Aaron Layman

October was a solid month for home sales, particularly for Denton County. The local housing market continued reflating on the Fed’s liquidity and some very favorable year-over-year interest rate comparisons. North Texas home sales jumped roughly 8% in October, while Dallas-Fort Worth home prices experienced some of the best gains in two years. The inventory of DFW homes declined in October, falling to 3.2 months of supply. Pending sales for October were higher, indicating we’ll likely finish out the year on a positive note for the housing market.

Denton County managed to eclipse previous records with some impressive growth. Looking at the 12-month rolling average for sales, DFW still hasn’t taken out the previous cycle highs. Denton County has knocked it out of the park, as a resurgence in new home sales helps to fuel the rebounding housing market. Denton County saw a 17% rise in closed sales in October, while pending homes sales were also higher by about half that percentage increase. The average price of a home in Denton County rose 3.7% in October, less than the 5.5% increase for the DFW area. With the rebound in sales, the number of homes available in the area has declined to 2.9 months of supply.

The City of Denton hasn’t enjoyed the recent rebound to the same extent of some surrounding areas, and that’s largely due to the limited supply of housing stock, particularly a limited supply of new homes. Denton has a limited supply of resale properties on the market, and what’s for sale is still at elevated prices.

Of the 250 or so pre-owned homes on the market in Denton, the median asking price is roughly $300,000 while the average asking price is more than $390,000. Both figures are completely detached from actual closed prices for Denton pre-owned homes in October. Median closed prices were at $251,250 for Denton pre-owned homes last month, while average closed prices were at $275,307. With such a mismatch between supply and demand it’s easy to see why home sales in the city of Denton have been lagging the surrounding area recently.

New home sales continued to lead the housing rebound in the DFW area in October. New construction sales were up by roughly 16% while average new home prices fell 3.2%. New home sales jumped over 20% in Denton County last month, as new home prices fell by 3.9%. The median price of a new home in Denton County declined by 5.4% in October. The rolling average for new home prices in North Texas continues to trend downward from the summer 2017 peak, and that is helping to boost sales when combined with dramatically lower rates.

The most important factor driving the North Texas home sales rebound in October is low mortgage rates. Interest rates were 114 basis points lower in October compared to the same time a year ago. This is the easiest year-over-year comparison we’ve had in recent memory. For those who remember, North Texas home sales began tanking in September 2018, and they didn’t rebound until February of this year … after it became clear the Federal Reserve was going to completely cave on normalizing policy, and bring rates back down to the basement.

A few months of repo (repurchase agreement) market madness and three interest rate cuts later, and here we are with the Fed now staring at another mess of its own making. It’s interesting to hear the Federal Reserve’s mouthpieces talking about tepid inflation in the economy while prices for automobiles, homes, health care and stocks are at record highs. It’s almost as if Federal Reserve officials are afraid to tell the American people the truth.

The unfortunate truth is that the Fed is still bailing out Wall Street at every turn and enriching the 1 percent with more trickle-down stimulus. The Fed has added $288 billion onto the Fed’s balance sheet since September, largely to quiet disruption in the overnight repo markets. The New York Fed refuses to discuss which primary dealer banks are receiving the funds, but JPMorgan is one of the likely recipients. As Pam and Russ Martens have pointed out, JPMorgan has pleaded guilty to three criminal felony counts in just the past five years. JPMorgan’s chairman and CEO, Jamie Dimon, is now a billionaire. And the Federal Reserve wonders why they have a credibility problem?

The Fed’s trickle-down stimulus is continuing to drive inequality within the economy and bifurcation within the housing market. This is a big reason why affordable homes are in short supply in the DFW market, and certainly here in the Denton area. First-time homebuyers, as if they didn’t have a difficult enough time already, are still competing against a large group of investors, flippers and speculators. This is the unfortunate reality of our hyper-financialized housing market.

For now, at least, the North Texas real estate reflation scheme still has legs. Very soon, however, the year-over-year rate comparisons are going to become more difficult. That’s the nature of the Fed’s credibility trap. The Powell Fed is kicking the can down the road to sustain the economic expansion. Powell and other FOMC officials know the economic expansion is not being broadly distributed among the American public, but they keep pouring gasoline on the fire anyway to keep the party going. The law of diminishing returns requires more and more stimulus to keep the charade going, and as a result, budget deficits and the federal debt are going through the roof.

Last year many of the pundits and “professionals” in the real estate sector were worrying about higher interest rates. Some agents and lenders were even using rising rates as a scare tactic to spur people to buy homes. They weren’t paying attention to what is actually happening in the real economy. The real economy was choking to death on a modest rise in interest rates. The DFW real estate sector began tanking before mortgage rates could even hit 5%.

Interest rates are low because they have to be unless Trump and the Powell Fed want to see the wheels fall of this wagon. The interest expense on the U.S. national debt is near a record, and annual budget deficits are growing, yet these are supposed to be the good times. Technically we’re not even in a recession. To maintain appearances on that $23 trillion national debt, the interest expense has now swelled to roughly $600 billion

This is why rates are back in the basement, and why they are not likely to rise in any meaningful way in the near future. The state of the U.S. economy, and certainly the DFW real estate market depends on super cheap credit.

If you are in the market to buy or sell a home, enjoy the show for what it is, an elegant distraction from the Fed’s efforts to inflate asset prices while enriching the wealthy and well-connected. Low mortgage rates provide an opportunity for those looking to buy a home or refinance an existing mortgage. They are also a signal of underlying structural economic weakness.

AARON LAYMAN is the owner-broker of Aaron Layman Properties LLC. Contact him at 281-935-2889, or

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