The Denton County housing market continues to climb out of the hole. Home sales were flat for the month of May compared to last year. Pending contracts fell a modest 2.7 percent. Median and average prices were up 1 percent year-over-year. The market continues to clear despite ongoing headwinds. Abundant inventory is helping. Inventory is still plentiful, relatively unchanged after the big spike last year. Months of supply is down slightly to 4.6 months of inventory. We currently have close to six thousand homes for sale across Denton County. We could still eclipse last summer’s peak, but not if buyers keep showing up.

The Iran War Tax is still a big drag on the market. Consumer price inflation for May came in at a 3-year high of 4.2 percent. Core inflation was more muted, but inflationary pressures from higher fuel costs are still eating away at household budgets.

The new Fed chair has his work cut out for him. Despite cries from President Trump for lower rates, the bond market isn’t amused. Treasury yields remain elevated due to higher fuel costs feeding into the system. It doesn’t help that the current administration continues to blow a massive budget deficit. The Trump administration is on pace to blow a $2 trillion fiscal deficit this year. As you might have expected, the “fiscal conservative” shtick was a joke. The new boss is the same as the old boss in that regard.

Home Builders Keeping Prices in Check

Denton County home builders continue to put more inventory on the ground. With multiple developments breaking ground across the area this summer, buyers will have plenty of options for new homes. Builders gotta build, so they are keeping the light on. New home inventory is up 10 percent from last year. This is has helped offset a slight decline in existing resale inventory this year.

Abundant new construction options are helping to keep a lid on overall prices. Existing home sellers have to compete with builders when they ramp up incentives and offer generous mortgage rate buydowns. I know of one local seller who experienced this the hard way after they ignored my advice earlier in the year. They are still trying to sell that home after three months and several price reductions. They can’t say I didn’t try to warn them.

Weakest Multifamily Market in DFW

The weakest multifamily market in the DFW metroplex belongs to Denton Texas. Abundant rental inventory is providing serious relief for Denton Texas renters this summer. Apartment rents are 11 percent lower year-over-year with the June report from Apartment List. The city of Denton is experiencing the sharpest correction for apartment rents in all of Denton County. The catch is that local renters normally have to pack up and move to take advantage of the current deals. Most apartment developments aren’t fond of lowering their rents for existing tenants.

Single-family rents rebounded a bit in May. Median and average single-family lease prices were essentially unchanged across Denton County.

Nothing Stops This Train

Prevailing mortgage rates are still stuck in the six percent range. With elevated inflation and spiraling debt, don’t expect the Federal Reserve to come to the rescue anytime soon. The U.S. is still in a period of fiscal dominance where rampant government spending piles on larger piles of debt. The Federal Reserve has been sent to the bench in this environment.

Trump’s new Fed chair, Kevin Warsh, has a monumental task on his hands. On the one hand he has Trump breathing down his neck, begging for lower rates. His real boss, the U.S. bond market, holds all the cards. Warsh can’t cut rates into rising inflation because the market would rip his head off and upset the delicate balance currently in play. To say the current administration is juggling a lot of plates in the air at the same time would be a mild understatement.

We can expect more stagnation and stagflation while this continues. If you are in the market to buy or sell a home, this is significant. “Date the rate and marry the house” continues to be horrible advice. You should avoid anyone in the real estate or mortgage industries pitching this nonsense. The only thing we know for certain is that the U.S. is going to be monetizing a lot more debt. Until someone in charge actually has the courage to right the ship and balance the budget, nothing will change.

Stay safe out there!