stagnation ahead as the real estate market tries to adjust to artificially inflated asset prices in the midst of anemic wage growth. The Fed now has few good tools available to fight the next recession. That could pose a number of problems. Any increase in rates at this point will definitely pinch consumers hard due to elevated debt levels.