The Fed Policy errors continue to slam the north Texas housing market. Home affordability remains near historic lows, and inflation is still percolating through the U.S. economy. This is despite two rate cuts from the Powell Fed in the second half of 2024. Mortgage interest rates are up nearly a full percentage point since the Fed’s ill-advised 50-basis-point cut in September. The yield on the 10-year Treasury is up roughly 115 basis points.
The December unemployment report made it clear inflation is still a thing. The U.S. economy is still humming along with inflated asset prices and a savagely unhealthy housing market. Bifurcation is still the order of the day if you are looking to buy or sell a home. Home prices in Denton County (and most of the country) continue to be largely disconnected from incomes. The Fed’s continued policy errors are a key driver of this dynamic.
Denton County Housing Stats
The median price of a home in Denton county Texas rose 2.2 percent year-over-year in December. Sales were up 15 percent, but that was before the latest surge in mortgage rates slammed the market again. Pending contracts were 5 percent lower.
Residential lease prices in Denton County were 1.4 percent higher than a year ago. Rent prices have basically gone nowhere over the last two years after that massive Covid spike. The continued appetite from investors resulted in a lot of new rental inventory in North Texas. This is why it’s still cheaper to rent a Denton County home than it is to buy one. The affordability gap in North Texas is still huge when comparing incomes to home prices. Fed policy errors are a big driver of that disconnect.
Employment Still Solid
The U.S. employment sector is still hanging tough. The unemployment rate dipped back to 4.1 percent with the December employment report. Continued unemployment claims show very little stress among the labor force. Wage gains are still solid, but they have failed to keep up with the inflation of home prices by a wide margin.
If you are looking for stress in the economy, you won’t find much until you start looking at the credit markets. Behind the scenes the plumbing looks less healthy. That’s because the top 10 percent of the population is holding up spending and credit growth while the bottom 90 percent is still getting pulverized by continued inflation.
Know What You’re Selling and What You’re Buying
If you are in the market to buy or sell a home in Denton County Texas it’s still a volatile market. There’s still healthy demand for reasonably priced homes. While not a true seller’s market, most sellers are still sitting on significant equity gains. That’s assuming they bought before the Covid-era ramp.
There are plenty of recent North Texas transplants experiencing some challenges selling into this warped, inflated housing market. This is particularly the case with some of the newer communities where builders continue offer big incentives and mortgage rate buy-downs. Some sellers are finding out the hard way you can actually lose money on a Texas home if you have a short-term hold and end up having to move.
Many existing home sellers are still under the impression that prices are still rising. While that may be true is some submarkets, the overall picture in North Texas remains a bifurcated mess. Wealthier cash-rich buyers are propping up average prices in Denton County while demand at the margins is weaker than it might appear.
The ugly truth when it comes to monetary policy is that the wealth doesn’t trickle down. This is an important fact to understand if you find yourself needing to sell a home. Fed policy errors are feature of the modern U.S. economy with direct consequences for the local housing market.
“Trickle-Down Theory – the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.” J.K. Galbraith
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