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What the heck is happening to the housing market?
We’ve got bank crisis, inflation is increasing, the job market is holding strong, what does this mean for the housing market and for residential real estate? So, we’ve got a lot of things to unpack here. But ultimately what happened is we had some banks failing because of an unbalance in their diversification at the end of the day and when that happened the Feds panicked, and you have inflation indicators coming up and you’ve got a bank crisis happening. So, what’s going to happen is, to combat inflation the Feds need to increase their interest rates. But if they’re going to raise their interest rates, it’s going to further impact the bank crisis.
The Feds intended to increase the rates by 50 basis points, .50, and instead they did it by a 1/4%. So, they met in the middle, saying we’re not ignoring inflation and we’re not ignoring the bank crisis. What does that do for mortgage interest rates? In the short term, we’ve actually seen it come down. And when there’s uncertainty in the market, rates tend to go up. When inflation was showing that inflation was increasing in the February numbers, we did see an uptick in rates. If you remember last time, I said we’ve been watching rates increase for a period of time. February 1st, February 2nd was probably the last time rates were looking at a positive direction and since then they’ve been climbing. But since the bank crisis and since the Feds only raised their rate .25%, we saw that mortgage rates came down.
What’s going on with homebuyer activity?
We had two open houses this last weekend, one in Folsom and one in Orangevale, and we had over 20 people come through each weekend on both of those properties. Buyers are out in numbers right now and we’re seeing that there’s a lot of interest and activity from buyers as we see rates kind of settling, whether they’re setting, if that’s even possible at this point. We’re going to see buyers start to make some decisions.
When we saw rates dip in early February, we saw application data go up, and we saw offer data go up, but what we are not seeing going up right now is inventory. If we’re looking year over year on how much inventory is coming to market, new listings month over month as we approach the spring market, we are still down. Why? Because we still have so many people that are going to have a real reason to move because they are sitting at a 2% and 3% interest rate in their home. What does this mean for the feature? Time will tell.
Don’t navigate this market all alone. Give us a call here at Bear Flag and we will help you buy, sell, with your home loan or property management.
Talk soon – Martin
Click here to view March Newsletter.