WEBVTT
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Welcome to the October market update.
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We've got a lot to talk about this month.
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Up first mortgage rates in midterms.
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Will the timing of the Fed's decision be impacted by upcoming elections?
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And as always, we'll give you the latest housing data.
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And finally, we're going to share with you some tips and tricks on what you can do as an agent or as a consumer to respond to this housing market.
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All that and more on this month's market update.
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Before we jump in, if you are an agent out there, we would love to hear from you.
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00:00:40.625 --> 00:00:43.986
Send us your questions and we'll be sure to answer them in an upcoming podcast.
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00:00:44.386 --> 00:00:47.048
Also, please click like and subscribe to our YouTube channel.
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Well, Ruben, rates have significantly shifted and there are quite a few factors going on that cause this.
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Let's talk about it.
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Yeah, so definitely it's gotten a little bit complex.
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But, you know, what we've seen is, you know, treasury rates moved up quite substantially over the last couple of months, which in turn then pushed mortgage rates up to, you know, seven and a half percent range in the last couple of weeks.
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And we're seeing now potentially a little bit of a pullback.
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We saw treasuries rally a little bit the last couple of mornings, you know, we're here in mid-October.
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It's lowered mortgage rates a bit.
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You know, we've seen a little bit of a like a 20 basis point adjustment where we're hitting around 7.3 percent right now.
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You know, in terms of what's causing it all, it's a few things.
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Number one, we've moved into a tightening cycle from the Fed.
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That's led to expectations for short-term mortgage rates or short-term interest rates to go up, which then translates into higher long-term interest rates to an extent.
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We've also seen the spread widen a bit between mortgage rates and treasury rates, meaning that the difference between what you would get in return for a 10-year treasury versus if you bought, say, a mortgage-backed security has increased a bit.
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Why have the FEDs tightened more?
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So inflation is the simple answer there, right?
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Like we're seeing heightened inflation levels.
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We saw CPI hit a much higher level, I think at 3.7% this last month.
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The producer price index for final goods in particular was up 5% year over year.
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Another, you know, and it's been trending around in that direction for a while.
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So we have several different indications that inflation is elevated right now.
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Some of that's being driven by energy markets.
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Obviously, what's going on in the Middle East with oil prices and oil supplies is part of this equation.
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But we're seeing other things, too.
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We're seeing a lot of inflation in electronic goods being driven by investment in semiconductor equipment by the AI industry.
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And we're also just still seeing pretty strong consumer spending despite everything.
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So the U.S. economy is kind of plugging along for the most part right now.
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And because we haven't seen a pullback from consumers, it's just adding to that inflationary pressure.
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So the Fed's having to raise rates.
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So it seems like people still have money to be able to consume.
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Yeah, like right now, you know, employment's still relatively robust.
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We've seen some indications that hiring isn't super strong right now, but for the most part, people who have jobs are keeping their jobs, right?
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So we're still seeing spending despite higher prices in a lot of categories.
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As we kind of go forward, we're going to have to watch to see how inflation evolves, and that'll impact Fed decisions.
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Right now, we're anticipating probably a rate increase,
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maybe this month, but more likely in December.
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And, you know, we kind of talked before about what drives the Fed's decisions, right?
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And there's a lot of chatter right now around like, okay, midterms are coming up.
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They won't, either they will or they won't make an adjustment based on that.
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Honestly, I would say if anything over the last six months, we've seen the most evidence directly that politicians don't have a lot of control over what the Fed does or doesn't do, right?
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I think,
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This has been maybe the most concerted effort I've seen by an administration to try to directly impact rates that
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leading up to an election that I've ever seen.
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And they went in the opposite direction, right?
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So I think to me that should kind of put to rest that myth that like, oh, before any big election, the powers that be will try to lower interest rates to help the incumbent party.
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You know, there's a lot of economic papers that have shown that that's generally not true.
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And I think now we've seen,
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You know, what looks like a genuine effort to actually move rates in one direction or another by a White House administration.
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And we've seen it go pretty well awry for them for the most part.
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You know, there's bigger market factors at play and the Fed's decisions are made independently because they're not running for office.
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Right.
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Like they're already appointed.
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They're the same people have been making decisions for several years now.
