Lower prices produced more home sales for Denton County last month. Area home sales rose 4.4 percent compared to March of last year. Sales were up 3.3% across the DFW region. Pending contract activity also picked up for Denton County, rising 5.3 percent year-over year. The spring awakening was modest, but welcome in an overall sluggish market.

The key to the recent increase in sales activity boils down to affordability. Median prices in Denton county were down 6 percent year-over-year in March. Average prices fell 6.9 percent across Denton County. Prices were even lower in the city of Denton, with average prices falling 8.3 percent.

Pricing Pressure from New Construction

Generous incentives from area home builders continue to put downward pressure on the market. Average prices for new homes in Denton County were down 13.8% in March. That compares with a modes 3.3 precent decline in area resale home prices. Average new home prices in the city of Denton slid 15.7 percent from March of last year.

The continued motivation from builders is showing up in the days on market too. It’s taking longer to sell a home this spring due to the sluggish economy and plentiful inventory. Inventory levels are basically in line with what we saw last year, but the economy is noticeably weaker. This is filtering into the real estate market. Average days on market are up 20% in Denton County and 37 percent in the city of Denton.

Mortgage Rates Bounce

Prevailing mortgage rates are back above 6 percent after the inflationary spike with the Iran war. The Trump administration and FHFA director William Pulte Jr. touted their impressive scheme to blow $200 billion buying MBS to lower rates below the 6 percent mark. That market intervention has been completely wasted by the energy price spike and resulting inflation.

The latest consumer price index showed inflation spiking to a 3.3 percent annual rate. Inflation isn’t going anywhere as long as the Strait of Hormuz remains closed. Area gasoline prices range between $3.50 and 4.00 per gallon. Fuel costs are dramatically higher than where we started the year.

Area Rents Still Soft

Average rents for single-family homes in the city of Denton were down 5.2 percent from March of last year. Average rents were 2.1 percent lower across Denton County. The April report from Apartment List shows asking rents in the city of Denton are down 9.4 percent from last year. Denton still has one of the weakest apartment markets in the DFW region.

The recent immigration crackdown appears to be hitting the local multifamily sector along with those university budgets. The city of Denton has 32 percent more single-family rental inventory than March of last year. Renters in the city of Denton have more options, and that continues to put downward pressure on prices.

Tug-of-War Continues

The tug-of-war continues for the local real estate market. On the one hand we have pent-up demand for real estate. Plentiful inventory and more competitive prices are obviously attractive to potential buyers. On the other hand we have a weak economy with stagnant wage growth amid a major energy price shock.

How this scenario resolves is anyone’s guess. The only thing we know for sure is that volatility is alive and well. Flexibility is your best friend in a market like this. If you are in the market to buy or sell a home, prepare accordingly and be wary of anyone making bold predictions about where the market is heading.

Stay flexy!