Realtor.com, owned by News Corporation, has thoughts on how Trump will affect the real estate market:
On the campaign trail, Trump had blamed rising home prices on a surge of illegal immigration during the Biden administration. He also claimed that he would somehow lower mortgage rates if elected, although presidents do not control mortgage rates.
Here’s a look at some of Trump’s signature policy proposals, and what impact they might have on the housing market.
Bill is one of the few bloggers still around who comments daily on housing and the economy. Read his full article at his free substack here:
https://open.substack.com/pub/calculatedrisk/p/watch-months-of-supply-76b
He makes an interesting comparison between June and December.
It looks like this will be the first year in the last eight that could have a higher months-of-supply reading in December than in June. If so, it means there will be more than the usual active (unsold) inventory carrying over into 2025.
It’s been steady between La Jolla and Carlsbad lately, using the average number of actives for the month:
NSDCC Months-Of-Supply
June, 2024: 470/153 = 3.07
October, 2024: 470/165 = 2.85
Last month, there was a flurry of sales that keeps the ratio down for now, but the number of December sales should be quite lower. It looks like we could enter the new year with 400+ unsold listings, and I sugggested here that the healthy months-of-supply (active listings divided by monthly sales) is around 3.0. It looks like it the actual ratio will be closer to 4.0 by the end of the year.
Bill suggests that it will cause soft prices. I agree.
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Lance says the SD inventory is +63% YoY – the highest of any metro on his list. Yikes!
The Fed came through yesterday and lowered their rate by 1/4%.
It caused mortgage rates to come all the way back to….7%.
This is probably as good as it will get for the next few months.
The market feels fairly balanced currently, with some tilt towards a buyer’s market for the fixers and older listings. Creampuffs are still selling for a premium!
I think any distractions from the election have passed and the housing market should be better than expected for the rest of the year! Those who are thinking about selling in 2025 and who are ready to go now should consider expediting their plans.
When to sell your home:
If you have all three going for you now, let’s go!
Most home sellers are reluctant to do much, if anything, to prepare their home for sale. The covid frenzy was very forgiving when buyers were desperate to buy anything at any price – which spoiled sellers (and agents) who were still able to sell homes for retail regardless of condition. Those days have passed:
With all the talk about the presidential election being so close, some thought it could take weeks to determine the eventual winner – and only a powerful Trump victory could avert it.
Standoff averted!
No matter how you feel about it, another Trump presidency should be good for home sales.
Why? Because we saw when Covid broke out that uncertainty encourages people to hunker down.
Buyers will be motivated to end their search before rates go much higher – which will be in the mid-7s shortly. If my predicted surge in inventory happens early in 2025, there will be plenty of homes to go around. Some will wait-and-see, but the highly-motivated buyers and sellers (the only ones that matter) will be pushing to make deals as soon as possible.
Who should put their home on the market right now?
Just when it looked like home sales were going to take a break….here we go!
I thought the run-up to the election would cause potential home sellers to wait it out.
Wouldn’t it make sense to NOT list your home in the month or two before the most contentous election in history? Certainly home sellers would have foresight and believe that buyers would be distracted. Everyone would be doing the wait-and-see!
Nope – and we’re not done with new listings this month. There will probably be another 10-20 homes go on the market before Friday (plus late-reporters).
It means that a surge of listings is in the works.
Our stager told Donna yesterday that she is already getting booked up for January. Our regular contractors have been voicing the same thing – they are very busy, and getting busier.
How about this as an indicator:
I already have three listings signed for January/February, and another 2-3 in the works. Never before have we had a January listing signed in October!
It means the first quarter of 2025 is going to be insane – a frenzy of inventory!
Get Good Help!
If there is a surge of inventory next year, will sales increase too?
Yes, probably.
There have been 6% more sales this year.
Oh – but there were 15% more listings. Hmmm it sounds like not every seller gets out.
We could be set up for an old-fashioned price war, where only those sellers willing to deal can find a buyer.
It won’t be vicious.
It will be civil and gentlemanly, and the condition of the home will play a big role in the outcome.
There are several reasons why I think the local inventory will surge in 2025. It will be due to several causes contributing more houses for sale, and all combined it may look like a flood in some areas.
Been Trending That Way in 2024 – The inventory this year has been +15% more than last year, making it look like we have already hit bottom, and the number of listings will keep growing. It may not get back to the 4,000+ like it was in the pre-covid years, but 3,000+ should be a lock in 2025 (+22% over this year).
