High prices and higher rates are hammering the Dallas-Fort Worth new home market. Starts from new home builders are now expected to increase by only a few hundred homes next year. I am not surprised. I covered this development a few days ago in my post on DR Horton’s fourth quarter results, but a recent piece in the Dallas Morning News citing an industry insider/expert highlights the failure of local media to report on what is actually happening. My October housing market report for the DFW area explains why the correction in the local real estate market is likely just getting started. What is interesting is how industry insiders are desperately trying to spin recent developments into a soft landing story.
Yesterday’s piece in the Dallas Morning News provides another glorious example of how Steve Brown is failing readers with spin from industry insiders. Here are just a few of the quotes that caught my attention.
“We believe that the housing market is generally flattening.” Ted Wilson – Residential Strategies
“There is an enormous amount of pent up housing demand in this market.”
When housing industry professionals start floating the pent up demand story, you know they are getting worried. I can prove that the pent up demand ruse is a pile of bunk because pending sales for Dallas Fort Worth were down across the board in October. If there was so much pent up demand, the forecast for new home starts in 2019 would be up double digits, not flat. Mr. Wilson’s pent up demand fairy tale sounds like a press release from NAR. The reality is that demand in the local housing market is fading with Fed’s balance sheet shrinkage.
As I commented on the article, any idiot could see this coming, yet the Dallas Morning News is completely missing the story. This is unfortunate, but I am not surprised. Main stream media has failed the American public on so many levels it is really not worth counting anymore. The truth is that the economic growth story, and the pent up demand story, are only as good as the Fed’s balance sheet, and at this juncture, their willingness to expand it. The Fed, for better or worse, supplanted/suspended real economic forces and literally became the market when they chose to bail out a corrupt banking sector and reflate asset prices. We are now finding out what happens when they remove the cocaine and heroin that was inflating real estate prices and home sales across the Dallas Fort Worth area since 2012.
As Danielle DiMartino Booth recently noted, the Federal Reserve’s Goldilocks forecasts are completely blind to history.
Here is former Dallas Fed Chair, Richard Fisher, congratulating former Federal Reserve Chairman, Ben Bernanke, while discussing the bang up job they did reflating asset prices…
In case you need context, the guy Fisher was congratulating said this several years earlier…right before the entire global economy collapsed.
“Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.” Ben Bernanke – May 2007