Denton’s housing market continued to cool in August.
Despite sizzling summer temperatures, many buyers were forced to the sidelines with mortgage rates posting new highs for the cycle. Home sales in the city of Denton were down 25% from August of last year. Pending contracts slid 6% year-over-year.
Median and average prices posted declines of 5.8% and 4.3%. Good homes were still selling fairly quickly in August, but there were simply fewer people who could afford the available housing stock. The stag-flationary housing market of 2023 continues to take shape.
With mortgage rates over 7%, home sellers and buyers have been forced to lower their expectations. Many sellers are offering concessions to get buyers to the closing table. For the 36 new homes sold in the city of Denton during the month of August, the average seller concession from the builder was more than $7,600.
Builders have been reducing prices, ramping up the incentives and even sweetening the deals for agents in some cases. With monthly payments through the roof, sellers are again making deals if they want to move inventory. One national builder has been offering $20,000 incentives along with $5,000 price discounts and a 2% BTSA (bonus to selling agent). That’s the kind of motivation you see in a slowing housing market.
Big seller concessions for mortgage rate buy-downs have been a common theme for most of the year. The concessions from builders have ramped up in recent weeks. It is important to note these generous seller concessions do not get captured in the reported sale prices. Real home prices are lower than what you see reported in most major news outlets and industry press releases.
The financialization of America’s housing stock
One of the more interesting trends to watch this year has been the continued financialization of housing. It should come as no surprise that Federal Reserve apologists are also some of biggest shills for higher home prices and the financialization of housing. As long as the numbers go up, it’s all fine from their perspective. All we need to do is build more housing, and the more the better.
There are some notable talking heads in the media who dismiss the institutional ownership of single-family homes while ignoring the long-term effects this development has on the overall market. Some agents are beginning take notice and calling it out.
“We’ve estimated that 30% of the housing stock in Charlotte, [North Carolina,] is owned by institutional investors. That’s a three-zero, which is a huge concern on the real estate side because that means a huge piece of our housing stock is owned by Wall Street,” real estate trainer and broker Leigh Brown said.
When prices are formed at the margins, major buyers of homes can move markets. This is precisely what has been happening in many markets across the U.S. Wall Street profiteers, private-equity parasites and Airbnb speculators have turned America’s housing market into a hot mess of unaffordability coming out of the pandemic.
The month of August checks in as the most unaffordable in history for prospective homebuyers. The monthly payments for new buyers entering the market were through the roof. Things weren’t any better for renters, either. Apartment List figures showed Denton apartment rents up 0.7% for the month of August. Rents were up 2.9% year-over-year and 29.9% since March 2020.
An astute observer might ask how this could happen when the U.S. has the most multifamily housing markets under construction in history. The answer boils down to financialization.
As more and more pandemic-related stimulus chased a limited pool of housing units, the market has become even more concentrated in terms of who owns the assets. More concentration among ownership makes it easier to manipulate prices higher. Sometimes an algorithm may be all that’s needed to juice prices higher.
A new class-action lawsuit charges Yardi Systems and 18 property management firms of rent price-fixing in cities across the country. Yardi’s RENTmaximizer software is a central issue in the lawsuit.
“The software was used to price 8 million residential units. The new lawsuit falls on the heels of the law firm’s class action against RealPage alleging similar rent price-fixing tactics.”
The dismal science
You may remember last month when I mentioned the consumer price index head fake. The August report on consumer prices showed what many like myself were expecting — a reacceleration of inflation in the data. Headline inflation rose to 3.7% in August. Core CPI posted a 4.4% year-over-year gain. This followed several weeks of partisan economists talking up the need for a higher inflation target from the Fed.
The insufferable Nobel Prize-winning economist Paul Krugman stepped into the arena and was appropriately ratioed for his buffoonery. His comically tone-deaf attempts to talk up the “disinflation” narrative belong in The Onion. Krugman had the audacity to post a chart of inflation excluding food, energy, shelter and used cars as “evidence that inflation has been largely defeated.”
If you had that one on your 2023 bingo card, congratulations.
In the hive minds of multimillionaire economists and other intellectually dishonest people, there is a continued effort to play up any progress if it helps to support “their team” or a preferred narrative. In the real world, people are busy dealing with prices they actually pay. They are too busy trying to make ends meet. A massaged government statistic doesn’t capture their reality.
The current income-driven cycle is a bit different than credit-driven cycles of the past. This helps to explain why many Americans are not fans of the current economy. As asset holders and those with 2% mortgages ride out the cycle, millions more are getting buried with higher rates and a higher cost of living.
Many in the real estate industry continue to hold out for the promise of lower rates sometime in the near future. With the current backdrop, it will take significant demand destruction before we see a return to cheap capital. That means more quantitative tightening until something breaks.
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