AUGUST 2019
Fed Cuts Interest Rates for First Time Since 2008
There is often a misconception that changes in the federal funds rate affect mortgage rates. Mortgage rates track the 10 year Treasury rate, and both have declined by just over 1 percentage point since November as financial markets anticipated slower economic growth and inflation in 2019. Thus, a Fed funds cut will likely have little impact on fixed mortgage rates.
How the National Mood Can Factor into Real Estate Decisions
Unemployment is down. Mortgage rates are down. The stock market is up. So why don't more people want to buy real estate? Real estate purchases throughout most of the country are made as much for emotional as for financial reasons. And we as a nation currently suffer from a mood disorder which cannot be easily cured.
This mood disorder contains many facets. For one, the politics of the past decade (and particularly the last few years) have polarized unlike at any time since the New Deal. Anger and fear abound across the country, driven by genuine ideological differences but profoundly exacerbated by confrontational rhetoric and name calling.
For many workers throughout the economy, from bankers at the top end to manufacturing and blue collar job seekers lower down the pay chain, the recovery of the past decade has been incomplete.
It's not that buyers cannot afford to buy a home. Rather, the mood of the country does not encourage the sort of optimism of which home buying is an expression. Judging from the data on employment, mortgages, and stocks, everything looks good. In a world waiting for the other shoe to drop, a new home, even one which is affordable and desirable, can feel too risky. We all know the old adage "Feelings are not facts." But sometimes, it seems, they are.
Realtor.com predicts market shift impacting buyers is on the way
A market shift that will impact buyers well into 2020 is likely on the way, according to the REALTOR.com 2019 trend report. Total inventory grew only 2.8% year over year, according to the study, but annual gains have softened throughout the year; the number of newly listed homes has dropped year over year. If this trend continues, inventory growth is set to flatten over the next three months and could start to once again decline in October.
"It was only 18 months ago that the number of homes for sale hit its lowest level in recorded history and sparked the fiercest competition among buyers we've ever seen," Danielle Hale, chief economist for realtor.com, said in a statement. "If the trend we are seeing continues, overall inventory could near record lows by early next year." Declining inventory could lead to the return of bidding wars, stronger price appreciation and quicker home sales, according to the report. So far there has been a lackluster response to low mortgage rates, but if they do spark fresh buyer interest later in the year, U.S. inventory could set new record lows this winter," Hale added.
While rates are historically low, they are still higher than they were seven years ago when they reached their lowest point, at 3.3% for a 30-year fixed rate mortgage. Rates are higher than 1/3 of weekly rates seen over the last seven years, which means many homeowners have mortgage rates lower than today's levels, according to the report.
Hale says that the reason why people are not putting their homes on the market is difficult to pinpoint. "It is likely a combination of rate lock, recently decreased consumer confidence and older generations choosing to age in place," she added. Consumer confidence fell 4.4% over the past year, signaling that potential home sellers are more worried about a possible recession or future economic growth, according to the report. In the short term, the U.S. median listing price has likely reached its high point for the year. Prices usually peak in July, but the report notes that the likely high point came earlier in the year due to a mismatch of what is available and what buyers want.