With record-low interest rates and an influx of new residents to North Texas, the demand for homes is reaching new heights — but without the inventory to keep up, market conditions are spelling trouble for potential buyers.

Denton County homes were on the market an average of just 54 days in December, a dramatic decrease from the midsupply point of six months as buyers sought to take advantage of increased market liquidity and rock-bottom mortgage interest rates. But with more homeowners wary about putting their house on the market thanks in part to the uncertain economic conditions created by the COVID-19 pandemic, the lack of available properties has caused the cost of buying a single-family home to soar. The median price for a home in Denton County has increased around 4.4% since 2019, from $315,000 to $329,000 in 2020, according to data from the Texas Real Estate Research Center.

“It’s surprising when you think about [the fact that] we’re in the middle of the pandemic and the recession, and the housing market is doing great,” said Luis Torres, a research economist at the center. “In 2020 a historical number of housing sales occurred in Texas, Dallas-Fort Worth, Denton — the majority of the state recorded record numbers.”

Nominal interest rates have dipped with falling inflation, both factors influenced by the slowed economic growth of the past year. Rates on Thursday for a 30-year, fixed-rate mortgage were as low as 2.7%, with the annual inflation rate reported at 1.4% for 2020, down from 2.3% for 2019.

The pandemic also has accelerated the rising demand — and thus, price tags —that have been trending upward for several years in Denton County and across North Texas as more people move to the area, Brad McKissack of McKissack Realty Group said. Dallas-Fort Worth gained more than 1 million people in just eight years, with Texas’ rate of out-of-state transplants second only to Florida. That much accelerated growth can strain existing infrastructure, as new residents compete for what has become a limited number of homes on the market between $225,000 and $375,000.

“The North Texas area is kind of a hot spot right now where we’re not just seeing buyers wanting to go from one home in the metroplex to another home in the metroplex; we’re seeing a lot of people that are coming in from out of state that are buying locally in the DFW market,” McKissack said. “It’s creating a huge buyer inventory, but our seller inventory is lagging way behind, so it’s causing the prices to really kind of skyrocket.”

Those trends also are being seen across the state. While construction has accelerated, with single-family construction permits flattening at a record high in November, it hasn’t been able to keep up with a perfect storm of accelerated demand among buyers and a decline in homes on the market with so many potential sellers staying put.

Another factor lending itself to increased demand is millennials coming of age and entering the market at a time when the pandemic may have prompted people spending more time in their homes — including for work — to want more space, Torres said. But between worries about job security, the safety of showing homes in the pandemic and market conditions, even those who want to sell might be hesitant.

“Say my house is worth a billion bucks and I sell it, but what am I going to buy now when the next best thing is a house that’s worth $3 billion?” Torres said. “It’s that vicious cycle that if you don’t sell your house, I’m not going to buy it and I’m not going to sell mine, and you stop the listings in the market.”

The traditional buy-sell pattern of people moving within the area has shifted, with many sellers right now moving out of the area or downgrading to an RV to travel rather than looking to buy another home in Denton County, said Chase McKissack, Brad’s brother and partner at McKissack Realty.

Though the current market conditions aren’t what might be considered a traditional housing bubble, which is defined by buyers overleveraging and underregulated financing such as in the subprime mortgage crisis between 2007 and 2010, the trends are indicative of what the future of real estate in North Texas might look like, Torres said.

“Texas has always had a competitive advantage right about low housing prices compared to California, New York [and] other states, but going forward, I think we’re going to lose that affordability advantage we’ve had in the past,” Torres said. “It’s the price of growth.”

As for the immediate future, market watchers are split on what the next few years will look like.

Torres said he expects the housing market to remain strong but growth to slow some in 2021, as the potential of future stimulus money and the vaccine could create gains for the economy that might see sellers gain enough confidence to come back to the market. The McKissack brothers say they don’t expect major shifts until 2022, when potential government loans and other buyer incentives might prompt more sellers to list their homes. In the meantime, all three say buyers will have to practice a little patience.

“As long as we have people flocking in here and the economy the way it is, they’ll continue to rise unless we get inventory back on the market,” Chase McKissack said. “Anything could happen, but you know, from what we’ve seen forecast at least this year, it’s going to stay relatively hot for sellers and tough to get into homes for buyers. I don’t think we’re going to see a slowdown.”

Amber Gaudet can be reached at 940-566-6889 and via Twitter at amb_balam.

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