Denton County home prices slid 2 percent in November as the DFW housing market experienced the worst sales decline in 7 years. The good news is that the sales volume estimates in the official press releases are now more reflective of reality. The bad news is that actual home sales in Dallas-Fort Worth are still rather soft.

Home sales in Denton County dropped 9 percent in November, in line with the 8 percent decline seen for DFW. Pending home sales in Denton County slid 3 percent compared to the same time a year ago, slightly better than the 5 percent pending sales decline for DFW. Closed and pending sales for new homes fared better than resale activity during November suggesting the moderation of interest rates brought some skittish buyers off the fence in November. Mortgage purchase applications edged higher during the last few weeks as borrowers took advantage of some of the lowest rates in several months.

What is concerning for Denton County is that prices are already rolling over. The median price of a home in November was roughly flat, sliding 0.3 percent to $306,000. The average price of a home in Denton County fell 2.1 percent year-over-year in November to $344,353. This is not entirely surprising considering the months of supply in Denton County is up 30 percent compared to the same time last year. Home prices are a function of supply and demand.

The City of Denton fared a bit better in November. Home sales slid 2 percent, but pending sales in Denton fell roughly 20 percent compared to last November. Median home prices in Denton rose 3.2 percent while the average price of a home in Denton climbed 7.1 percent to $268,322. The City of Denton recently saw sales tax receipts decline for the 2nd month in a row. Combined with the pending home sales decline, this could be a sign of both home buyers and consumers tapping out with higher interest rates and elevated prices.

I would point out this softness in sales activity is occurring in the midst of one of the longest bull markets in U.S. history and a relatively healthy job market. Gasoline prices in Denton are some of the lowest in the country, so that begs the question of why we are seeing economic weakness?

If recent developments are surprising, then you haven’t been paying attention to what drove actually drove the DFW land grab during the last economic cycle, and particularly during the last 5 years of asset price inflation.

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The Federal Reserve’s gross distortion of the housing market is finally revealing itself, and the current weakness we are seeing should not really be a surprise to the supposed “professionals” who seem to be a bit perplexed by recent developments in the housing market.

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The inverted yield curve we saw last week was just another warning that many Americans are struggling to keep up with inflated prices and stagnant income growth. The Fed is always the last one to figure out what the real economy looks like because many of their economists live on another planet more closely aligned with Wall Street. This is why we are seeing the incessant chatter about whether the Fed will continue hiking rates or not. For all we know, the Fed could be forced to prematurely halt their balance sheet unwind early next year and actually cut rates instead of raising them. It is entirely conceivable that we get a tax cut recession instead of a soft landing. This longer term view shows an interesting pattern of lower highs in the Fed Funds rate just prior to the last several recessions, something not entirely surprising considering the deterioration in government finances and ballooning deficits.

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There are a lot of dominoes currently being balanced, and the housing market is just one of them.

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Pay close attention to the real estate industry spin as this cycle plays out, completes. There are many economists who are willing to downplay the recent developments in Dallas-Fort Worth real estate. Some will offer excuses, and others will make inane statements to deflect attention from faltering demand in a stagnating economy. One of the more amusing statements this week comes from Paige Shipp of housing analyst Metrostudy.

“I believe the 1 percent decrease in sales this year is due to the lack of homes on the market below $200,000, not a lack of buyers.” Paige Shipp

I don’t know whether to laugh or cry. Apparently a degree in landscape architecture doesn’t translate into a basic understanding of economics. Captain obvious would tell us that virtually anyone in Dallas Fort Worth would like to buy a home priced under $200,000. The question is how many real “buyers” are available at average prices currently north of $307,000 for the DFW market.¬†

I would encourage anyone interested in the DFW housing market to read the latest DMN piece on November home sales. It’s worth a read, not for its quality of content (Mr. Brown is still misusing the term “preowned”), but rather for the interesting quotes from various housing industry experts. Your hard-earned equity may depend on your ability to discern housing market spin from real, fact-based research.