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Yeah.
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We've only had one new member added.
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For the most part, they're looking at data that's coming in and making decisions based off of that.
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And with inflation, where it's at, we're going to see rates go up, not down.
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So in other words, for anybody who may have been looking for signs as we approach the midterm elections and whether or not there is a correlation to what might be happening in the real estate market and interest rates, they may not find it.
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Yeah, no, I don't think you're going to see some kind of magical mortgage rate drop just because we're closer to elections.
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I think we would have already started seeing that.
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And I certainly don't think they would have let rates get above 7% in the lead up to an election if they had the option to do otherwise.
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Good point.
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Well, and with rates having gone up, let's see where the impact is most felt.
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Yeah, so obviously we've already started to see home sales start to slow down a bit.
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They were at 3.99, down 2% from last year, year over year.
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They actually picked up a little bit on a monthly basis, and part of that is, you know,
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One thing we do see sometimes when rates go up is people who have already kind of been in the market, maybe have locked rates or just see the writing on the wall where rates are going and they want to transact, like get the deal done.
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Right.
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So I think we saw that.
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I think we saw people closing on rates that they had gotten in June, July.
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August get their deals done.
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They've read to that small increase.
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I don't think we're going to see that for the rest of the year.
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You know, we saw prices are still going up a bit, but that started to slow down.
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They've already peaked for the year.
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They'll be going down for the rest of the year at this point.
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And probably some of those year over year increases are going to dry up a bit as well.
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So really we're looking at,
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Flat prices, I think, for the rest of the year.
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And, you know, the other part of the story is inventory.
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We're at 4.8 months of supply.
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We have been for two months now.
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Those are some of the highest inventory levels we've seen for years at this point.
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You're really starting to shift into something that's feeling more akin to a buyer's market for sure now.
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There's a lot of mix in inventory levels across the country.
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But even in the markets, we had seen more seller's market type activity, stronger home sales figures like have started going backwards.
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The Northeast saw sales decline 10 percent month to month and 4 percent year over year this last month.
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So that's the those are that was one of the markets that had been a little bit tighter that you're starting to see, you know, when we're heading into.
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essentially a seasonal downturn like it's normal for the housing market to sell to slow down from july into december that combined with increasing mortgage rates at the same time is going to lead to an even more pronounced slowdown in the housing market so we're the combination of those two things is going to add up to like some very noticeable fall off and buyer activity i think over the next several months
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And I also wonder if the motivated buyers that have a real reason to make a transaction in the coming months might also take this as an opportunity to talk to the real estate professional or for real estate professionals to talk about their clients right now.
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If we know that there might be a slowdown coming, partially due to seasonality, also because the mortgage rate increase has given buyers that pause, that there could be an opportunity for someone not having to invest significantly more in a monthly mortgage payment because of this investment.
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interesting intersection between, yes, mortgage rates, but also the slowing down of volume of real estate.
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Yeah.
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And certainly one thing we're also seeing is we saw the percentage of listings with price adjustments hit the highest level for which we had data on going back the last three years.
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It's about 34% of listings.
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And we know that's a national average, basically, right?
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So
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You know, there's going to be individual markets where that number is probably substantially higher, maybe as high as 50% of listings getting price adjustments, right?
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Given that, you know, for buyers who are still able to stay in the market with mortgage rates where they are, like there's going to be definitely opportunities to have increased negotiation powers right now for sure.
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Yeah, I would agree with that because if there were sellers three, four, six months ago that were not willing to adjust their price because of their perception of what the market may have looked like, those price adjustments are now an indicator of motivated sellers that would like to have a conversation with a buyer if they had an offer in place.
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So as a real estate professional to continue to watch the price adjustments based on the price bands makes it for an opportune time to get buyers under contract before the end of the year.
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Yeah, and we know the mortgage industry is out there trying to do deals as well.
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There are some tools that people are starting to talk about bringing back into play that had kind of gotten popular for a while, and maybe in a later podcast, we'll take a deeper dive on what these are.
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But things like temporary buy-downs, having sellers buy points either temporarily or permanently on a mortgage, some options like that to try to navigate the affordability issue right now for a lot of buyers in ways that...
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can still give them access to the market right now, despite the fact that we've seen mortgage rates go up quite a bit.
