DFW contract activity faded in April. Looking at the preliminary sales data for North Texas, it is apparent that the stimulus from the big drop in mortgage rates has run its course. It will be another week or so before we get the official press release numbers, but the data is telling. April was another good month for home sales. Actual closings for home sales showed a robust real estate market in the Dallas-Fort Worth area, but contract signings were another matter.
Preliminary sales data indicate that the DFW real estate market is peaking prematurely this year. Pending sales activity is not reflective of a strong housing market. It would appear that the trend of stagnating sales will likely resume going forward. I am not surprised. What we just experienced during the first quarter of 2019 was a creative sleight of hand to pull demand forward and keep the markets propped up, including the U.S. housing market. It is telling that the carnival barker in chief was calling for a 1 percent cut in interest rates and more quantitative easing this week. Election season is apparently starting early.
The Federal Reserve has spent the duration of 2019 jawboning markets higher at the behest of Trump. So much for the lauded Fed “independence”. What has all of this policy capitulation and jawboning gotten us? Well, Dallas Texas home prices did manage to eek out a new high in February according to Case-Shiller. The Big D is still one of the more pronounced housing bubbles in the U.S. That can be either good or bad depending on whether you already own a home.
The National Association of Realtors reported a much-improved pending home sales index for March, up by 3.8 percent on a monthly basis, yet the index was still down 1.2 percent from the previous year and the 15th consecutive month of declining contract activity. Well guess what ladies and gentlemen. You are probably going to see that streak extended to 16 months, judging from the preliminary April sales data in the DFW area.
With mortgage rates creeping higher during the month of April, it doesn’t take a rocket scientist to see why mortgage purchase application activity is once again stalling. The disturbing fact is that activity is stalling when rates are still 25-30 basis points lower than they were a year ago. This is the essence of stagflation. It is the result of continuous Federal Reserve market intervention and the Fed’s refusal to actually let the markets function. Even as wealth inequality in the U.S. reaches new heights, the Fed and administration officials are calling for ever more stimulus to extend the “recovery”.
Hold on to your hats, because the rest of the year promises to be an interesting show indeed. It was a nice rebound for the U.S. real estate market during Q1, but that rebound is looking more like the life cycle of a Mayfly.