Denton TX mortgage rates reached their highest levels in 7 years according to the latest weekly survey data from Freddie Mac. With Denton area home prices at record levels home sales activity and prices could soon be affected. As I have detailed in previous posts, you can already see this happening in many of the more expensive DFW submarkets.

It is rather ironic that the Fed’s latest Quarterly Report On Household Debt and Credit shows that debt rose for a 15th consecutive quarter with the latest increase fueled by mortgages and student loans. The real kicker is that NY Fed senior VP, Andrew Haughwout, inadvertently let the cat out of the bag when he stated that the boon in household wealth facilitated by the Fed’s massive balance sheet expansion (aka QE1, 2, 3) hasn’t exactly benefited average Americans. What a shock!

While housing wealth is at an all-time high, it has shifted into the hands of older and more creditworthy borrowers, in part because of tight mortgage lending standards,” said Andrew Haughwout, senior vice president at the New York Fed. “An increased amount of available home equity should make the household balance sheet more resilient in the event of a financial shock, though that may not be an option for lower-credit-score borrowers.”

DFW home sales are already starting to stagnate due to rampant home price increases. The latest DFW housing report for Denton County shows that sales rose 1.4% in April with the bulk of those sales registering in the $200,000 to $400,000 price range. NTREIS trends data for April shows a 4.2 percent increase in home sales in the City of Denton with prices up 12.1% from the same time last year. Pending sales are up 11.7 percent in April.

The reason Denton is still faring so well in this current housing market is the average price point in Denton. The average price of home sold in Denton in April was around $277,000. This compares to an average price of $359,000 in Denton County and $307,000 in the greater DFW area.

Mortgage refinance applications are now at an 8-year low while cash-out mortgage refinances are making a comeback. By all appearances it would seem that homeowners and home buyers are suffering from payment exhaustion. This should not be surprising now that the Fed is embarking on their latest PR campaign known as balance sheet normalization. After backstopping Wall Street banks and helping to make them whole at taxpayer expense, the Federal Reserve is now apparently content to remove the punch bowl.

As the Fed tightens the screws, letting the air out of yet another bubble (this time spread across multiple sectors), it is interesting to see homebuilder confidence still increasing while they are quietly managing construction starts. New home builders are not stupid. They talk a good game of endless optimism, but when push comes to shove they are reluctant to put too many spec (inventory) homes on ground because they don’t want to get burned with big discounts.

Higher mortgage rates are already affecting new home builders. Unlike existing homeowners, new home builders do not have a choice whether to sell or not. They have to keep the pipeline moving if they want to stay in business. This helps to understand why the average price of a new home sold in Denton FELL by 10.2 percent in April to $276,178 even as the number of new homes sold almost doubled compared to the same month a year ago.

Most owner-occupied buyers look a the payment, not just the prices.