Is the real estate market rebound stalling out? Denton County home prices edged higher again in June. The median price of home rose to $479,000, down 1.2% from the same time last year. Average prices in Denton County came in at $568,837. That was down 1.1 percent year-over-year. Average prices are still $20,000 shy of the spring 2022 bubble peak. Judging from the recent uptick in inventory levels and the typical seasonality of prices, it appears North Texas home prices will have to wait another year or more before we see those lofty levels again.

Behind the headline numbers North Texas home prices are actually lower than they may appear. Denton County stats show median and average price per square foot were down 5.9 percent and 4.4 percent respectively.

Denton County Home Price Per Square Foot June 2023

Closed sales edged up 1.7 percent from last year. Pending sales (contracts) in Denton County were 4.9 percent lower than last year. Available home inventory perked up in June, rising to 2.4 months of supply. Resale inventory has been hard to come by for most of the year, but sellers are finally showing up. This could have implications for prices in the months ahead because that extra competition is arriving just as activity normally begins to cool. Average percent of list and days on market both improved in June, typical of normal seasonal patterns. Those numbers will likely reverse as we head into fall and buyer demand cools.

Builders have been adeptly navigating the market this year by ramping up the incentives and lowering the average price points. When affordability is the name of the game, smart motivated sellers do what they have to do. Many new home builders are offering incentives or buy-down packages of $10,000 or more to lure buyers who have been priced out by 7 percent mortgage rates. The rate on a 30-year fixed rate mortgage finished the month of June at 7.02 percent according to Mortgage News Daily.

Rebounding home prices and a return of seven percent mortgages have made it a very challenging market for prospective buyers. Relief in the rental market hasn’t arrived yet either. Despite the media headlines of collapsing rents, average single-family rents in Denton County were actually $75 higher than June of last year. The median single-family rental in Denton County was over $2500 in June. The average single-family rental set you back over $2700 per month.

Property Tax Relief Finally Arrives

It took two special sessions, but the Texas House and Senate finally came to a compromise on property tax relief. The big news for homeowners is that the homestead exemption will be increasing from $40,000 to $100,000. The average Texas homeowner could save $1300 per year with the legislature’s deal to curb property taxes. Non-homestead properties below $5 million could also see some relief in the form of a 3-year 20 percent circuit breaker. That will be an interesting development to watch since many non-exempt properties saw assessment increases of 20 percent or more just last year.

“Another part of the plan would institute a three-year, 20% cap on appraisal increases for commercial and non-homesteaded properties valued at $5 million or below — a number that could be adjusted by the comptroller with inflation each year.”

Another part of the legislatures effort to reduce school taxes involves more direct money coming from the state. The latest deal calls for schools to reduce the M&O (maintenance and operations) rates by 11 basis points from existing levels. That means just about everyone gets an 11 basis point reduction on their total property tax bill. That will provide savings to landlords, developers and investors. This appears to be one occasion where the Texas legislature actually performed beyond expectations.

Voters will have the opportunity to approve the property tax relief package in November as part of a constitutional election. Assuming it passes it should be retroactive to include the 2023 tax year. The taxing entities who mail out those annual statements will likely be doing some recalculations this fall.

Where Do We Go From Here?

Unlike many industry apologists and cheerleaders I’m looking at the actual macro-level data. It is obvious the housing market has rebounded this year. The data suggests the housing market has more room to correct looking at larger market cycles.

It’s not too difficult to understand why the housing market was able to rebound through the first six months of 2023. The Federal Reserve, for all of its talk about quantitative tightening, has done a pretty miserable job of actually reducing liquidity. The Federal Reserve’s balance sheet is still at $8.3 trillion. Total public debt has swelled to over $32 trillion. Higher rates are only one part the equation. The Fed still needs to shed a few $trillion from its bloated balance sheet.

Fed Assets and MBS Pandemic Pump July 5 2023

As a general rule it would be very rare for the housing market to bottom when unemployment is still so low. A recession will inevitable arrive. Before that happens it is foolish to assume the real estate market is out of the woods.

U.S. Unemployment June 2023

Consumers are already beginning to pull back according to the latest data. How much will they pull back once student loan payments resume and unemployment begins to rise? No one knows for sure, but we will find out soon enough.

U.S. Consumer Credit June 2023