A weekend topic starting with the Bipartisan Press. "A few months ago, the Wall Street Journal published an article titled 'The U.S. Housing Market Boom is Coming to an End, Starting in Dallas.' And yes, we have all heard about the rising interest rates and housing prices are to blame. There is another factor that is hurting the housing market that has not been focused on and that is Washington D.C."

"Those of us in the trenches, get first-hand reactions from potential buyers. With consumer confidence at an all-time high, why the hesitation? This is a mental recession, one that is being created because of the dysfunction in Washington D.C."

"On a positive note, we are beginning to understand the phenomenon of perceiving market drops like the one in 2008 not as a disaster but as a cycle, with opportunities built in. We are becoming accustomed to seeing the housing market act like the stock market. The first time the Dow dropped 300 points, it was headline news. Now, we don’t throw up our hands in despair when we see swings."

"We don’t see them as devastating crashes any longer. We’re seeing our economy – including the housing market – behave like the commodities market, just not as severe: rallying and dropping, based on supply and demand."

"We are learning from our new norm, accepting it, and acting on it. Washington DC’s behavior is not the downfall of our economy. That’s why I feel confident that the current housing slump will be past history – sooner than expected, I predict. And the folks who bought homes in 2019 will be bragging about it in 2022. Not only will they profit from their buys, but they’ll also be looked upon as the smart people in real estate."

From Kevin Erdmann. "One of the factors that played a role in the Great Recession was the excessive amount of debt-fueled consumption that led up to it. Lending terms were generous at the time, and home prices were far above historical norms. Homeowners were able to tap into that growing home equity."

"But in the book Shut Out and elsewhere, I have presented evidence that high home prices before the financial crisis were largely owing to a lack of supply. A lack of supply leads to rising rents. Credit markets may have facilitated rising prices, but prices were largely justified by the rising rental values in the most expensive cities: Boston, Los Angeles, New York, San Diego, and San Francisco. I call these the Closed Access cities."

"This means that a collapse in prices was not inevitable. But more importantly, this means that calls for tighter monetary policy during the boom were calamitous. Loose monetary policy has been widely blamed for high home prices and for the debt-fueled consumption that they funded. Critics, and even Federal Reserve policymakers, generally agree that monetary policy should have been tightened sooner."

"But this is the wrong conclusion. In fact, monetary policy was powerless to counteract the debt-fueled consumption of the boom period, and the bust was only inevitable because the Fed tried to solve a problem that it could not functionally solve with tighter monetary policy."

"As in 2005, the primary stresses that characterize the American economy do not have a monetary source or solution, but mistaken monetary attempts at solutions are capable of adding to those stresses. Certainly, there is no reason to tighten policy today as a reaction to high home prices."

"Looser credit standards would allow low-tier home prices to rise back to a level reflecting the norms of decades of precrisis, liquid housing markets. Loosening credit standards would be inflationary, but to the extent that low-tier homeowners could make it through the crisis without being foreclosed on and without selling their undervalued homes, the re-attained wealth of a normalized lending market would be highly progressive."

"It would be progressive because (1) it would allow home equity of low-tier homes to recover, and (2) recovery in those markets would lead to recovered rates of building, adding new supply that would reduce rents for households that rent. The net effects on inflation would be mixed. New credit growth would be inflationary, but more housing supply would be disinflationary, creating an economic situation similar to that in 2005. However monetary policy responds, the key is to avoid triggering a contraction in new housing supply."

From Aaron Layman. "Spring is in the air, but temper your enthusiasm. As February’s home sales numbers confirmed, the North Texas real estate market correction that began last year is still in play. The local housing market is still trying to sort through the distortions caused by the Federal Reserve’s interventions in the markets."

"Dallas-Fort Worth home sales are still struggling to regain their footing, and home prices continue to roll over at the margins from the top down. What we are experiencing was years in the making. As I have detailed in numerous articles, the North Texas real estate market has the Fed’s fingerprints all over it."

"While the averages paint a picture that the U.S. economy is still performing relatively well, the averages are misleading because the Fed’s 'wealth effect' has not translated into shared prosperity. In fact, it’s been quite the opposite. The U.S. housing market is Exhibit A for the wealth inequality facilitated by the Federal Reserve’s trickle-down monetary policy."

"In the summer of 2008, the average price of a home in Denton was roughly $158,000. In the summer of 2018, the average price of Denton homes was more than $275,000. That’s a 75 percent increase. During the same time frame, median and average household incomes in Denton haven’t come close to matching that kind of growth. Sooner or later, something had to give, and it has."

"Now that the local housing market is cooling, we are seeing a tug-of-war between buyers and sellers. Many sellers are still holding out for prices that seemed reasonable a year or two ago when the market was red-hot and multiple offers or bidding wars were the norm. Homebuyers, particularly debt-strapped millennials, are increasingly looking for value where they can find it. Many are just choosing to rent."

"These imbalances will continue to pose headwinds for the housing market until the larger economic cycle is allowed to function as intended. The longer the Fed attempts to thwart market forces, the larger the imbalances and distortions become. For better or worse, the Denton area’s real estate market is still captive to Federal Reserve policy."