Declining mortgage rates leads to a rise in pending sales this past week. Interest rates have fallen below 6.5% and local buyers couldn’t be more pleased.
This past Tuesday the CPI number was released and it came in at 7.1 While this is a very high number historically, it is less than what it has been and a sign that inflation may have peaked. The markets took this as a good sign which means we could see long term rates fall even further. Don’t confuse short term interest rate hikes with long term rates.
Inverted Yield Curve
We still have a deeply inverted yield curve which signals the United States is in or will enter into a recession soon. Recessions are not good for housing markets. When people lose their jobs or the economy slows down, it keeps prices in check. A slowing economy can lead to weak demand.
Practically speaking, demand should be high. People need housing, either in ownership form or rent form. Housing demand will come from financial ability. On the one hand, lower interest rates will help more people afford more housing. On the other hand, losing your job or seeing a cut in hours doesn’t do much to help qualify for that mortgage.
Current Market Index
What we can say is that lower rates may have helped the local real estate market, and we will take all the help we can get right now. The Ellis Team Current Market Index accurately predicts the future direction of the real estate market. The index has been pointing higher three straight weeks, which was a bad sign for the market. A higher index number is not good for the local market. This past week the number stalled and went back to the number two weeks ago.
All Eyes on the Fed
We are writing this article prior to the Fed’s decision on interest rates. Our best guess is they will raise rates half percent versus the .75% they have been raising. This will be seen as a welcome sign if they do this. Perhaps more important than what they decide will be the language they use in describing their decision. If the Fed signals rate hikes may begin to slow going forward it means they see some progress in slowing the economy and raising unemployment numbers. They intend for people to lose their jobs to help stop the inflationary wage increase pressure.
Remember, the Fed has a tough job to do, and they are not necessarily the consumer’s friend. We have too much money in the economy and they are intent on slowing it down. Of course, Congress could stop spending so much money and that would help. Absent that, the Fed must continue raising rates to blunt overspending in Washington. It’s the only tool the Feder Reserve has, and they are using it.
2023 Real Estate Market
Most experts agree we will see fewer transactions in 2023 than we did in 2022. In 2022 we may have the single largest decrease in transactions in history. People better buckle up because 2023 may see even fewer. Many are expecting another 25-35% drop next year. Some experts are predicting a 30- 40% drop in the number of real estate agents in 2023.
85% of agents today have not experienced a housing shift. They have no idea how to sell homes or find customers in a shifting market. MLS and board dues are due December 31st. Our guess is many agents who have not sold a house all year will not renew their membership. The agent you speak with today may not be here next month. Falling transaction volume has hurt the inexperienced agents badly.
New Way to Sell Homes Coming to SW Florida
We are excited to roll out a new way to sell homes in SW Florida compared to the traditional way. You’ll be hearing more about the program in a few weeks. We will announce the program the 1st or 2nd week in January, and it is good news for home sellers.
In the meantime, you can check out your home’s value at www.SWFLhomevalues.com. If you are interested in a better way to sell your home next year, email Brett@topagent.com with the subject line Better Way and we’ll notify you first.