The City of Denton saw home sales rise 12% to start the new year. Pending sales were up roughly 8%. The median price of a Denton home rose 4% to a new all-time high of $285,900. Average prices rose 5.7% to $305,124. The supply of homes for sale in Denton crashed 66% to just 7 tenths of a month. That’s the lowest figure for inventory in the NTREIS series going back 20 years.
Home sales in Denton County were up about 10% in January with pending sales up by a similar amount. The median price of a Denton County home rose 6.7%. The average price jumped 13.5% to a record high of $406,980. Prices per square foot reached new highs as buyers tossed out offers like Halloween candy last month.
For better or worse, the local housing market is now a dependent of the Fed. Over $3 trillion in quantitative easing has ramped home prices to record highs while driving inventory to record lows. North Texas housing no longer resembles anything close to a normal market. COVID-19 mortgage forbearance has been extended by the FHFA for up to 15 months while the Fed is busy blowing another massive asset bubble. The American Enterprise Institute has called out the Federal Reserve for blatantly distorting the housing market, but the Fed is still flooding the system with liquidity. Some FOMC officials are calling for even more inflation.
America’s insatiable appetite for real estate during the pandemic has even caught the attention of Saturday Night Live comedians who mocked Americans stalking homes on the internet.
“The pleasure you once got from sex, now comes from looking at other people’s houses,” the sketch says.
The Fed-fueled ramp has been a boon for home sellers and existing home owners. It remains a cruel joke for many buyers trying to find affordable housing. If you are submitting an offer in the lower price tiers, you are often wasting your time with a full price offer unless you have some additional sweeteners (think all-cash, free leaseback, higher price etc.). Millennials with little or no down payment are now basically spectators in a casino. Home builders have been keen to capitalize on this dynamic during the pandemic. It’s not surprising to see buyers chasing expensive new construction as the only available alternative to lock in a contract.
Many real estate agents keep talking about a lack of supply being the issue behind rampant home price inflation. They aren’t entirely wrong. There’s definitely a supply issue, but the lack of supply isn’t in homes. There simply aren’t enough politicians or Federal Reserve officials who think it’s wrong to inflate their own portfolios at the expense of the next generation, or the bottom 90% of the current generation.
The stock market is hitting new highs while more than 8 million Americans fall into poverty. That’s the definition of a failed state, yet the Federal Reserve is still priming the pump. The number of under and unemployed Americans is still at crisis levels. According to the January employment report there are still 10.1 million Americans without a job. There are millions more who don’t earn a living wage. The more accurate gauge of the U.S. unemployment rate (listed as U-6 on the BLS tables) is still at 11.1%. It would be higher than that if it weren’t for millions of Americans simply dropping out of the labor force.
Economists continue to lobby for the destruction of the middle class and American labor. For the army of economists employed by the Federal Reserve it’s part of the job description. Mendacity is considered a skill set. Jerome Powell recently made one of his regular speaking engagements at the Economic Club of New York, where he once again told us that inflation is too low. Powell said it’s still too early for the Fed to consider tapering its monthly asset purchases because inflation is running short of its 2% target. For the record, average Dallas-Fort Worth home prices were up 14.4% in January from the same time a year ago.
You know there is something seriously broken in the CPI (Consumer Price Index) when home prices are hitting new records and owner’s equivalent rent is falling. This is how Powell receives cover from Congress for priming the pump to enrich the wealthy and well-connected. Any talk of real inflation in the economy would immediately spark discussions of spending constraints.
Maybe Powell should visit a local elementary school and talk to the overworked staff or hold a roundtable discussion in front of a Walmart or a dollar store. Perhaps then he would be challenged to answer why the purchasing power of the U.S. dollar continues to hit new lows.
In his latest speech at the Economic Club of New York, Powell made no mention of raising interest rates or normalizing the Federal Reserve’s massive $7.4 trillion balance sheet. Wall Street wants the party to continue, and so it does. It must be a pretty cool job to be able to inject trillions of liquidity into the financial system and watch the value of your Blackrock holdings rise as a result. When he leaves the job, he’ll probably make even more cash with a lucrative speaking tour like his predecessor. Where do we sign up?
Come to think of it, the Federal Reserve system always seems to be hiring somewhere. With more than 1700 “other officers” making an average of roughly $246,000 per year there’s obviously room for some cost efficiencies at the Fed. As of 2019 the average salary of all the 19,581 employees in the Fed system was over $117,000 per year. I’m sure the 2020 Federal Reserve budget will show that COVID-19 had little to no effect on Fed staffers and their personal quest for full employment.