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I might prefer a world without Octobers

Home sales hit a 14-year low, interest rates have given back nearly all of the improvement we saw in August and September and buyers seem to be frozen, not wanting to make any moves until after the election. Let’s be honest, it might be beautiful out there but to the trained eye – there is a lot of pain all over the place. 

Or maybe that is just in the realtor or lender’s line of vision. I don’t necessarily have the best news today, but I do have a couple interesting points for you to ponder this weekend. The first is that existing home sales are trading at their lowest level since October of 2010. The second is why are October’s always so bad for interest rates. Lastly, let’s discuss why people really want homes. 


Home Sales 

We are talking about existing homes, not new construction. US resales – homes previously lived in – declined to 3.84 million at an annualized rate. They were expected to indicate a 3.88 million pace and were only down 1% from the month prior but that does put us at an almost 14-year low. We can pretty easily speculate that buyers and sellers are not jumping to move. We’ve seen surveys showing 40% of buyers are waiting until after the election, I’ve also talked about why that is silly. We know many sellers are not in an optimal place to sell. Despite home appreciation gains being stellar, consumption and spending have been even more stellar. Many tapped into their home’s equity to consolidate debt or have damaged their credit and in turn their buying power. This makes it more challenging to move up or down. 


Then rates. Oh mortgage rates. After both job and inflation data raised concern on whether the Federal Reserve should continue with rate cuts instead of taking a more gradual approach to ensure the fight on inflation is truly won…mortgage bonds, well there is no subtle way to say this. It’s been a blood bath. We’ve had multiple mornings (two but listen they really hurt) where we woke up to interest rates being half a point higher than they were at closing the day before. 


IMO – October sucks. 

History agrees. One way to keep tabs on mortgage rates is to watch the 10-year treasury yields. When the 10 year is up, mortgage rates will be getting worse. When it’s down basis points, you’ll see mortgage bonds in the green which means improving. In October of 2022, the 10 year took a shit. In 2023, October gave us the highest interest rates of my career. Here we are in October of 2024 in another bond unfriendly market. 


A survey that surprised me. 

Lending Tree surveyed buyers on why they want to buy homes. Now I’ll give you some background, so you’ll know why the results surprised me. I have bought three homes without even seeing the insides. I’m not good at interior design but I’m good at mortgage payments. If I can make the payment affordable or the property cash flow, that’s all I need to know. My kids are going to trash anything that’s nice anyways, so it’s better I don’t get too attached to the current condition of the home.  


Consumers surveyed say the main reasons they buy a home are having authority over what to do with it, having stability and not having rules regarding pets. Building wealth was 20% lower than just being able to paint the walls however you want. That’s crazy! Appreciation and amortization gains are life changing – they’ve changed my life; I’ve seen homeownership change the trajectory of countless borrowers’ lives. This is a message that prospective homebuyers need to wrap their brain around. Buying a home is definitely going to accomplish you being in charge of whether you can get a puppy or not but it’s also going to give you the best returns out of almost any other asset class. 


Are you making sure your clients are clear on that too? 

 

 

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