New home sales were revised lower in November. The Census Bureau reported new home sales at a seasonally adjusted annual rate (SAAR) of 841,000 units last month. New home sales were still up 20.8% compared to last year, but sales dropped 11 percent from the revised October figure of 945,000 units. August and September were also revised lower. Let’s dig into the numbers and find out what happened.

The median price of a new home in the U.S. stood at $335,300. The average price was $390,100. Months of supply for new homes stood at 4.1 months of supply. That’s a 13.9 percent increase from October levels, but the supply of new homes is still down 26.8 percent from the same time last year.

I have seen some absolutely hilarious spin during the last few months from housing industry shills masquerading as professional economists. They keep cheering on the strength of the U.S. housing market and record high prices in the face of global pandemic where millions of Americans are still receiving unemployment assistance. According to these real estate industry hacks, the “fundamentals” look very solid as we head into next year. After all, there’s a massive cohort of millennials just chomping at the bit to buy a new home once they cash in their gains from their Robinhood accounts.

The problem with these professional economists is that they lack any semblance of professionalism. They are an insult to their profession. I guess that’s why they call economics the dismal science. 2020 will likely go down as the year many economists lost their minds. These economists were already making weather forecasters look like geniuses, but when it comes to the housing market apparently the bar is still not low enough. I fully expect agents to play up the real estate market and paint a rosy picture, but when your job is to provide concrete objective information on the economy and you do exactly the opposite that’s another level of deception entirely.

Facts matter, and policies have consequences. The simple truth is that the fundamentals for the U.S. housing market are a train wreck. The housing market is as risky as it has ever been thanks to the continued largesse of a corrupt Congress and the Federal Reserve. As a reminder, the Fed started pumping billions into the markets last fall, before the Covid pandemic even reached U.S. shores. Tens of billions were flowing into the banking system every single night to keep the shine on our too-big-to-fail banks. The Fed was already selling out U.S. taxpayers to keep Jamie Dimon’s train wreck of moral hazard called a bank flush with liquidity.

Along comes the Covid-19 virus and what do the Federal Reserve and Congress do? They flood the banking system with trillions in new liquidity and shove another bailout of parasites and profiteers down the throats of Americans and call it the Care’s Act. You’d have to be pretty depraved to come up with a more flawed concept of stimulus for the poor and unemployed that what we saw earlier in the year. But make no mistake, Congress is trying to outdo themselves once again with a second round of stimulus before the new year. McConnell and even many in the Democratic establishment are pushing for a stimulus-free stimulus package with bevy of pork for their rich donors. It’s the modern version of the Hunger Games, but every district is experiencing a booming housing market.

While hack economists continue to talk up the strong fundamentals for the real estate market, there’s only one fundamental that matters, and that’s the Federal Reserve’s willingness/ability to keep this show afloat…

Federal Reserve Balance Sheet December 16 2020

The latest numbers for new home sales indicate the Fed is already in trouble again. While driving income and wealth inequality ever higher with trillions in new trickle-down stimulus, home affordability has been getting crushed. Even with low rates, the picture has not really improved for many millennials. They are just getting squeezed into a smaller box while the Federal Reserve touts an economic recovery for the top 10 percent of Americans, and specifically for the top one percent.

The bifurcation in the housing market couldn’t be more evident in the Dallas-Fort Worth area. All you have to do is look. On the surface sales look strong, and prices seem manageable. Median and new home prices in the DFW area look pretty reasonable, and new home inflation looks tame. When you see the price per square foot new home buyers are paying, the story unravels pretty quickly. It’s all justifiable as long as the Fed keeps printing trillions in new liquidity to keep the show going, but under the surface the social contract continues to break down because the stimulus doesn’t trickle down. It never does, but the Fed keeps pretending otherwise. Ditto for many of the real estate industry shills. As long as they can keep selling homes and raking in commission fees it’s all good. Every day is a great day to buy a home.

Reality suggests there is more reckoning to come. There are mounds of new debt piling up, and someone is going to be asked to pay the bills. The wealthy donors driving policy in Congress want to make sure the costs of all this new debt are borne by those who can least afford it. It’s a familiar script, with plenty of implications for the housing market. How this plays out as we head into 2021 is anyone’s guess. What I do know is that when it comes to the real estate market, “fundamentals” are not currently part of the equation.

Merry Christmas, and may the odds be forever in your favor.