The stagnation continued for the Denton County real estate market in January. 2025 is not off to a great start. Home sales were up 3.8 percent from a year ago, but pending contracts were 7.8 percent lower compared to last year. Contract activity in the city of Denton fell 10 percent year-over year. Closed sales plummeted 23 percent. That was the lowest sales volume for the city since January of 2017.
The combination of historically normal market interest rates combined with inflated home prices continues to be a toxic mix for the Denton County real estate market. Average home prices in Denton County came in at roughly $542,000 in January 2025. Area home prices are still $184,000 higher than January 2020. The good news is that many area homeowners are sitting on large piles of equity. The downside is many prospective buyers remain locked out of the current housing market.
A Banquet of Unintended Consequences
The unintended consequences of wreckless fiscal and monetary policy errors continue to show up in the local housing market. Too much inflation and too much speculation pushed home prices too high. Now that the stimulus has run dry, the math doesn’t work for many prospective buyers. Many sellers are still reluctant to give up those sweet two percent mortgages. Who can blame them. The prospect of giving up a huge hedge on shelter costs is a pretty scary proposition.
In Powell’s recent testimony to Congress, he specifically mentioned the mess in the housing market. Comically enough he also mentioned he has no idea when mortgage rates will come back down and inflation will finally be tamed. That’s the fun part about central bankers. They are quick to act when their Wall Street friends need a bailout. The wreckage they leave behind is simply an unfortunate consequence for other people to worry about.
Softening Rents Provide Some Relief
A soft rental market has provide a bit of relief for North Texas home shoppers. Apartment List shows average rents down 4.3 percent from a year ago in the City of Denton. Other DFW suburbs also show lower year-over-year rents.
Single-family rents are also softening across the DFW market. Rents in Denton County have been flat for over a year. Median rents in Collin County were down 2.1 percent year-over-year in January. Average rents fell by 3.3 percent in January to $2514. Rents in Collin County are now several hundred dollars off the peak a few years ago. That’s the result of a major inflow of investors buying up homes for cash flow. More inventory means more competition and more opportunities for prospective renters.
More Volatility in Store
Volatility seems to be the theme so far in 2025. Stagflation continues to exact its pound of flesh from the Denton County real estate market. The new administration isn’t doing anyone any favors. For all of the talk of government efficiency, it looks more like a bull market in self-dealing and grift. When the fox is guarding the hen house it’s a safe bet that it won’t work out well for the chickens.
For those paying attention, the CFPB has been one of the few guardrails curtailing abusive and illegal activity in the real estate and mortgage sectors. The organization was literally created to regulate malfeasance in America’s largest banks. If one wanted to turn the housing markets and the general economy into a glorified casino, eliminating the CFPB and gutting the budget for HUD would be part of the playbook.
Inflation is still percolating throughout the U.S. economy, so don’t expect lower interest rates to come to the rescue of the housing market. We’ll likely need to see serious demand destruction before we see lower rates. On that note, be wary of unscrupulous agents or mortgage loan officers pitching the “buy the home and date the rate” nonsense. The time to buy a home is when you need one and can afford the purchase. Speculating on rates in such a volatile environment could be dangerous to your finances.
If you are in the market to buy or sell a home, be safe out there. We’re living the scene from Ghostbusters. The containment unit has been breached, and all of the ghouls will be looking to prey on consumers at the first chance they get.
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