Denton County new home prices jumped to a new high in January. According to NTREIS data the price of closed new construction within Denton County Texas was 10.2 percent higher year-over-year with the average price per square foot of a new Denton County home hitting $151. The total price of a new home was up 11 percent to $436,571. These are some impressive price increases particularly for what is normally a slower part of the selling season.

December was a banner month for new home sales throughout the DFW area, and January looks to be rather strong as well with pending sales numbers showing double-digit gains for new construction activity. The Mortgage Bankers Association is estimating an 18% sales gain for U.S. new home sales in January, so it should be interesting to see next week’s Census numbers.

Next week the Dallas Federal Reserve will be holding an event covering the housing market where they will ponder the following question:

¬†“Is it still possible to build or purchase a Texas house for under $250,000?”

For many prospective buyers in the DFW area, the answer is a resounding no. Readers of this blog have a good idea as to why that is the case, but I’m sure it will be interesting to hear the explanations and justifications of those presenting at the event.

This week the NY Fed released their fourth quarter Household Debt and Credit Report for the United States. There is a great deal of information contained in the report, particularly considering the Fed’s recent push to hike interest rates and “normalize” their balance sheet. Of course what the Fed and its army of economists won’t tell you is why all of this credit (debt) growth is necessary.

This weeks CPI numbers came in hotter than expected on the headline numbers, but those who were paying attention noticed the downward revisions on previous months so the stock market rejoiced. What’s troubling for the economy is the fact that interest rates continue to rise. The yield on the 10-year Treasury breached 2.9% even as the Federal Reserve added $11 billion in agency MBS to their portfolio holdings. The UN-Unwind by the Fed in the past week erased roughly half of their balance sheet normalization in January that likely contributed to the market’s abrupt swan dive.

Going forward, there are still consequences yet to be paid for years of can kicking. New home prices can hit new highs so long as the stock market remains elevated. Unfortunately, even here in Denton County Texas, real estate levels and equity levels are out over their ski tips. Will the Fed chicken out before the markets collapse? No one knows, but it’s a near certainty that higher interest rates are going to cause an economic slowdown. There is simply too much debt in the system, and higher rates will ultimately siphon organic growth. The math is fairly simple, and the math doesn’t work out.