By the end of today, the 30-year mortgage rate should be in the mid-6s – who would buy a house now?
Between higher prices, higher rates, and the hefty federal and state capital-gains tax, the move-up/move-down homeowners are effectively locked in to their existing home. It’s just too hard to make sense of a move, unless there is another strong reason to overcome those.
It would help if they don’t mind leaving town, and probably leaving California. But who wants to do that?
Without the move up-and-downers, the supply and demand will both be greatly diminished, and the number of sales should drop significantly. But there will always be sales!
Here are the potential buyers who might still be interested, even at 6%-7%:
The Mega-Rich – When they see something they like, they just buy it.
Tenants – They are sick of how high the rents have become, and they don’t want to keep moving around trying to ease the pain. Some inheritance would help.
Inheritance/Gifts – They have been waiting, and now their ship has come in.
Job Transferees – They are used to owning, and they usually have their company’s blessing – and relocation package ($$) to assist them with the transition.
Contarians/Opportunists – The deal hunting will kick into high gear.
Self-Employed – Lenders should ease up a bit on underwriting to keep the doors open, and the alternative mortgage products might get more love. Qualifying with 24 months of bank statements, instead of tax returns, and getting a 8% or 9% rate won’t sound as onerous as it did when rates were 3%.
Most Everyone at a 10% to 20% discount – Those who stay in the hunt might get lucky!
Hopefully, the floor for NSDCC sales should be around 100 per month while the market recalibrates in preparation for the next selling season.
If sales drop below 100 per month, then I’ll be looking for the panic button!
The bears are back to pee in the punchbowl
Ain’t that the truth! Whatever you do, don’t go on twitter!
The Federal Reserve raised interest rates by three-quarters of a percentage point on Wednesday, its biggest move since 1994, as the central bank ramps up its efforts to tackle the fastest inflation in four decades.
The big rate increase, which markets had expected, underlined that Fed officials are serious about crushing price increases even if it comes at a cost to the economy.
Officials predicted that the unemployment rate will increase to 3.7 percent this year and to 4.1 percent by 2024, and that growth will slow notably as policymakers push borrowing costs sharply higher and choke off economic demand.
The Fed’s policy rate is now set in a range between 1.50 to 1.75. Policymakers penciled in interest rates hitting 3.4 percent by the end of 2022 — a level that would be the highest since 2008 — and officials saw their policy rate peaking at 3.8 percent at the end of 2023. Those figures are significantly higher than previous estimates, which showed rates topping out at 2.8 percent next year.
Fed officials newly expected to be cutting rates in 2024, which could be a sign that they think the economy will weaken so much that they will need to reorient their policy approach. The major takeaway from the Fed’s economic forecasts, which it released for the first time since March, was that officials have become more pessimistic about their chances of letting the economy down gently.
Underlining that, policymakers cut a sentence from their post-meeting statement that had predicted that inflation could moderate while the labor market remained strong — a hint that they believe they may have to slam the brakes on job growth to wrestle inflation under control.
“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures,” the Fed reiterated in its post-meeting statement.
One official, the president of the Federal Reserve Bank of Kansas City, Esther George, voted against the rate increase. Though Ms. George has historically worried about high inflation and favored higher interest rates, she would have preferred a half-point move in this instance.
Why do they even have to mess with the rates in the first place? I seriously don’t know the answer to this but do other countries do such a thing? Why not just let the market do what the market does
6 – 7 % mortgage rate is not historically high. About the same as when the last housing bubble occurred. It wouldn’t make sense to wait for 3 % rates to return.
This is a second housing bubble correction and second tech stock bubble correction. That’s a reason for buyers to wait.
Officials predicted that the unemployment rate will increase to 3.7 percent this year and to 4.1 percent by 2024.
The same people predicting 3.2% mortgage rates for 2022.