2024 Leftovers – We have 100+ of this year’s listings waiting until 2025 to not sell (unless they adjust).
More Baby Boomers Are Dying – According to the CDC, the number of deaths per year in the U.S. has been steadily increasing, in part because of the Baby Boomers’ advancing age. Estimates suggest that Boomers will account for millions of deaths over the next two decades as they continue to reach their 80s and beyond. There were 1.6 million boomers who died last year, and the number will be above two million by the year 2030.
Prop 19 – Those who have already inherited a home from their parents or grandparents since 2020 have had to occupy the property as their primary residence to inherit the lower property tax rate too. But the old family homestead needs work and/or the other siblings want their dough. Renting the house triggers the higher property taxes, so that’s no longer a viable choice. More of these will decide to sell instead.
Politics – The 49% who don’t have the election go their way will threaten to move to cure their ills. Most won’t actually get around to it, but I’m guessing more will move than before.
Jackpot – In 2023, total U.S. credit card debt surpassed $1 trillion for the first time, reflecting a significant increase over pre-pandemic levels. More homeowners in that group will throw in the towel and finally decide to sell the house to lighten the load, and move out-of-state where they can live the rest of their life on their home-sale proceeds.
There is enough demand to soak up all of the additional inventory – but at what price?
Get Good Help!
Another believer in the lock-in effect.
The drop in percentages is 8.5% over two years, which sounds like a full-blown liquidation event if you ask me. These are national stats so those in the more-reasonably priced areas and/or areas that didn’t appreciate much lately probably wouldn’t care as much about losing their low rate.
One of these years, there is going to be a real surge of inventory. Next year? I say probable.
2018: 3,998
2019: 3,969
2020: 3,714
2021: 3,254
2022: 2,570
2023: 2,137
2024: 2,445
This year has had +14% more listings than last year, so hopefully we’re past the bottom.
Who is rooting for 3,000-ish for the selling season next year? Besides me! 😆
Hat tip to Jorge who sent in this interview with Jeffrey Gundlach, the prominent bond trader who speculates with confidence on the Fed’s half-point cut and what it means for the markets. He speaks quite knowledgeably about everything except the future of the housing market, which he called the ‘wild card’ for the economy.
This video starts where he says that he expects another 3/4% Fed cut this year, and then housing:
He said that none of us really know what’s going to happen……but let’s use math to predict the future.
My Theory:
It’s the HIGHER HOME PRICES that are locking in the current homeowners, not mortgage rates.
Everyone who bought a home before 2022 is enjoying a bonanza of new-found equity. Let’s use the 2019 buyer for an example. They hit the jackpot to buy a regular home for $1,300,000 back then, and now it’s worth around $2,385,000 – wow, an extra million dollars of equity, just like that!
Some may have a good reason to move, and they are DREAMING about using their same equity, and same mortgage amount to buy up and live with a slightly-higher rate.
But they can’t buy a much-better house for $2,385,000 – they already own a similar-sized house! The old house that was worth $1,300,000 is now $2,385,000. So they have to spend more to make it worth moving.
My rule-of-thumb is 50% more, or $3,577,500.
But let’s say that they work with a really sharp, experienced realtor and find a home that makes it worth moving for $3,200,000 and use ALL of their equity from the old house after closing costs:
Let’s also point out that in California the property taxes would go up an additional $1,742 per month, so the $11,345 + $1,741 = $13,086 MORE PER MONTH to move to a better home in the same area. Even if rates were to drop to 3.5%, the combined P&I+T = $10,713 per month.
“You’re killing me, Jim – aren’t there any other alternatives?” Yes, there are two:
That’s it, or throw down another $1,000,000 in cash to keep the loan amount down where it was.
What does it mean for the 2025 market?
Mortgage rates should be lower than they are today, and probably in the mid-5%s. There will be a new president, and all the wait-and-see buyers who were determined to see the Fed cut rates before venturing out again will be storming the streets en masse. Those first-time buyers and out-of-towners are used to these prices now and will succumb.
What about the supply? We will have a similar number of deaths, divorces, and job-transfers (The Big Three) who always sell every year. Will those who bought a home since 2022 who made a mistake and bought the wrong house be motivated to sell? Not unless they can buy something at least equal or better – the ego can’t take a step down, so they may just refi to a lower rate instead.
But those who already own a house here will appreciate it even more, because once they look around, they will realize that their existing home will have to last them forever – they’re not moving!
Are you looking for an experienced agent to help you buy or sell a home?
Contact Jim the Realtor!
CA DRE #01527365, CA DRE #00873197
