By Ryan Casey Stephens, FPQP®
Special Contributor
Dear real estate professional, I see you. The battles you’ve fought in the last six months have been real. You’ve been forced to transition from abundance to scarcity, but so far you’ve survived. I’m here to tell you again that the game is going to change. The hard times are going to end. However, there are forces at work against you, some quite distant. Learn about them, be aware, but don’t give up. Hope is around the corner.
Let’s discuss this in more depth in this week’s Three Things To Know.
Bright News For Real Estate Professionals
It’s no secret that I’m an eternal optimist, and have been predicting the return of strong purchase volume by summer for a while. I think we’re going to see a steady climb of progress out of this housing recession each month, then suddenly we’ll be hit with an onslaught of buyers all at once when a balance is reached between falling interest rates and falling home prices.
The Wall Street Journal is one of the first to report the start of the thaw in our industry. They’ve correctly noticed that mortgage demand just jumped to the highest level since September and at the fastest rate in five years. Pending Home Sales are also climbing to points not seen since last October.
The driving forces behind the sudden turnaround are lower mortgage rates, the availability of 2-1 Buydown products, seller and builder willingness to offer incentives, and the fact that this is the time of year we begin to see the winter lull come to an end.
First Thing to Know:
The signs are all around us — this housing recession is coming to an end. If we remain patient, the coming months should bring more buyers off the bench and onto the court.
Isn’t This Why We Fought a Revolution?
The global nature of economics can be a blessing and a curse. On the one hand, it’s great to be able to buy avocados or French wine anytime, anywhere. On the other hand, the interwoven nature of the world causes us to be subject to the whims of powers that rarely even consider us. Take for example today’s problem — the Bank of England is raising mortgage rates on Texas home buyers.
You read that correctly, the Bank of England as well as the European Central Bank believe the risk of over-raising their rates is far smaller than the risk of allowing inflation to continue at current levels. The first problem is that markets are begging the Fed and central banks for a pivot, believing inflation has been defeated.
The second problem is that they’re reacting to the very strong Bureau of Labor Statistics jobs data from Friday and interpreting it as a sign the global economy hasn’t slowed enough. The January number for this report has been nearly six times too high in the past three years, probably due to seasonally available jobs.
In essence, these economic superpowers are nuking our markets based on data we released, which they don’t understand, and our shoppers are paying the price.
Second Thing to Know:
It’s frustrating, but true, that conventional loan rates in the United States are often subject to the changing winds of global economics, and this week opened with higher rates because of that interconnectivity.
A Shift in Sentiment
Friday brings us the latest installment in The University of Michigan’s Consumer Sentiment survey, and the results are sure to be juicy. This report is rarely a big market-mover but is a good gauge of where the housing market might be heading.
Until recently most of those surveyed felt it was a great time to sell a home and a bad time to buy one. However, with some of the more recent data, there’s been a sharp drop in those that see the value in selling. This month’s data might be the start of a shift into a buyer’s market mindset, where more Americans believe the time to buy is now. It’s sure to be one more sign that the real estate slump is coming to a close.
Third Thing to Know:
Tools like Consumer Sentiment do a great job of helping us understand the mindset of the average buyer. If, like we believe will soon be the case, buyers see an increasingly friendly field in front of them, agents need to be prepared to serve them in that shift.
Ryan Casey Stephens FPQP® is a mortgage banker with Watermark Capital. You can reach him at [email protected].
