The easy year-over-year comparisons are coming to an end for the DFW housing market. Dallas-Fort Worth home sales rose one percent in November compared to the same time a year ago, while pending home sales were about 5 percent higher. DFW is capping off 2019 with nice little rebound in real estate sector. Next year the easy comparisons for the housing market will be a thing of the past. That 117 basis point drop in mortgage rates we saw for November won’t be there to stimulate sales. Area home prices which were inflated by the Fed’s intervention in the housing market will still be there to digest.
Throughout the DFW area home sales and prices were rebounding during the second half of the year as the Federal Reserve continued to pour liquidity into the markets. Median home prices rose 4 percent in November while average prices climbed 2.2 percent. The supply of homes in Dallas- Fort Worth fell to 3.0 months. Despite the apparently solid growth in November, average days on market rose to 54 days in November.
Denton County saw home sales rise 3 percent, with pending sales which were roughly 15 percent higher. Median home prices in Denton County climbed 2.9 percent while average home prices swelled 4.4 percent. The supply of homes in Denton County dropped back to only 2.7 months in November, but average days on market jumped 9 percent to 60 days, compared to the 55 days it took last year. It would appear buyers are catching on to the Federal Reserve’s parlor tricks. Affordability is still the critical component required to stimulate home sales sales.
As I have been explaining in recent months, the solid performance of the Denton County housing market has been primarily due to the new home sales market where builders have continued to shrink those average prices (and lot sizes) to lure prospective buyers. That trend continued in November with pending sales of new construction in Denton County ripping higher by an amazing 45%! Apparently local home builders are getting competitive to sell more homes. The median price of a new home sold in November in Denton County plunged 12.2 percent to $341,500, while the average price of a new Denton County home fell 7.9 percent to $386,609. As you can see from the chart below, new home prices peaked out in 2017 and have continued to trend lower.
Those lower new home prices help to explain the recent rebound in the housing market, but so does the huge drop in mortgage interest rates. The big drop in rates has also helped existing homeowners to unload their properties at these elevated prices.
Realtor.com’s 2020 national housing forecast shows a 4.9 percent decline in sales for the DFW area with a slight (0.5%) drop in prices. Senior economist, George Ratiu, provides an interesting picture of what to expect in the housing market next year. Ratiu also provides a stunningly naive view of monetary policy and the Federal Reserve along with it.
“While the bank’s two main objectives—stable employment and low inflation—remained on track in 2019, the rate cuts seemed aimed at walking a tightrope between maintaining US economic momentum amid a global economic moderation and placating investors’ expectations for growth.”
Anyone who believes the Fed’s main objectives are stable employment and low inflation hasn’t been paying attention. Either that, or he/she is simply willing to parrot industry spin to drum up some sales. Regardless, Ratiu should know better. While Jerome Powell has been busy doing the bidding of Donald Trump and primary dealer banks like JPMorgan, the bifurcation of the housing market has not slowed down. If anything it has gotten worse. The longer the Fed prevents the markets from clearing, the longer it facilitates imbalances.
The rebound in the DFW housing market this year is easy to explain. All it took was a complete capitulation from the Federal Reserve, along with 3 rate cuts and a massive balance sheet expansion which will receive a steroid injection at the end of the year. By the end of January 2020 the balance sheet could breach the $4.5 trillion mark as the Fed pulls out all the stops to bail out Wall Street speculators and stabilize a jittery repo market.
As we put a closing stamp on 2019 and the longest economic expansion in U.S. history, be mindful of the policies which were required to achieve it.