“Anyone who has ever lived or worked in a corrupt dictatorship knows what happens. When the system is rigged, when ordinary citizens are powerless, and when whistle-blowers are pariahs at best, three things happen. First, the worst people rise to the top. They behave appallingly, and they wreak havoc. Second, people who could make productive contributions to society are incented to become destructive, because corruption is far more lucrative than honest work. And third, everyone else pays, both economically and emotionally; people become cynical, selfish, and fatalistic. Often, they go along with the system, but they hate themselves for it. They play the game to survive and feed their families, but both they and society suffer.”

— Charles H. Ferguson, Inside Job

Home sales in Denton fell 17% in August as prices continued to cool. The median price of a Denton home registered at $327,250 for August. That was down slightly from July but still up 20.3% from the same time a year ago. The average home price in Denton came in at $352,698, down about $10,000 from July figures but still up 19.2% from last year. Pending home sales in Denton were relatively flat in August, a sign that there is still adequate demand with mortgage interest rates hovering near record lows.

Available home supply in the city is still very tight, dipping slightly below one month in August. Resale inventory had been edging higher this summer, but new listings cooled last month with the start of school.

New construction inventory in Denton remains near record lows, and that is certainly putting a damper on overall sales numbers. There were just seven new home sales noted in the Multiple Listing Service last month, a drop of 77% from the same time a year ago. The 17 pending sales of new construction was a 51% decrease from August 2020.

New apartment construction in the Denton area has helped to mitigate pressure on rental prices. The average price of a Denton rental rose 5.3% compared to August of last year, according to MLS data. Adjusting for unit size, however, prices were up 9.6% from the same time a year ago.

Denton County is suffering from the same low levels of new construction inventory. Record-high prices for new homes and depleted inventory led to a 63% nosedive in new home closings compared to the same time a year ago. The average price of a new home in Denton County was over $512,000 in August. The average price for all construction types hit $507,404. That was a new record high and a rise of 29.8% from August 2020. Talk about asset price inflation!

Speaking of inflation, the latest reading on producer prices showed an 8.3% yearly increase in what businesses are getting ready to pass on to consumers. That was the largest jump in producer prices since 2010. This is important because producer prices eventually make their way to consumers. It’s also relevant because Federal Reserve chair Jerome Powell has continued to stick to his “transitory” narrative on inflation despite the overwhelming evidence to the contrary.

With the Federal Reserve staring at another potential taper tantrum, it will be interesting to see how the housing market responds to the eventual removal of unprecedented stimulus. The Federal Reserve is still engaged in $120 billion per month in asset purchases to keep the show going and keep asset prices inflated. Area home prices have responded in kind by registering new record highs amid massive injections of central bank liquidity.

The real test comes when all of the stimulus is removed. It’s a frivolous exercise to make any assumptions on the strength of the housing market until the artificial stimulus is removed. Sadly, that has not stopped many agents and economists and sell-side pundits from talking up the housing market and all of the “pent-up demand” driving the market. I have a number of charts referencing the source of that demand on my website. An $8.35 trillion balance sheet goes a long way toward stimulating home prices.

You know what else that balance sheet stimulates … stocks!

Recently revealed disclosures show that Dallas Federal Reserve President Robert Kaplan has been enjoying the fruits of the Federal Reserve’s labors. The Wall Street Journal revealed how Kaplan was actively trading stock during the COVID pandemic: “Federal Reserve Bank of Dallas President Robert Kaplan made multiple million-dollar-plus stock trades in 2020, according to a financial disclosure form provided by his bank.”

According to Kaplan’s disclosure, the Goldman Sachs alumnus has 27 different asset holdings valued at a million or more, including some bond exchange traded funds.

David Belle remarked how the optics of Kaplan’s trading activity last year are pretty much deplorable: “The Fed had never bought corporate bond ETFs before. The year they do, Kaplan is active in the space. Again, sure, this might be a very feasible investment strategy. But one thing matters when you’re in the public eye … OPTICS.”

Epsilon Theory co-founder Ben Hunt summed up the situation: “Dallas Fed prez Robert Kaplan trades e-minis at >$1m per clip. Boston Fed prez Eric Rosengren trades in and out of Annaly and mortgage REITS. A junior analyst at Citi has more restrictions on her PA than Fed governors.”

Investment research firm Hedgeye offered a scathing thread: “This is unscrupulous and morally bankrupt behavior by the very people who are tasked with maintaining employment and price stability, mandates of great importance to our country and society.”

The New York Times noted how Fed officials’ trading activity has fueled calls for more accountability. Fed historian Peter Conti-Brown called out Kaplan’s energy stock trades: “Mr. Kaplan was buying and selling oil company shares just as the Fed was debating what role it should play in regulating climate-related finance. And everything the Fed did in 2020 — like slashing rates to near zero and buying trillions in government-backed debt — affected the stock market, sending equity prices higher.”

The Dallas Fed tragicomedy was accompanied by a CNBC appearance from former Dallas Fed chief Richard Fisher excusing Kaplan’s behavior as no big deal. Contrary to Fisher’s assertions, the revelations surrounding Kaplan and his trading activity apparently were a big deal. Bloomberg reported that Robert Kaplan and Boston Fed chief Eric Rosengren will be selling their stock holdings to avoid “the appearance of any conflict of interest.”

It should go without saying that the wealthy elite in America have benefited from home price inflation. Real estate inflation is a gift if you have significant real estate holdings to profit from it. The same holds true for equities.

Imagine running $120 billion in monthly quantitative easing (QE) along with zero-interest rate policy with the producer price index up 8.3% and Denton County home prices up 30% while feigning concerns about inequality, and then subsequently laughing all the way to the bank selling your stocks because of the “appearance” of ethical concerns.

It’s pretty comical to think that Martha Stewart spent time in prison and Pete Rose was banned from baseball, yet somehow Fed officials get a free pass to cash in their holdings with stock prices near all-time record highs while major financial news media yawns. This is the kind of behavior you would expect in a corrupt third-world dictatorship, but apparently that’s where we have arrived. Just when you think the public’s trust in our financial institutions can’t sink any lower, the Dallas Fed has managed to lower the bar even further.

“But there is a sort of ‘Ok guys, you’re mad, but how are you going to stop me’ mentality at the top.”

— Robert Johnson

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

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