As the Federal Reserve begins their QE unwind, one interesting metric to watch will be the number of Denton County homes for sale. The number of Denton TX homes for sale was up 34 percent year-over-year in October. In Denton County inventory was roughly 18 percent higher through October. In Collin County the number of homes for sale was up a surprising 38 percent compared to last year.

Reading between the lines, it appears the Goldilocks economy that the DFW area has enjoyed for the past 5 years is due for some consolidation. The inventory of Denton County homes for sale appears to be rising off a cycle low. This will likely cause some interesting developments in the local housing market as salespeople who have been trumpeting the red-hot housing market come to grips with the consequences of the Federal Reserve’s manipulation of asset prices. In my conversations with mortgage loan officers and other real estate industry salespeople, one prevailing theme is a fundamental lack of understanding as to what’s been driving the rampant DFW home price inflation during the past 5 years. If you are shopping for home or a Realtor consider yourself warned. There a plenty of “salespeople”, but the pool of real estate professionals is a much smaller cohort.

The Federal Reserve managed to draw down their massive balance sheet expansion in October just slightly, by less than half of their advertised balance sheet reduction target. The QE unwind of Treasury securities has commenced, but the Fed’s holdings of mortgage-backed-securities (MBS) were higher through the end of October. These contracts can take longer to settle, so time will tell if the Fed puts its money where it’s mouth is. It will be interesting to see if they actually reduce their security holdings by $10 billion per month through 2017 and follow through on the projections for 2018, siphoning off $600 billion a year of their bubble-blowing balance sheet.

The number of homes on the market in Dallas/Fort Worth is already creeping up. This is not surprising considering the impressive rise in average home prices. I have been watching a local submarket near me where average prices are already rolling over. This is a relatively high-end area with a high income demographic. As I mentioned in a previous post, I fully expect to see a top-down compression of DFW home prices where some high-end properties experience some significant price reductions as the reality of QE inflation meets the opposing reality of QE unwind.

The number of Denton County homes for sale could continue to move higher if sellers insist on holding out for recently inflated home prices, prices that were juiced by the balance sheet expansion of the Fed. This is assuming the Federal Reserve actually has the stomach to watch the consequences of their handiwork. The Fed has proven they are really good at serving the interests of the banking cartel, but their record on stabilizing the U.S. economy is a comical farce.

If you are in the market to buy a Denton TX home, or anything in the Denton County area, QE unwind should bring a welcome change to the housing market. If you are a seller looking to unload a Denton TX property your red-hot housing market is likely fading into the sunset as the flight to quality and affordability picks up steam.