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Absolutely.
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And in addition to the ways that you can negotiate around the mortgage, I also think it's important for real estate professionals to remember that
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if there are currently clients that have indicated that they need to break their rent, their leases, that there is an opportunity to understand what that dollar amount is and to bring that into the conversation with sellers that might have homes currently on the market that those buyers would really like to get into.
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But it is our job as professionals to be able to create different scenarios and options because the consumer may not know what all the options are beyond the mortgage payment and the interest rate.
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Yeah, I definitely think seller concessions
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as a broad concept or a thing that are definitely going to be important right now.
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And one reason also being the fact that there's more inventory, basically under construction, new homes than we've seen in a while as well, which is weighing on existing home sales, right?
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Like when you have builders who are motivated to sell already constructed inventory, they're also out there giving substantial concessions, both on the mortgage side and on the home side, right?
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Absolutely.
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And we had discussed those in the earlier episodes as well, what the different ways can be.
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And it's a great reminder to step back into the winter months to take a look if you are in a market where you have new construction builders that are still active or that have high levels of inventory at this time to understand.
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How have their programs and incentives changed and how might some of those areas now get unlocked for the buyers that one might have?
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And as real estate professionals, I think more than ever, it's going to be important that we remember what the top ways are that we can have better conversations with the consumers out there so that we can present multiple options.
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We can no longer make an assumption that buyers have had that conversation with the lenders.
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Yeah, people's affordability conditions are actively evolving right now, right?
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So those conversations need to be happening frequently.
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We have to make sure that we're front and center of what the different ways are as they have changed.
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And we anticipate that going into the next year that there will be a few classic mortgage hacks that will prevail.
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So we'll talk about that next month on our podcast.
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Couldn't agree more.
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Can't wait to go deep on that next month.
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For those of you watching, make sure you subscribe so you don't miss it.
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And thanks for joining us for this month's market update.
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We'll see you next month.
1
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Welcome to the October market update.
2
00:00:02.132 --> 00:00:03.613
We've got a lot to talk about this month.
3
00:00:04.074 --> 00:00:05.715
Up first mortgage rates in midterms.
4
00:00:06.255 --> 00:00:09.478
Will the timing of the Fed's decision be impacted by upcoming elections?
5
00:00:10.038 --> 00:00:12.299
And as always, we'll give you the latest housing data.
6
00:00:12.540 --> 00:00:19.204
And finally, we're going to share with you some tips and tricks on what you can do as an agent or as a consumer to respond to this housing market.
7
00:00:19.645 --> 00:00:21.386
All that and more on this month's market update.
8
00:00:36.723 --> 00:00:40.525
Before we jump in, if you are an agent out there, we would love to hear from you.
9
00:00:40.625 --> 00:00:43.986
Send us your questions and we'll be sure to answer them in an upcoming podcast.
10
00:00:44.386 --> 00:00:47.048
Also, please click like and subscribe to our YouTube channel.
11
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Well, Ruben, rates have significantly shifted and there are quite a few factors going on that cause this.
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Let's talk about it.
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Yeah, so definitely it's gotten a little bit complex.
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But, you know, what we've seen is, you know, treasury rates moved up quite substantially over the last couple of months, which in turn then pushed mortgage rates up to, you know, seven and a half percent range in the last couple of weeks.
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And we're seeing now potentially a little bit of a pullback.
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We saw treasuries rally a little bit the last couple of mornings, you know, we're here in mid-October.
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It's lowered mortgage rates a bit.
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You know, we've seen a little bit of a like a 20 basis point adjustment where we're hitting around 7.3 percent right now.
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You know, in terms of what's causing it all, it's a few things.
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Number one, we've moved into a tightening cycle from the Fed.
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That's led to expectations for short-term mortgage rates or short-term interest rates to go up, which then translates into higher long-term interest rates to an extent.
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We've also seen the spread widen a bit between mortgage rates and treasury rates, meaning that the difference between what you would get in return for a 10-year treasury versus if you bought, say, a mortgage-backed security has increased a bit.
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Why have the FEDs tightened more?
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So inflation is the simple answer there, right?
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Like we're seeing heightened inflation levels.
