“People of privilege will always risk their complete destruction rather than surrender any material part of their advantage. Intellectual myopia, often called stupidity, is no doubt a reason. But the privileged also feel that their privileges, however egregious they may seem to others, are a solemn, basic, God-given right.”
— John Kenneth Galbraith
Denton home sales went parabolic in September, rising 53% compared to the same time a year ago. Pending home sales in the city of Denton jumped 22%. Available inventory plummeted 46% to just 1.5 months of supply at the current pace of sales. Not surprisingly home prices marched higher in September. Median prices in Denton jumped 9.4% while average prices rose 11.1%. Average home prices in Denton are off their record spike in July, but still sitting above $300,000.
Denton County home sales ramped 30% higher in September with pending sales up 18%. Median prices rose 7.8% with average prices up 10.9% from the same time a year ago. The supply of homes in Denton County fell 53% to a new low of just 1.5 months’ supply. Available inventory has all but vanished from the local market as the supply of new homes has failed to keep up with demand.
Denton County is sitting on just 1.8 months of supply for new construction. That’s a 60% drop from September 2019. The supply of new homes in the entire Dallas-Fort Worth market fell 49% from last year as the search for affordable homes reached a torrid pace.
With the Federal Reserve’s liquidity firehose still monetizing the spiraling U.S. debt, Denton homes have never been more expensive. It’s a testament to the power of central bank liquidity. It’s remarkable considering the U.S. employment backdrop. Initial claims for unemployment rose 53,000 in the latest weekly survey. The 4-week moving average of weekly U.S. unemployment claims rose to 866,250.
If you are wondering why Congress can’t seem to get a second stimulus package approved despite a massive unemployment crisis, the reason should be obvious. They. Don’t. Care. Many members of Congress and most of the managerial staff within the Federal Reserve have likely been unaffected by the recent recession. The stock market is up. Home sales and prices are through the roof, so there is no crisis in their insulated world view.
Jerome Powell and Federal Reserve officials continue to push for more inflation to make up for sluggish economic growth in previous years and the sharp drop in economic activity related to COVID-19. It’s a poorly kept secret that the Fed’s preferred metrics of inflation grossly understate what most U.S. families are actually experiencing. Housing inflation is a perfect example. Ditto for healthcare and education.
The Fed’s policies (piling debt onto more debt with trillions in trickle-down stimulus) are a direct cause of the anemic, uneven growth in the U.S. economy. The Fed’s trickle-down monetary policies also guarantee that most of the gains go to the top 10%, and particularly the top 1%. If you don’t own assets or passive income-producing capital, you are getting buried by the Fed’s ridiculous inflation targets. Those inflation targets benefit wealthy Americans who own assets like stocks and real estate.
BlackRock is perhaps the largest asset management firm on the planet. Its latest earnings report showed just over $7.8 trillion in assets under management. That’s equivalent to 39% of U.S. GDP. Earlier this year the Federal Reserve chose BlackRock to buy corporate bond ETFs. The Fed is run by Jerome Powell. Powell is heavily invested in the market via a large personal asset portfolio with BlackRock. If you are wondering how the stock market could bounce back so quickly amid the pandemic even as millions of Americans are still unemployed, it helps to know who is priming the pump and why.
Fed Vice Chairman Richard Clarida recently suggested the recession may be over.
“This recession was by far the deepest one in postwar history but it also may go into the record books as the briefest recession in U.S. history.”
Not to be outdone, San Francisco Federal Reserve Bank President, Mary Daly, said the U.S. economy and Fed policy are in a good position. Daly apparently has no reservations about enriching the 1%.
“We’ve got the economy and the policy in a good position right now... I am not willing to trade millions of jobs... to keep the stock market from going up for the few who have those holdings.”
That’s a pretty remarkable statement for a labor economist, but it fits within the Fed narrative. Maybe someone should tell her a large percentage of those “jobs” she’s referring to don’t actually pay a living wage. In reality the recession is over for Powell, Clarida, Daly and the managerial class who earn handsome salaries while backstopping Wall Street corporations or making excuses for their continued malfeasance. It should not be surprising that the Fed’s view of the “economy” is quite different from the nonprofits in Denton County which are bracing for a surge in evictions.
If you are wondering what’s in store for the housing market, I highly recommend Hoisington Investment Management’s latest quarterly review. It’s a good summary of where we’ve been during the past 40 years and what could be in store after the election. Dr. Hunt specifically addresses the declining marginal revenue product of debt and the continued secular erosion in the U.S. economy. Risks ahead include a debt financed fiscal package which could produce short term inflation followed by more deflation. If the Fed’s liabilities are somehow deemed legal tender (a major potential policy shift), the U.S. could see a much more serious inflationary dynamic.
If you are in the market to buy or sell a home, be safe out there. COVID isn’t the only risk for the housing market. We are also drowning in bad ideas from central bankers.