Denton County home prices turned lower in August. Plentiful inventory and more economic uncertainty continued to weigh on the local real estate market. Consumers appear to be caught between a rock and a hard place with a softening job market and above-normal inflation. Mortgage rates have improved, but not enough to make a significant difference.

Median home prices were 9.4 percent lower year-over-year across Denton County. Median single-family home prices declined by 10.2 percent compared to last year. There are still plenty of homes for sale in North Texas even after resale speculators pulled their unsold listings. Denton County was sitting on 4.7 months of available inventory in August, with 5.1 months of resale home supply.

Across North Texas we’ve seen the mean reversion in the real estate market playing out this year. Some submarkets like the city of Dallas still have inflating prices. Many other suburban submarkets continue to soften. To give you an example of what I mean consider this.

Real Estate is Still Local

Average home prices in the city of Dallas were 13 percent higher year-over-year in August. It was a much different market in the city of Pilot Point near Lake Ray Roberts. Average home prices in this north DFW suburb plummeted 35 percent year-over-year. Many of the luxury homes with acreage lots in this area of lake lovers are now surrounded by smaller new homes as infill development continues across North Texas.

Before you get too excited, land is still really expensive. The unusual correction in prices in Pilot Point is more about a shift in product mix. The price per square foot of a single-family home was down by 15 percent, driven by the absence of any luxury home sales.

Across Denton County, the average price per square foot for a single-family home declined by 5 percent compared to last year. In areas where new home supply is more plentiful the price declines have been more significant. Builders continue to get serious when it comes to moving inventory. Mortgage rate buydowns and incentives are still the norm while the market is soft.

Single-family rents in Denton County are pretty flat compared to last year. Apartment rents are roughly 3.4 percent lower.

Staflation Nation

Stagflation is still a major hurdle for the North Texas housing market. Recent economic data show consumer inflation well above trend. CPI and core CPI are hovering near 3 percent. At the same time, the labor market is showing more cracks. Softer job numbers point to economic weakness lurking under the surface.

The U.S. unemployment rate is hovering near 4.3 percent. Full-time employment is stagnating as more part time labor keeps the economy stitched together. Corporations are still enjoying fat margins while they game immigration rules and import more cheap labor. Big tech continues to utilize the H1-B visa pool while they lay off more Americans.

The residential construction industry hasn’t experienced significant job losses yet, but it’s not growing either. Most builders are still enjoying margins above the pre-pandemic trend. This has allowed them to avoid significant staff reductions as the market softens. It will be interesting to see how long they can hold out if margins continue to compress.

Caveat Emptor

If you are in the market to buy or sell a home, it’s still a wild market out there. While inventory is plentiful, it’s tough to really call it a buyer’s market with prices at current levels. It’s more of a balanced market where there is finally some give and take between buyers and sellers.

For the time being, the casino is still open with the current adminstration. They are breaking out all the old scripts to keep the show going. The bull market in currency debasement shows no signs of slowing down.