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We saw CPI hit a much higher level, I think at 3.7% this last month.
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The producer price index for final goods in particular was up 5% year over year.
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Another, you know, and it's been trending around in that direction for a while.
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So we have several different indications that inflation is elevated right now.
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Some of that's being driven by energy markets.
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Obviously, what's going on in the Middle East with oil prices and oil supplies is part of this equation.
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But we're seeing other things, too.
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We're seeing a lot of inflation in electronic goods being driven by investment in semiconductor equipment by the AI industry.
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And we're also just still seeing pretty strong consumer spending despite everything.
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So the U.S. economy is kind of plugging along for the most part right now.
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And because we haven't seen a pullback from consumers, it's just adding to that inflationary pressure.
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So the Fed's having to raise rates.
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So it seems like people still have money to be able to consume.
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Yeah, like right now, you know, employment's still relatively robust.
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We've seen some indications that hiring isn't super strong right now, but for the most part, people who have jobs are keeping their jobs, right?
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So we're still seeing spending despite higher prices in a lot of categories.
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As we kind of go forward, we're going to have to watch to see how inflation evolves, and that'll impact Fed decisions.
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Right now, we're anticipating probably a rate increase,
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maybe this month, but more likely in December.
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And, you know, we kind of talked before about what drives the Fed's decisions, right?
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And there's a lot of chatter right now around like, okay, midterms are coming up.
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They won't, either they will or they won't make an adjustment based on that.
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Honestly, I would say if anything over the last six months, we've seen the most evidence directly that politicians don't have a lot of control over what the Fed does or doesn't do, right?
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I think,
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This has been maybe the most concerted effort I've seen by an administration to try to directly impact rates that
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leading up to an election that I've ever seen.
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And they went in the opposite direction, right?
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So I think to me that should kind of put to rest that myth that like, oh, before any big election, the powers that be will try to lower interest rates to help the incumbent party.
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You know, there's a lot of economic papers that have shown that that's generally not true.
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And I think now we've seen,
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You know, what looks like a genuine effort to actually move rates in one direction or another by a White House administration.
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And we've seen it go pretty well awry for them for the most part.
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You know, there's bigger market factors at play and the Fed's decisions are made independently because they're not running for office.
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Right.
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Like they're already appointed.
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They're the same people have been making decisions for several years now.
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Yeah.
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We've only had one new member added.
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For the most part, they're looking at data that's coming in and making decisions based off of that.
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And with inflation, where it's at, we're going to see rates go up, not down.
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So in other words, for anybody who may have been looking for signs as we approach the midterm elections and whether or not there is a correlation to what might be happening in the real estate market and interest rates, they may not find it.
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Yeah, no, I don't think you're going to see some kind of magical mortgage rate drop just because we're closer to elections.
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I think we would have already started seeing that.
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And I certainly don't think they would have let rates get above 7% in the lead up to an election if they had the option to do otherwise.
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Good point.
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Well, and with rates having gone up, let's see where the impact is most felt.
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Yeah, so obviously we've already started to see home sales start to slow down a bit.
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They were at 3.99, down 2% from last year, year over year.
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They actually picked up a little bit on a monthly basis, and part of that is, you know,
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One thing we do see sometimes when rates go up is people who have already kind of been in the market, maybe have locked rates or just see the writing on the wall where rates are going and they want to transact, like get the deal done.
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Right.
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So I think we saw that.
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I think we saw people closing on rates that they had gotten in June, July.
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August get their deals done.
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They've read to that small increase.
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I don't think we're going to see that for the rest of the year.
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You know, we saw prices are still going up a bit, but that started to slow down.
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They've already peaked for the year.
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They'll be going down for the rest of the year at this point.
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And probably some of those year over year increases are going to dry up a bit as well.
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So really we're looking at,
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Flat prices, I think, for the rest of the year.
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And, you know, the other part of the story is inventory.
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We're at 4.8 months of supply.
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We have been for two months now.
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Those are some of the highest inventory levels we've seen for years at this point.
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You're really starting to shift into something that's feeling more akin to a buyer's market for sure now.
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There's a lot of mix in inventory levels across the country.
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But even in the markets, we had seen more seller's market type activity, stronger home sales figures like have started going backwards.
