Advice For Buyers/Sellers From Someone Who Isn't A Realtor

Yesterday was actually a pretty good day for this market.

PCE came in lower than expected for the second month in a row. GDP slowed - which sounds bad but I'll explain why it isn't. The Fed held rates for the fifth time. The thing is, all of the data is pointing in the same direction.  Which is really helpful for buyers and sellers trying to map out their next best move.

But I'd be doing you a disservice if I sent you into the weekend without being honest about what comes next.

Oil is back above $92 a barrel. Brent crossed $100 last week for the first time since May after the conflict expanded beyond Hormuz. The war that was supposed to be winding down is doing the opposite. Which means the July inflation data - which comes out in August - is almost certainly going to be ugly.

We had two hopeful months in terms of inflation and mortgage rates. We might be about to give some of that back.

That's the honest picture. Now let me explain what to actually do with it.

Why Yesterday's Numbers Matter Even If August's Are Bad

June PCE showed inflation is coming down from its May peak (we recklessly hope that was the peak) of 4.1%.

The reason that matters even with oil back above $90 is that it tells us something important about the underlying trend. The war-driven energy spike is volatile. It goes up when the conflict escalates and down when it de-escalates. Core inflation - which strips out energy - is what tells you whether inflation is actually embedded in the economy or just riding the oil price roller coaster.

Core PCE came in at 3.3% annually in June. That is still above the Fed's target. But it is not accelerating. Which means the inflation we are dealing with right now is mostly an energy story - not a wages-and-services story. Both are hard to fix but I think we’d prefer the external driver versus one rooted deep within our labor market as insensitive as that sounds.

If and when this war ends - and it will end eventually - oil comes down, energy prices follow, and inflation cools faster than most people expect. The question is just when.

The Fed: Reading Between the Lines

The Fed held rates again yesterday. Fifth consecutive hold.

Three members wanted to hike. That number matters. A 9-3 vote is not a comfortable hold - it is one bad inflation print away from a very different conversation and press conference. And with oil back above $90 and July data coming in August, that conversation might arrive sooner than the market wants.

Here is what I actually want you to take from the Fed this week though.

They did not hike. Even with oil at $90, with inflation still above 3.5%, with three dissenters on the committee - they still did not hike. That tells you Warsh is watching the underlying trend, not just the headline number. He sees what we see - a war-driven spike on top of a cooling core. And he is not overreacting to it.

That is actually a reasonably sophisticated read of a complicated situation.  Coming from someone who didn’t see herself liking this guy very much. 

Rates

Rates are at 6.58% this week. They have been remarkably stable for a market this chaotic. 

Here is why and why it matters going forward.

Mortgage spreads - the gap between Treasury yields and your actual mortgage rate - are holding at 1.94%. In September 2022 that spread hit nearly 3%. If we were still there, your rate today would be closer to 7.5%.

The reason rates have held below 7% through everything this year - the war, the oil spike, the hawkish Fed, all of it - is that the bond market has been better behaved than it was at the worst point of the post-pandemic cycle. That is the single most underreported story in real estate this year.

And those spreads have room to compress further. Which means when this war does end - and when oil does come back down - rates could fall faster and further than the headline Fed funds rate would suggest. You do not need a rate cut to get meaningful rate relief. You need geopolitical stability and spread normalization.

The Trend

Here is the thread connecting all three of those things.

We are in a deceleration. Not a collapse. Not a recession signal. A deceleration. The economy grew faster in the first quarter than the second. Inflation was higher in May than in June. Of course all of this could change when we get July’s data but let’s consider the information in front of us today…

Decelerations are uncomfortable to live through because they feel like things are getting worse. But in a market where the primary enemy of buyers has been inflation and high rates - a deceleration is the mechanism that eventually brings relief. You need the economy to slow slightly and inflation to cool before the Fed can change its posture. Both of those things happened yesterday.

What Buyers and Sellers Should Actually Be Doing Right Now

Realtor.com said something this week that I think is worth repeating: for the first time in years, buyers may finally have the upper hand.

The market hasn’t crashed. It’s rebalancing. Asking prices are falling. Inventory is growing. Days on market are up. Price reductions are more common. The home that got five offers in 2022 is getting two today - if it is priced right.

That is the environment we are in. And here is what to do with it.

For buyers - ask your agent to pull expired listings.

An expired listing is a home that went on the market, did not sell, and came off. Most buyers never think to look at them.  But those sellers are stuck in homes they already decided they didn’t want to live in anymore.

The seller who listed in the spring at a February 28th price and watched their home sit has already done the grief work. They know the market moved. They are far more likely to negotiate on price, on terms, on a rate buydown - than a seller who just listed Friday with fresh optimism. Ask your agent for homes that expired in the last 60 to 90 days in your target area. Then ask them to reach out directly. You might find someone who is ready to have a completely different conversation than they were a few months ago

Now allow me to step outside my lane and speak to the sellers for a moment - here is when to move on price or pull the listing.

More than 10 showings with no offer means buyers are seeing your home and walking away. That is price feedback.  Not a full moon or bad luck, just price feedback.

Fewer than 5 showings in 30 days means the problem is price, presentation, or both. Ask your agent for a comp analysis using only the last 45 days. Not last year. Not six months ago. The last 45 days is your actual market.

And if after a price reduction you still have nothing meaningful within two weeks - consider pulling entirely and relisting in late September or October if your plans allow. Every year I’ve been told activity will slow after the school year starts and every year it does the opposite.  So maybe that’s your time. Your days-on-market clock resets. A strategic pause does a lot less damage than a stale listing that buyers have already scrolled past, in my non-realtor unexpert opinion.