2020 is going to be memorable for a number of reasons, and the housing market is certainly one of them. With the Federal Reserve injecting $trillions in Covid stimulus to prop up the flailing U.S. economy, Denton Texas home prices managed to completely detach from traditional fundamentals in July. Denton TX home prices skyrocketed 14.8 percent to an average price of $316,601 last month, easily shattering the all-time record. 3647 fewer people had jobs in Denton according to the latest employment report, but apparently it didn’t matter. 2020 is all about central bank liquidity and the monumental efforts to prop up perverse incentives, zombie corporations and failing systems during an election year.

Across North Texas the housing market has completely detached from the real economy this summer. Denton County lost 23,708 jobs compared to last year, but home prices rose 5 percent in July on the back of Fed stimulus and record low mortgage rates. That’s nothing compared to the price action in Argyle, just south of Denton. The town of Argyle saw average home prices jump 22.9 percent last month. In the City of Dallas, where Covid-19 cases continue to spiral higher and 33,273 jobs have been lost according to the latest figures from the Texas Workforce Commission, average home prices leaped 20.1 percent in July. With rates at record lows and the supply of homes limited in many areas, prices have responded by going completely nuts.

Both prices and sales have been on a tear this summer as buyers came out of lockdown and rushed to make up for lost time in the pandemic. Denton County home sales rose 21 percent in July, easily eclipsing the record for sales in a single month. Home sales for the entire DFW market were 21 percent higher while pending sales jumped 13 percent. August should be another solid month for the North Texas real estate market, but what follows is a big question mark.

Available home inventory continued to plummet across North Texas this summer. The supply of homes in DFW fell 38 percent in July to only 2.3 months. Denton County saw months of supply shrink 43 percent to just 2.0 months. The 2.1 months of supply in the City of Denton was a 28 percent decrease from last year. This is happening amid the backdrop of massive unemployment in the U.S. where we just saw the 20th consecutive week of unemployment claims of a million or more.

The only thing that matters (so far) in 2020 is the endless supply of liquidity from the Fed. For the time being that liquidity is propping up zombie corporations with negative cash flow and sending the stock market to new highs. Some of the best performing stocks in 2020 are companies which have no actual profits. It’s enough to make your head spin, but this is the lunatic asylum facilitated by central bankers. It all works until it doesn’t.

The problem of course is all of this new liquidity comes with a hefty price tag. One person’s asset is another person’s debt obligation. The pile of debt continues to spiral higher. U.S. wealth and income inequality were already near record levels coming into the pandemic, but the Covid-19 bailouts have taken things to a whole new level. Amazingly the Powell Fed continues to insist that Federal Reserve policies are not contributing to inequality.

¬†“It’s difficult to get a man to understand something when his salary depends upon his not understanding it.” Upton Sinclair

It takes an enormous effort to prop up the show on Wall Street and distract the American public from the underlying economic wreckage. This would help to explain the Federal Reserve’s 2019 budget with over 19,000 employees and a whopping $2.3 billion paid out in salaries last year. Even if you bought the ridiculous narrative that the Fed’s policies aren’t exacerbating inequality, Table 13 in the latest publication of the Federal Reserve budget shows the Fed’s payroll is the poster child for institutional bloat. The Federal Reserve now has 1707 “other officers” earning an average salary of $246,488 per year. Nope, no inequality there.

Dr. Lacy Hunt has repeatedly warned about the declining marginal product of debt within the U.S. economy. The Powell Fed doesn’t seem to care. They are pulling out all the stops in an election year to keep the show going. The North Texas housing market has completely detached from the underlying economy as a result. That’s going to pose some real challenges as we finish out the year. A number of Realtors are cheering the fabulous summer selling season (a stick save courtesy of Fed intervention), but the eventual price tag is going to be very expensive.

Plunging mortgage interest rates have been helping to keep monthly payments manageable. There’s a reason Jerome Powell isn’t thinking about raising rates any time soon. Any rise in rates with asset prices at stratospheric levels would be extremely problematic for the housing market and the economy in general.

30-Year Mortgage Interest Rate August 6 2020

The Fed has continued to gobble up a huge chuck of U.S. Treasury securities and mortgage-backed securities as its balance sheet has blown out with pandemic damage control…

Fed Balace Sheet Blowout August 5 2020

While exploding the money supply for the parasitic financial system, the Federal Reserve is also busy destroying the purchasing power of the U.S. dollar for consumers. The purchasing power of U.S. labor hit a new all-time low in July.

Purchasing Power of U.S. Consumer Dollar July 2020

The unemployment rate has more than doubled in the Dallas-Fort Worth-Arlington MSA (8.4% in June, up from 3.5% in 2019), but it doesn’t matter. DFW home prices still rose 10.4% last month with all of the artificial sweeteners from the Fed & Treasury.

DFW Employment June 2020

As the financial hub of the state of Texas, Dallas showed you don’t need a growing economy to have rampant home price inflation. All you need is central bank intervention. Dallas home prices spiked to a record high of $471,146 in July

Dallas TX Average Home Prices July 2020

Average prices rose just 2.9 percent in city of Fort Worth last month, falling from June’s record high to $281,394. Fort Worth home prices are rising from a much lower base, but still in an uptrend.

Fort Worth TX Average Home Prices July 2020

2020 is turning out to be one seriously wild ride in the housing market. Be safe out there.