I know it’s not easy nor interesting to open and look at another newsletter. I get 2 handfuls per day myself. For those of you who do take the time to check out what Valerie and I have to say, THANK YOU! Also, if you do Valerie and I curate most of our content to talk directly to our clients.
Financial markets are increasingly unpredictable which creates uncertainty with a lot of the people that we are talking to right now. Everyone is wondering if NOW is the right time to sell or buy a home?
The Federal Reserve has firmly stated that their primary focus is tamping down runaway inflation. Inflation rates that we have not seen in the US in many decades. The Fed rate has an indirect effect on long-term interest rates. As long as interest rates remain elevated the home selling environment will be challenging for quite some time.
Many are thinking that the housing market will return to the highs we saw just months ago. Prices are unlikely to reach the heights we saw recently, The good news for sellers is that inventory is predicted to remain low with home prices expected to stabilize in our Seattle / Eastside market.
Buyers, get ready! Mortgage rates are dropping as we write this to you. With the information shared on the Consumer Price Index (CPI) today, mortgage rates are expected to go down from the current level of 7%. We have lenders who creatively work with our buyers to find a solution that is affordable at all price points.
When it comes to the housing market today, here are the top 5 questions clients are asking us:
Is the housing market going to crash like it did in 2008? - Very unlikely. One of the best data points for price stability is the months of inventory. Right now, this data tells us that the months of available housing inventory is much lower than 2008. If you'd like to learn more about this data, reach out.
What is happening with mortgage rates? - The cost to finance a mortgage has more than doubled in the last 6 months. As inflation comes down, mortgage rates will trend lower. Pro tip: keep an eye on the 10 year treasury yield while tracking mortgage rates. When that yield falls, mortgage rates fall too.
Recession and Real Estate? - Mortgage rates have fallen by an average of 2.38% in the last 6 recessions dating back to 1980. It is reasonable to think that rates will come back down IF the US goes into a recession in 2023.
Housing prices have been positive in 4 of the last 6 recessions by an average of 4.63%. 2008 saw a huge drop but the 1991 recession saw prices fall only 1.9%.
What's ahead for home prices? - Home prices have soared over the last couple of years. A breath was absolutely needed. However, Dave Ramsey said it best "The root issue of what drives house prices almost always is supply and demand". Humans need shelter and rent is EXPENSIVE!
Should I wait to buy a home? - Owning a home is definitely a personal preference and affordability can be challenging right now. Over the last 5 years, homes have appreciated 63.5% nationally. There are financial and non-financial benefits to home ownership. The data suggests that there could be opportunities ahead to own a home.
Uncertainty can be uncomfortable but a look at the data can give us some clarity. If you or someone you know has questions about what the heck is going on, give me or Valerie a call and let's grab a coffee or cocktail!