Denton County home sales continued their rise into the summer heat. The dog days of summer are upon us, and schools will be back in session next month. Many prospective home buyers have probably already secured their shelter at this point. It’s crunch time for those who haven’t found a place. Area home sales rose 5.7 percent year-over-year in June, continuing the slow, steady improvement in transaction volumes. Pending contracts slid 3.3 percent. Seasonality is setting in, and we can expect sales volumes to slow further heading into fall.

Home prices in Denton County were still soft compared to last year. Median prices fell 4.4 percent from a year ago. Average prices were down just slightly. Bifurcation is still prevalent in the local market. Solid buyers with cash or significant down payments are still propping up prices. At the median, affordability is still a challenge for many prospective buyers utilizing mortgages. Mortgage interest rates are currently hovering near the highs for the year, after briefly dipping below six percent earlier this spring.

Home inventory in Denton County is still plentiful. We’re sitting on 4.8 months of supply for single-family homes in Denton County. That’s down 5.9 percent from last June. We still have roughly six thousand homes for sale across Denton County.

Multifamily Softness Adding to Inventory

Area home prices remain soft despite a year-over-year decline in number of homes for sale. The multifamily sector is contributing to that softness. The continued correction in the multifamily housing market is helping to cap local home prices. Vacancy numbers for the city of Denton and Denton County show this part of North Texas is swimming in inventory. That has pushed vacancy rates up for local apartment developments while pushing down rents.

The latest numbers from Apartment List shows Denton County asking rents are down 4.5 percent. The multifamily market in the city of Denton is more saturated. Rents for Denton Texas apartments are down 10.9 percent with the July report. Denton is still experiencing one of the weakest apartment markets in the U.S. We can see the effects of this supply and pricing pressure working through the single-family sector.

The $400 million fallout involving S2 Capital is yet another reminder of the challenges in the North Texas multifamily market. When you dissolve a $400 million fund with “no return of capital” to the investors, that’s a pretty clear indicator that somebody screwed up. It appears company founder Scott Everett has been living the vida loca while some of his investors are getting hung out to dry. Word eventually gets around. The internet trail on this story is littered with red flags. The lavish lifestyle of the founder, floating rate debt, leverage, greed…take your pick.

Friends don’t let friends invest in crappy multifamily deals as limited partners.

Competition Breeds Motivation

When the going gets tough, professional sellers do what the need to do to move inventory. New home builders are used to this. It’s not personal. It’s just business. Many existing home sellers are still attached to those pandemic era dreams, and a return to ultra low mortgage rates which are not coming back. “Date the rate and marry the house” is still horrible advice for prospective buyers. The best time to buy a house is when you need one and can afford one. You shouldn’t let a builder, lender or Realtor try to talk you into an obligation if you aren’t actually prepared for it.

Many prospective buyers have learned this lesson. Instead of buying small homes with noticeable deficiencies, they are choosing to rent instead of locking themselves into a long-term purchase obligation. Considering the wide assortment of choices we have in the local market, who can blame them. If the rent is cheaper than the mortgage payment, that’s simple math.

Honesty is the Best Policy

Existing home sellers who are honest with themselves about what they are selling, are doing just fine. Home inventory continues to clear despite normal mortgage interest rates. Go figure! Sellers and agents who misjudge the actual market are watching their listings stagnate on the market with no bid. I’m still seeing plenty of big box agents agents phoning it in while their client’s listings go without a bid. That’s a shame.

A fancy brand name on a real estate brokerage is no guarantee of sales success. If your agent is still advertising your dormant winter trees after your listing has stagnated for six months on the market, that’s partly on you. It still amazes me when some owners allow this kind of negligence. Selling a home is a partnership, and that transaction requires honesty. If one party or the other isn’t getting the job done, it’s probably time for a change.

The Final Stretch

As we head into the final stretch of the summer home selling season, it will be interesting to see how the numbers come in. Demand is still robust. Affordability is still strained. Inventory is plentiful. Mortgage interest rates probably won’t cool down again until the fall. The oil market is still an accident waiting to happen. Months of manipulation with reserves and jawboning could still come back to bite us. Fuel prices have come back down this summer, but they’re still higher compared to where we started the year.

If you are in the market to buy or sell a North Texas home before the summer is over, you know where to find me.