April 10 - Mortgage Spotlight | Don't get too excited about the rate drops + other news
Updated: Apr 23
A NOTE ON THE WEEK
It bites you when you think it is safe to start talking about lower-rate trends. All of last week's gains were wiped out on Friday and Monday. We are still under 7 for well-qualified buyers. The market remains volatile. We like to lock when your buyer gets into a contract to eliminate surprises.
With inventory running light, the focus remains to find qualified buyers and ensure they understand that the headlines are far different from the local reality. We could be in for a long run with low inventory, which means home prices would start moving up in earnest. Time to build equity!
Jesse Passafiume
SCRIPT OF THE WEEK
Cost of Waiting
“Today's challenge is fewer homes for sale. We don’t anticipate a large spike in new listings in the coming months. Homeowners have very low rates, and there is almost no distressed inventory. That means that home values could start rising in our market. Since rates have stabilized a bit, you might consider buying a home to start building equity.
Remember, as long as you still qualify, you can refinance if rates drop.”
MORTGAGE MARKET
A great week and a couple of lousy days.
Early last week was good for rates. But the jobs report came out, and although it didn’t set the world on fire, it proved that the labor market is still robust. Strong labor market = continued inflationary pressure. So, rates gave back all of their gains on Friday and Monday.
This week, we are focused, along with the rest of the Western world, on the US Consumer Price Index data that comes out Wednesday morning. The CPI is a measure of inflation, and as you probably recall, it has been the primary market mover in the last two years.
While we aren’t sure what the market will do, we are confident that rates will be reasonably volatile this week. If it comes in lower than expected (inflation is decreasing faster than anticipated), rates could drop. However, the strong jobs report indicates that it could remain elevated, putting upward pressure on rates. How do you like that lack of commitment to predicting?
Here is the market key: Rates are better than the fall, and home prices are trending up in most markets due to a lack of inventory. Buying now is a great solution.
FOR YOUR BUYERS
You can copy and paste this note and send it directly to your buyers. You will also see this on social and as a forward-able email on Thursday so you can engage your buyers before the weekend!
It Could be More Expensive To Wait
We saw another very light week for new homes coming on the market. We have 50% fewer homes for sale this week than during the same period in 2017-2019. What impact does this inventory have on potential home buyers?
If you read the headlines, you know that most experts are projecting slightly lower rates at the end of the year. Many homebuyers are sitting on the sidelines, waiting for lower rates. But there could be a cost.
With fewer homes for sale, most markets will likely see prices ticking up. According to Altos Research, the median list price for houses increased in the last few months. You must understand what is happening in your market to make the best home-buying decision possible. The other thing to remember is that most of the data you see about home prices is based on homes that closed last month or months ago. This spring is unique because of the rate drops and lack of inventory; things are changing quickly.
Take a look at the chart below. On a $500,000 home, if home prices climb 6% but rates drop 0.75%, you potentially miss out on $30,000 in equity.
Happy Househunting!