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The Northeast saw sales decline 10 percent month to month and 4 percent year over year this last month.
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So that's the those are that was one of the markets that had been a little bit tighter that you're starting to see, you know, when we're heading into.
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essentially a seasonal downturn like it's normal for the housing market to sell to slow down from july into december that combined with increasing mortgage rates at the same time is going to lead to an even more pronounced slowdown in the housing market so we're the combination of those two things is going to add up to like some very noticeable fall off and buyer activity i think over the next several months
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And I also wonder if the motivated buyers that have a real reason to make a transaction in the coming months might also take this as an opportunity to talk to the real estate professional or for real estate professionals to talk about their clients right now.
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If we know that there might be a slowdown coming, partially due to seasonality, also because the mortgage rate increase has given buyers that pause, that there could be an opportunity for someone not having to invest significantly more in a monthly mortgage payment because of this investment.
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interesting intersection between, yes, mortgage rates, but also the slowing down of volume of real estate.
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Yeah.
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And certainly one thing we're also seeing is we saw the percentage of listings with price adjustments hit the highest level for which we had data on going back the last three years.
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It's about 34% of listings.
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And we know that's a national average, basically, right?
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So
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You know, there's going to be individual markets where that number is probably substantially higher, maybe as high as 50% of listings getting price adjustments, right?
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Given that, you know, for buyers who are still able to stay in the market with mortgage rates where they are, like there's going to be definitely opportunities to have increased negotiation powers right now for sure.
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Yeah, I would agree with that because if there were sellers three, four, six months ago that were not willing to adjust their price because of their perception of what the market may have looked like, those price adjustments are now an indicator of motivated sellers that would like to have a conversation with a buyer if they had an offer in place.
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So as a real estate professional to continue to watch the price adjustments based on the price bands makes it for an opportune time to get buyers under contract before the end of the year.
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Yeah, and we know the mortgage industry is out there trying to do deals as well.
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There are some tools that people are starting to talk about bringing back into play that had kind of gotten popular for a while, and maybe in a later podcast, we'll take a deeper dive on what these are.
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But things like temporary buy-downs, having sellers buy points either temporarily or permanently on a mortgage, some options like that to try to navigate the affordability issue right now for a lot of buyers in ways that...
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can still give them access to the market right now, despite the fact that we've seen mortgage rates go up quite a bit.
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Absolutely.
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And in addition to the ways that you can negotiate around the mortgage, I also think it's important for real estate professionals to remember that
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if there are currently clients that have indicated that they need to break their rent, their leases, that there is an opportunity to understand what that dollar amount is and to bring that into the conversation with sellers that might have homes currently on the market that those buyers would really like to get into.
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But it is our job as professionals to be able to create different scenarios and options because the consumer may not know what all the options are beyond the mortgage payment and the interest rate.
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Yeah, I definitely think seller concessions
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as a broad concept or a thing that are definitely going to be important right now.
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And one reason also being the fact that there's more inventory, basically under construction, new homes than we've seen in a while as well, which is weighing on existing home sales, right?
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Like when you have builders who are motivated to sell already constructed inventory, they're also out there giving substantial concessions, both on the mortgage side and on the home side, right?
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Absolutely.
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And we had discussed those in the earlier episodes as well, what the different ways can be.
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And it's a great reminder to step back into the winter months to take a look if you are in a market where you have new construction builders that are still active or that have high levels of inventory at this time to understand.
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How have their programs and incentives changed and how might some of those areas now get unlocked for the buyers that one might have?
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And as real estate professionals, I think more than ever, it's going to be important that we remember what the top ways are that we can have better conversations with the consumers out there so that we can present multiple options.
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We can no longer make an assumption that buyers have had that conversation with the lenders.
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Yeah, people's affordability conditions are actively evolving right now, right?
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So those conversations need to be happening frequently.
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We have to make sure that we're front and center of what the different ways are as they have changed.
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And we anticipate that going into the next year that there will be a few classic mortgage hacks that will prevail.
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So we'll talk about that next month on our podcast.
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Couldn't agree more.
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Can't wait to go deep on that next month.
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For those of you watching, make sure you subscribe so you don't miss it.
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And thanks for joining us for this month's market update.
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We'll see you next month.
