The North Texas housing market continued to cool with mortgage rates rising to eight percent in October. Closed sales in Denton County fell 9 percent from a year ago. Pending contracts slid 2 percent. Inventory remained steady at 2.5 months of supply. Percent of list and days on market were relatively unchanged. Median home prices in Denton County slid to $450,000 in October, down 1.3% from a year ago. Average prices cooled as well, sliding to $538,063. Prices have cooled for 3 months in a row.

It’s not just normal seasonality at play. Higher mortgage rates have simply eaten away at demand. According to Mortgage News Daily the rate on a 30-year fixed rate mortgage reached a new cycle high of 8.03 percent during the month of October. That put a real dent in the affordability of local homes for prospective buyers.

Janet’s parlor trick with the composition of Treasury issuance (QRA) provided a short-term boost to liquidity and some temporary relief on rates. Rates have fallen roughly 50 basis points from the October high. The temporary boost to liquidity and easing of financial conditions is a double-edged sword. The Federal Reserve is still trying to bring inflation down. Janet’s election cycle fiscal politics only served to make Jerome’s task even more difficult. It appears volatility is going to remain a theme until something really breaks.

The U.S. labor market is still structurally tight. Layoffs are increasing, but the alarm bells aren’t ringing yet. Credit delinquencies are beginning to rise, particularly for younger demographic cohorts. Auto loan delinquencies are also on the rise.

Real Estate Industry in Flux

Many in the real estate industry are still calling the low for home sales volume. While anything is possible, history suggests we still have a bumpy road ahead. That road has been made even more challenging with the slew of recent lawsuits rippling through the industry. While NAR and major brokerages are busy appealing the Sitzer/Burnett verdict more suits keep popping up on behalf of both sellers and buyers. The entire residential real estate model is in limbo now as we wait for the judge’s final order in the case.

The real estate market is still hanging tough for the time being. Deals are still getting done, and buyers are still out in the market. It’s just harder to make the numbers work in this distorted, higher-rate environment.

Builders are still taking advantage of the opportunity work through their pipelines. NTREIS stats show new construction sales in Denton County were up 42 percent year-over-year in October. That contrasts to the 22 percent decline in existing home sales. Builders are capturing a higher share of the market by tackling the affordability equation. New home sales accounted for a third of the total sales volume last month. Home builders know what’s at stake, so they are doing what they can to maintain deal flow. Big incentives for rate buy-downs and closing incentives will likely continue through the end of the year.

Proposition 4 Brings Property Tax Relief

Property tax relief for Texas homeowners is on the way. Proposition 4 was approved by more than 80 percent of voters in the November 7 constitutional amendment election. The homestead exemption rises to $100,000. School tax rates will be 10.7 cents lower per $100 of property value. The amendment also brings a new 20 percent annual cap on the rise in business property values.

Taxing districts will be sending out those tax bills to property owners. The notices for 2023 should reflect the new savings passed with Proposition 4. If you received a property tax bill before the recent election, you may want to check your account at the end of the year to make sure it reflects the passage of Prop 4 tax relief.

BLS CPI Shenanigans Continue

The Bureau of Labor Statistics surprised the markets with some cooler than expected inflation readings in October. All they had to do was take the massive manipulation of health insurance costs and keep burying the evidence. As Wolf Richter put it, the ridiculous chickenshit from the BLS should result in some top level staffers at the BLS losing their jobs. He’s right. The absurdity of what the BLS has done to manipulate health insurance costs in the CPI formulas is mind boggling.

“So today’s 1.1% month-to-month increase reduced the year-over-year collapse from -37% in September to -34% in October.”

You all saw a 34 percent decrease in your health insurance premiums since last year, right??? Wink, wink.

Even with the manipulated numbers, core inflation is still running about double the Fed’s 2 percent target. While economists keep praising the falling rate of inflation, real prices for consumers are still moving higher. A slower rate of inflation simply means your purchasing power is getting destroyed less quickly.

Here’s a chart of CPI and Core CPI

Consumer Price Inflation October 2023

Here are the same two series, but with a more realistic perspective of what consumers are experiencing…

Consumer Price Inflation Reality October 2023

It’s still a challenging market to buy or sell a home. The mortgage market continues to whipsaw buyers. Sellers are still faced with the conundrum of where they go when they sell. Flexibility and patience are key if you are trying to maintain your sanity. If you need seasoned real estate professional to help you navigate the process you know where to find me.

U.S. Mortgage Interest Rates Nov 9 2023