The National Association of Realtors reported existing home sales for August at a seasonally adjusted annual rate (SAAR) of 6,000,000 units. That was up 2.4 percent from July numbers and a 10.5 percent increase from August of last year. According to NAR the median price of an existing home was $310,600 in August.  That’s an increase of 11.4 percent from August 2019. The average price of an existing home jumped 8.8 percent from last year to $342,500. August was the 102nd straight month of year-over-year home price gains. Home price inflation is running well ahead of Jerome Powell’s supposed 2 percent inflation target at the Fed.

Jerome Powell and the Federal Reserve say they are here to help. The real question is who they are helping. It certainly isn’t first-time home buyers. According to the August home sales data it seems pretty clear that millionaires are making out quite well courtesy of the Federal Reserve’s 2020 pandemic related interventions. Buyers shopping for an affordable home have been left holding the bag. The sales numbers for August show that homes priced at a $million or more saw a whopping 44% sales increase from the same period a year ago. The August home sales increases were entirely skewed toward luxury homes. Go figure! Existing home sales of more typical U.S. homes priced in the $250,000-$500,000 range saw a more modest 14.2 percent rise from last year.

Sales below the $250,000 mark declined sharply from last year, not surprising because there are few affordable homes left available to purchase. The Fed has made sure of that with their constant intervention in the markets to inflate asset prices.

According to NAR chief economist, Lawrence Yun, the housing market is the place to be:

“Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market,” said Lawrence Yun, NAR’s chief economist. “Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.”

That may be true for the time being, but there are already some cracks in the strong housing market narrative. The v-shaped recovery we have seen in the housing market this year is directly tied to the lockdowns and the Fed stimulus which followed. There are still millions of homeowners in mortgage forbearance, and it remains to be seen whether they will ever become current on those mortgages. Available home inventory has been artificially low for months, working in tandem with record low mortgage rates to help drive up prices.

I’m not so certain about Yun’s call for home sales increases through the remainder of the year. The Federal Reserve has made another fine mess in the housing market. Without additional stimulus from the Fed and/or Congress, things could certainly become more volatile heading into the end of the year.

It’s fairly obvious the rebound in the housing market this year has exceeded the rebound in the actual economy. Employment in the the Dallas-Fort Worth area is still below pre-pandemic levels.

DFW Employment August 2020

Despite fewer people having jobs, median and existing home prices in the Dallas-Fort Worth area rose 8.9 percent and 12.9 percent respectively last month. How do you like them apples?

DFW Median and Existing Home Prices August 2020