The National Association of Realtors reported that existing home sales slumped 4.8 percent in January. Despite a month-over-month increase in available inventory, existing home sales still came in softer than expected. The median price of an existing home was $240,500 in January, an increase of 5.8 percent from a year ago.

Existing home prices have increased for 71 consecutive months according to NAR while existing home inventory has declined year-0ver-year for 32 consecutive months. In a sign that higher mortgage rates are starting to put a damper on sales, first-time buyers accounted for only 29 percent of sales in January, down from 33 percent a year ago.

Real wages for working Americans are not rising in any meaningful fashion, and the recent rise in mortgage rates has made homes even more unaffordable in the current environment. I’m not foolish enough to believe that higher borrowing costs AND higher home prices are a sustainable combination, but apparently NAR’s chief economist, Lawrence Yun, thinks this is possible. I also question the logic of Elizabeth Mendenhall when she suggests that “competition will only heat up in the months ahead”. Seriously???

Data on mortgage purchase applications for the latest week showed continued deterioration in demand. The purchase application index is now up only 3 percent compared to the same week last year. This data reflects stagnating demand, not increased competition. This is not too difficult to understand considering mortgage rates are at a 4-year high. Today’s January Fed minutes sent bond yields to new highs this year exacerbating an already troublesome trend for mortgage rates.

Existing home sales are now back to 2014 levels. This is a clear sign that Americans real wages are NOT keeping up with home price inflation, but that may not deter the Fed from hiking interest rates further this year. As we have (or should have) learned, the Fed’s real constituents inhabit finer dining establishments and social circles than most Americans. While Fed officials may feign a concern for “full” employment and price stability, their actions and policy suggest something entirely different.

The U.S. is currently staring over a fiscal cliff in terms of budget landmines and spiraling deficits, yet the Fed seems to ready and willing to give Uncle Sam a gentle nudge into the canyon.

Will new home sales for January be as strong as some are expecting? I certainly hope so, because the January numbers on existing home sales suggest a banquet of consequences is waiting on our doorstep. Locally we are still bucking the trend. Existing home sales were up 1.3 percent in the DFW area, while Denton County existing home sales were up 2.5 percent from January of last year.