Question from Mark Hamrick with Bankrate:
Wonder what your assessment is about the outlook for the housing market given the years long increase in home prices, and now the sharp rise in mortgage rates. And all that, of course, given the heightened sensitivity around the housing market given the fact that it was a trigger for the Great Financial crisis over a decade ago?
Powell: (emphasis added)
Rates were very low. A good place to start is rates were very very low for quite a while because of the pandemic and you know the need to do everything we could to support the economy when unemployment was 14% and the true unemployment rate was well higher than that. So …
And that … that was a, uh, rates were low and now they are coming back up to more normal or above levels. So … in the meantime, while rates were low and while demand was really high … obviously demand for housing changed from wanting to live in urban areas to some extent to living in single family homes in the suburbs. Famously. And so, the demand was just suddenly much higher.
So we saw prices moving up very very strongly for the last couple of years.
So that changes now. And rates have moved up. We are well aware that mortgage rates have moved up a lot. And you are seeing a changing housing market. We are watching it to see what will happen.
How much will it really effect residential investment? Not really sure.
How much will it affect housing prices? Not really sure. Obviously, we are watching that quite carefully. You’d think over time … There is a tremendous amount of supply in the housing market of unfinished homes … and as those come online …
Whereas the supply of finished homes, inventory of finished homes for sale is incredibly low. Historically low. So it’s a very tight market. So prices might keep going up for a while, even in a world were rates are up. So it’s a complicated situation and we watch it very carefully.
I’d say if you are homebuyer, somebody or a young person looking to buy a home, you need a bit of a reset. We need to get to back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again.
This will be a process were by ideally, we do our work in a way were the housing market settles in a new place. And housing and credit availability are at appropriate levels
Another guy with no clue – and he’s in charge!
They should let me handle this.
TOB asked “Why do they even have to mess with the rates in the first place? I seriously don’t know the answer to this but do other countries do such a thing?”
Yes, countries with their own Central Banks are also manipulating interest rates as well. The much ballyhooed “Free Market” does not exist!🤣
European Central Bank (ECB)
Bank of England (BOE)
Bank of Japan (BOJ)
Swiss National Bank (SNB)
Bank of Canada (BOC)
Reserve Bank of Australia (RBA)
Reserve Bank of New Zealand (RBNZ)
“These banks often work together to ensure that the global economy remains in check.”
https://www.investopedia.com/articles/forex/06/centralbanks.asp
Maybe the buyers agent is not dead after all in a crappy real estate market? I have qualified buyers for your house that has been sitting on the market. I am not saying that we are in a crappy real estate market. However, it can turn crappy.
I want to make sure I’m on the record. I believe the demise of the buyer agent is going to be the worst thing that ever happened to real estate. Buyers won’t be getting any representation and have no one to count on to be in their corner. It’s a terrible thing.
I agree 100% Jim!
I owe you coffee! This week!
@JtR
not to worry!! should I need to buy again, I will gladly pay you out of my own pocket the consulting fee.
“not to worry!! should I need to buy again, I will gladly pay you out of my own pocket the consulting fee.”
Ditto!
How much would you consider fair?
I’d love to do net listings, where my pay is everything over the list price.
Elections have consequences and the people got what they wanted. In a short time frame of 16 months, this country has completely flipped to record high inflation, gas prices, a porous border, record crime, and much more. I had to chuckle at the article when mentioned, It would help if they don’t mind leaving town, and probably leaving California. But who wants to do that? Lol, thousands and thousands are fleeing California for a better life. The leadership of the state has really caused issues. But take a deep breath, interest rates were too low for the past few years. The average rate over the past 30 years is 7.3%. Rates should be in the 5 to 6 range but the media freaked out and the fed should have had gradual increases the past 3 years instead of hitting us with a record rise the past few months. Powell and Yellen may be the biggest jokes in the history of their positions. The good news is it will weed out 25% of the crappy real estate agents, real estate companies, mortgage agents, and companies. Real estate will flatten out with a possible 5 to 10% decrease in value which is not a bad thing. Just my take.