Denton County Texas home sales continued to slide in October as the real estate market softened throughout the Dallas-Fort Worth area. Closed sales in Denton County fell roughly 8 percent for the month of October compared to last year. This is slightly worse than the 6% sales decline for the Dallas-Fort Worth metro area. Pending single-family home sales in the Denton County area were down about 14 percent for the month of October as the stock market swoon also hit the local housing sector. The official statistical estimate of a 9 percent pending sales decline for DFW single-family homes is likely understating the real double-digit pending sales decline of single-family homes in October for the Dallas-Fort Worth area. My calculations show that the decline is more like 12 percent.
Median and average home prices were both higher in October rising 4.8% and 3.8 percent respectively. The total number of homes for sale in Denton County rose almost 20% compared to the same time last year as the months of inventory also rose by slightly more than 20 percent. Current NTREIS Trends data shows over 3800 homes for sale within Denton County and over 30,300 properties for sale in the DFW area. Denton County is currently sitting on 3.1 months of supply compared to 3.2 months for the Dallas-Fort Worth area as a whole. These numbers will rise, and I will explain why.
The official press releases for Dallas-Fort Worth Home sales, and the same numbers which are regurgitated without question by a reporter calling himself a real estate “editor” are still a bit inflated. The algorithms at A&M’s RECenter have improved since I called them out this summer, but they are still underestimating the shift in the real estate market. As a reminder, the official press release numbers are generated by the Aggies at A&M’s RECenter. It’s also important to remember that economists are hopefully optimistic that this housing downturn is just a hiccup in an otherwise healthy economy. They are hoping this time is different. How do I know the sales estimates are still inflated? Simple…I actually bothered to read the press releases and compare them, something real estate editor, Steve Brown, of the Dallas Morning News apparently has no interest in doing.
To prove my point that the official estimates for DFW home sales are still a bit top heavy, all we need to do is go back to September’s official report and see what they statistically estimated for final September sales. Again, you have to scroll down to the 3rd page to see the updated actual sales numbers in previous months. Last month the press release reported a statistical estimate of single-family home sales of 8260 for September. Updated data more than a month later shows we’re still well over a hundred actual sales shy of that.
The official printed estimate for pending September single-family home sales was 8347, or a 6% decline from the previous year. The official press release botched the printed number/estimate AND missed the full pending sales decline. Updated NTREIS Trends data shows pending single-family home sales of 7746 for September…a 7.6% decline from the 8312 pending single-family home sales in September 2017.
I suppose the lesson here is that you shouldn’t outsource your press releases to a bunch of Aggies, even if they call themselves professional economists. It also proves a point I have made previously that Texas Realtors are throwing away a lot of money to A&M’s real estate center for output that sometimes resembles garbage.
Denton Texas home sales fared better than the surrounding area in October, sliding 2 percent year-over-year. Pending sales in City of Denton were softer, falling about 7 to 8 percent. Median and average prices pushed back up toward their recent highs of the year, rising 6.9% and 10.8% respectively. The average price of a home sold in October within the City of Denton stood at $276,441, near record highs but still well below the average for Denton County and the DFW area. The lower average price points in the City of Denton are a big reason why it will likely fare better than some Dallas Fort Worth areas in the coming market correction.
The largest homebuilder in the country just flashed a big warning signal that the housing market is shifting. New home builders have been leading indicators of the coming correction as their stock prices have nosedived this year with rising rates. Sales of new homes have been providing a buffer to softening resale numbers seen for most of the year here in the Dallas Fort Worth area. That buffer to declining sales is fading. DR Horton’s recent numbers are just another data point indicating that a slowdown is ahead. On a call with analysts, DR Horton CEO, David Auld, said that “a little momentum is slipping from the market”.
