layman land

A land sale brokered by Aaron Layman Properties. 

The city of Denton posted its second year-over-year decline in home sales last month. It appears the manic frenzy for homes is finally losing some steam.

It was bound to happen with inventory at such depleted levels — closed sales declined 18% in July with pending sales sliding 16%. Prices fell from their record highs in June, but the average price of a home in Denton was still 15% higher than July of last year.

Available home inventory is still about half of the historical trend, but the number of homes for sale in Denton is up by roughly 40% from the historic lows we saw in February. Existing home supply is beginning to come back to the market. Builders are still maintaining a limited supply of homes, keeping new construction inventory at record lows in Denton. Many of the publicly traded builders have been enjoying fat profits this year, so they are in no rush to spoil the party. They are reluctant to kill the golden goose when they have waiting lists of customers and order backlogs.

Aaron Layman

Aaron Layman

New home builders were presented with a once-in-a-generation opportunity to move inventory during the COVID-19 pandemic and recovery. As housing supply begins to normalize, builders will probably start returning more phone calls and expressing a little more interest in “selling” their product. That’s the nature of a bubble. Home sellers can get away with skipping much of the hard work when FOMO (fear of missing out) is gripping the market. When the tide rolls out and buyers quit making ridiculous offers on homes or lining up to get on a waiting list, sellers suddenly develop a little more motivation.

This Reddit lament from Canada sums up the risk of chasing a FOMO housing market:

“Sorry if this is horribly formatted, I’m not a redditor.

“My wife and I bought 6 months ago at the height of the housing market it seems now. We bought hours away from work (Toronto) as we both were working from home. We thought WAH would be permanent and we were both afraid of missing out on buying if we didn’t pull the trigger. Wife is being called back to work full time. I’ve been given notice that we’re going back part time come September.

“We listed our house a bit over two weeks ago, no offer has come in that we break even on let alone profit. Our realtor has told us the market is cooling and that it would be a surprise if we got what we were asking for. We’ve gotten a couple of offers, none of which are asking price.

“We’re at a loss. My wife is looking for work locally but due to the nature of her work she is unlikely to find equivalent in pay or opportunity. She also doesn’t want to leave her employer; she has great upward mobility and seniority there. I don’t personally mind commuting part time but she’s livid about the situation and refuses to live here now.

“My friends keep telling me that there is no such thing as a Canadian market cooling and to just wait it out until it sells.”

While the Federal Reserve has been busy adding fire to the housing market frenzy, there have also been plenty of agents encouraging their clients to throw out crazy offers to “win” the bidding wars on homes here in North Texas. With FOMO gripping the local housing market this summer, caution was thrown to the wind on many deals. In the months ahead, buyer’s remorse could well be a thing again. If housing supply continues to build within a typical seasonal slowdown, those bidding wars could come to a screeching halt. Throw in some tapering by the Federal Reserve to cool down red-hot inflation numbers, and you have all of the ingredients in place for a housing market correction and some buyer’s remorse.

So far, the Fed has continued to ignore the inflationary pressures within the economy. The July prints for the consumer price index and the producer price index made the hot seat a little hotter. It’s also worth noting that the “shelter” component has yet to capture real rent increases people are experiencing. With shelter composing almost a third of the CPI inflation formula, there is some baked-in bad news waiting for the Fed. Anybody who has been shopping for a rental home in the area knows what I’m talking about.

Even with new apartments in the area, the average price of a rental home in Denton rose from $1,605 in July 2020 to $1,721 last month. That’s an increase of 7.2%. The Bureau of Labor Statistics’ official made-up version of shelter inflation showed only a 2.8% yearly increase for July. Apparently the BLS didn’t interview too many actual renters with their surveys.

Rent inflation in Denton County is much worse than official estimates are indicating. Multiple Listing Services’ data show average rental prices in Denton County rose from $2,041 last summer to $2,343 in July 2021. That’s a 14.8% rise in the cost of leasing a home. With home purchase inflation even higher, it doesn’t take a rocket scientist to realize the government’s official CPI metric of shelter inflation is an insult to your intelligence.

Speaking of insults, Congress is looking more like a den of vipers and thieves. It should come as no surprise that many members of Congress have access to inside information when legislation is being debated and policy is being formed, yet they still have a free pass to trade individual stocks. Several members decided to take advantage of the COVID-19 pandemic and purchase shares of companies they thought would be a hit as the pandemic raged. Never waste an opportunity as they say.

”Crime once exposed had no refuge but in audacity.” — Tacitus

Are you not entertained?

AARON LAYMAN is the owner-broker of Aaron Layman Properties LLC. Contact him at 940-209-2100 or sales@aaronlayman.com or www.aaronlayman.com.

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