SW Florida inventory and real estate demand fell slightly in the last week. Inventory fell because 99 single family homes expired at the end of April. We will be watching to see how many of these homes are relisted plus the new listings that hit the market.
Real estate demand fell this past week, and that may have been caused by rising interest rates. We have seen rates falling for several weeks; however, they have risen the past two weeks. We are not convinced the market is this interest rate sensitive, although we have seen a high correlation between modest rate movements and movement in pending sales in the past several months.
Banking
All eyes this week will be on the Fed’s decision, and more importantly their commentary on what they believe their actions might be in the future. The failure of First Republic Bank could influence commercial real estate lending but should have no effect on residential real estate lending.
Jobless claims are a lagging indicator. We expect jobless claims to rise someday as vacant jobs leave the marketplace and companies continue to cut back. All the Fed’s actions to tame inflation will help to tame price increases in real estate. The cost of borrowing has risen and that helps cap what consumers can afford to pay for housing.
Florida
What we do not know is how this will affect Florida. Florida seems to be better off than many states, so people’s desire to move here may offset dampening economic conditions elsewhere.
Insurance is one topic that is on the mind of many homeowners. Costs are rising and insurance companies are still in trouble. It may take another year or more for the insurance market to stabilize. Re-insurance is an increasing cost for insurers adding pressure to their decision to write new polices or stay in business.
Debt Ceiling
Perhaps the biggest wildcard is the looming debt ceiling battle. The US is simply spending too much, and everybody knows it. The dollar is being replaced as the trading currency of choice. Should the US default on it’s debt, which is highly unlikely, it would bring grave consequences. As we get closer to the debt deadline, rate may get a little wonky, and it will bring unpredictability in the economy, and perhaps the lending markets. This could bleed through to Wall St and the real estate markets too if we’re not careful.
The reason we feel a default is unlikely is because the treasury secretary can cut services before defaulting on actual debt. Cutting services would be extremely unpopular, but far less catastrophic than defaulting. We might never recover from an actual default.
We are not sure how cutting services would affect FHA and VA loans, or the secondary markets. The Fed has been buying assets and treasuries. If they can no longer do this, the free market might take over and rates could soar. It would be hard to choose between cutting back on the military or food stamps versus monetary policy that could drastically change our debt structure and affect rates. Single handedly rates could change drastically overnight, and what would that do to the real estate market?
An overhaul of the budget needs to be made, that is for sure. How we do it, and how soon they make progress will determine much more than people realize. Stay tuned, and stock up on the popcorn. Not only will it be a heck of a show, but it might also be what’s for dinner if we don’t get this debt under control.
If you’re considering selling, Always Call Sande Ellis or Brett Ellis at the Ellis Team at Keller Williams Realty 239-310-6500. We’ll help you navigate through these wildcards. Be sure to ask about our 8-day sale program.
Good luck, and Happy Selling!