Denton’s housing market reached new heights in August. A strong showing from the luxury housing segment pushed the average price of a Denton home to a record $452,411. That was 9.
6% higher than a year ago. Before you get too excited (and before the folks at the appraisal district extrapolate this outlier as gospel), a word of caution is warranted. The overall housing market continues to struggle.
Closed sales in the city of Denton collapsed 27% year-over-year, and pending sales were 18% lower. The heart of the market with homes priced between $400,000 and $500,000 saw sales collapse 40%! In short, it was more wealth and income bifurcation working through the local housing market giving us those record high prices. It’s still a savagely unhealthy housing market in many respects.
Mortgage rates are now solidly in the 5’s if you have good credit. Rates are at the lowest levels we’ve seen in roughly 20 months. That’s great news if you are a prospective buyer.
The flip side is that typical monthly costs beyond the mortgage are all more expensive than they used to be. Property taxes, hazard insurance, homeowners association fees and maintenance costs are all significantly higher than levels seen before the pandemic. While the rate of inflation may have cooled, the actual prices haven’t come back down.
This is the key driver of the economic angst so many Americans are feeling. The stimulus checks have been spent. Apartment rents are still proving to be sticky in the city of Denton.
All of the recent supply in the multifamily space hasn’t cooled the optimism for asking prices. Apartment List shows median asking rents are down 1.5% from last year, but up 1.
4% so far in 2024. Local city officials might want to start asking some questions about what’s driving apartment market rents, as other U.S.
cities have recently done. There’s an algorithm at work in many U.S.
cities (including Denton) that could be a bigger problem than many had imagined. The U.S.
Department of Justice filed its official civil antitrust complaint against Richardson-based RealPage. The DOJ alleges that RealPage’s algorithmic pricing scheme has harmed millions of American renters. The suit by the DOJ and eight state attorneys general is an eye-opening read.
If you want to understand what goes on behind the veil of algorithmic pricing, the entire 115-page filing is worth your time. The DOJ’s lawsuit follows the groundbreaking investigation by ProPublica in 2022, and other class-action lawsuits and settlements. RealPage’s software, and the use of artificial intelligence to drive rents higher, is now squarely under the microscope of regulators.
A cursory reading of the DOJ’s civil suit shows why the attention is warranted. There’s no doubt there’s more than a single actor or algorithm behind the recent rise in housing expenses. In plain English, there was simply too much liquidity thrown at the market chasing a limited pool of supply.
That doesn’t excuse unscrupulous actors working behind the scenes to add insult to injury, particularly if those actions were illegal. The courts will ultimately be the judge of that. For now, we are left with a growing pile of evidence and claims of alleged illegal activity.
As the Justice Department explained it: “The complaint cites internal documents and sworn testimony from RealPage and commercial landlords that make plain RealPage’s and landlords’ objective to maximize rental pricing and profitability at the expense of renters. For example: It could well be that current antitrust statutes are enough to bring the abuse of AI under control. Regulators have turned a blind eye to industry abuses and market consolidation for too long, ignoring important antitrust statutes that have been on the books for decades.
At least now they are finally paying attention to the importance of fair, transparent markets. University of Texas at Tyler business law professors Kevin White and Tammy Cowart wrote an excellent piece in the Washburn Law Journal looking at the use of AI in the multifamily housing sector and the potential antitrust issues involved: “The concern with algorithmic collusion is that it evades detection even more profoundly than a classic cartel.” Speaking to Slate , White put it like this: “Even though these landlords are not getting together in the proverbial smoke-filled room and saying, ‘We all need to raise our rents by $100,’ they’re colluding by using the same software that aggregates their data.
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I think these things have teeth.” As White and Cowart noted, the U.S.
government has other tools available if it wants to prevent unlawful price discrimination. The Robinson-Patman Act of 1936 even has Texas roots. Wright Patman served 24 terms in the U.
S. House of Representatives for Texas’ 1st Congressional District. Temple University Law School professor Salil Mehra makes an interesting argument that price discrimination enforcement should be revived for AI platforms .
If multifamily housing is a commodity, maybe regulators should use the Robinson-Patman Act and other antitrust tools to keep unethical players from gouging renters with an algorithm intentionally hidden from their view. Renters should at least be made aware of market forces directly affecting their most important monthly budget item. Maybe a new Brandeis populist movement is precisely what’s needed to restore a level playing field for renters and consumers.
Artificial intelligence is here. The question is whether we’re going to use it for the common good or as a weapon to be wielded against consumers in the marketplace..