What Mr. Auld is failing to acknowledge, and what virtually no one in the housing industry wants to talk about is the unfortunate fact that the entire growth/recovery narrative of the last several years was based on a lie. Without that ever-expanding sea of central bank liquidity, the markets (and particularly the housing market) would have rolled over. Well guess what’s happening? Global QE (quantitative easing) is grinding to a halt with the Federal Reserve pulling away the punch bowl first…
Builders are struggling to build enough affordable homes to match real demand in the market. The reason should be obvious, but most economists continue to downplay this issue. EVERY piece of dirt (the actual real estate) under the sun was artificially inflated by the Fed’s massive liquidity injection/balance sheet expansion. The Fed has only begun to “normalize” that huge balance sheet and the market is already beginning to roll over. Things should get even more interesting when the European Central Bank (ECB) stops printing next month. In case you didn’t get the memo, yes, Europe is still padding their central bank balance sheet in an effort to keep zombie banks afloat. An end to central bank liquidity injections will likely have some nasty consequences for high end real estate. That mean reversion is already underway in many of the world’s most expensive housing markets.
Despite the assertions by local economists and housing industry players that the recent soft patch is nothing to be concerned about, history suggests we are at the end of the longer economic cycle. DFW home sales actually topped out last year. Home prices are still rising for the time being, but there are an increasing number of indicators suggesting that markets are rolling over with the Fed’s balance sheet reduction and the subsequent rise in interest rates.
The economists at the Fed continue to blindly follow their flawed econometric models because they don’t live in the real world. They live in the artificial world of Wall Street and Wall Street bankers, home to the one percent and the 0.1 percent. Those are the Fed’s primary constituents. Wealth inequality in the United States is the worst it’s been since the Great Depression, yet we have a tone deaf former Fed chair telling us that an economy near full employment is helping to lift pay for unskilled workers and solve the problem. Sorry Janet, but the facts suggest otherwise.
The remarks from Mrs. Yellen are beyond insulting when $38 billion a year in riskless profit is being paid to a corrupt banking sector in the form of interest on excess reserves held at the Fed. It is readily apparent that both Yellen and Bernanke presided over some of the most destructive Fed policies in American history while the country’s middle class was virtually destroyed, yet both are still congratulating themselves when the consequences of their actions are only beginning to be laid bare. Those consequences, now awakening in the local real estate market, will likely blossom in the next downturn.
Many Realtors likely don’t have the faintest understanding of what is happening. Many economists are apparently willing to dismiss the warning signs. This is the nature of a sell-side industry. I get it. Nobody likes to spoil a party.
The problem is that the party was driven by a giant (and increasing) pile of debt. The Federal Reserve simply took one pile of defaulted debt (toxic, fraudulent mortgages) and papered over it with a new, larger pile of debt spread across multiple asset classes. Instead of a mortgage crisis, we now have a multi-tiered pile of debt in housing, automobile loans, student loans, corporate bond debt and unfunded pension liabilities. The U.S. consumer-driven economy is more fragile than we’re being told. All of that debt has to be serviced, and the expense to keep it from defaulting is going up with rising interest rates.
As the Fed continues to raise rates into this new echo-bubble, the brick veneer (to use a housing analogy) will likely continue to keep crumbling. Spiraling budget deficits virtually guarantee the debt will continue to grow, yet tax receipts on corporate income are plunging.
It is worth noting that the National Association of Realtors has continually cited low inventory as one of the primary problems behind stagnating home sales this year. The truth is that declining home sales are also a reflection of the health of the economy. This is easy to demonstrate. We’ve seen declining home sales in the Dallas Fort Worth area for several consecutive months. Here is a summary of some of the inventory increases (percentage increase) in the number of homes for sale in various DFW markets for October:
- Denton County – 20.8% Increase
- Collin County – 18.2% Increase
- Dallas County – 10.7% Increase
- Tarrant County – 9.5% Increase
- Lewisville Texas – 50% Increase
- Argyle Texas – 39.6% Increase
- Little Elm Texas – 28.6% Increase
- Allen Texas – 25.6% Increase
- Richardson Texas – 24.5% Increase
If you are in the market to buy or sell a Denton County home, give me a call. I’m old enough to appreciate what a complete market cycle looks like. I can help you retain your heard-earned equity if you are selling. I can also help you find the best deals in the local market as we enter a new phase in the economic cycle. Local home prices are still rising in many submarkets, but home price appreciation is dependent on low inventory. Available home inventory is rising throughout the Dallas Fort Worth real estate market. Anyone who thinks local home prices can’t fall, might want to refresh their longer-term memory banks. It’s okay to hope for the best. Just remember that hope is not a tactic.