It’s the perfect combination – a little more inventory, mixed with improving interest rates yields us an almost 5 percent increase in contracts. But the media is still describing the real estate market as an impossible mess. Is it fake news? Plus everyone will be talking about the jobs report over the weekend, so I’ll make sure you’re up to speed.
Housing affordability is almost at its worst level in 40 years. But more inventory and better rates definitely puts buyers in a better position. Even sellers, as we’ve talked about before. So why does the media keep telling everyone not to buy? Bloomberg had a headline this week that’s sure to make everyone feel great: “Starter Home Prices Top $1 Million.”
The media is a mess.
Do you remember when our parents trusted the news? When the evening anchor was part of our household and we listened to the actual facts he shared? Let alone trustworthy, the lack of balanced news today is a huge part of the unrest in our country – maybe the biggest part. I won’t get on a soapbox about all the hot button issues, I’ll stay in my lane with real estate because it’s a big enough problem just there.
We already know that major corporations back the media, many of which are part of portfolios that are acquiring real estate at an extremely fast rate. Blackrock for instance is setting aside a larger percentage of their fund to acquire real estate than it ever has before. Word on the street is they will own 60% of the single-family housing in our country by 2030. Isn’t it weird that they would try to scare their viewers away from real estate while their investors buy real estate?
We also know that real estate investing is a powerful tool to achieve financial freedom – it’s accessible to anyone who can make a small investment, or in some cases no investment using a zero down loan program. They achieve stability which leads to different decisions being made about their jobs, families, and spending habits. They also start building wealth in ways renters are not able to. The trajectory of a homeowner’s life is different.
The cost of waiting is real.
Home values in Washoe County are expected to appreciate about 4.5% over the next 12 months. The media will start telling buyers to wait until the Fed cuts rates to buy a home, which is problematic because of a remarkably simple and very real problem we have with housing – supply and demand. After 12 months, we are forecasting appreciation rates will double. Then it really gains speed and five years from now – based on the data we have now, the forecasted rate of appreciation in Northern Nevada is over 20% year over year.
Let’s look at a home in the northwest, priced at $500k and pretend we have a buyer who is putting 5% down. If they heed the headlines and wait to buy until rates are 5.625% - that home is likely to go up in price to at least $511k. At least. If they wait a year, they miss out on almost $25k in appreciation gains. According to Keeping Current Matters, the average home in the US is likely to increase in value $83,000 over the next five years.
We’re going to get real about these numbers and break down the genuine cost of waiting, the potential to get a better interest rate and what it will mean for your bottom line over the next 6 to 24 months on Property Pursuits next week. I highly recommend joining us live because we have a fun giveaway planned too! Use the link below to register.
Fed Meeting Week
I can’t let you out of here without talking about the Fed on a Fed announcement week. Powell has finally, personally been quoted saying an interest rate cut is on the horizon. I know lots of people have posted that the Fed promised four rate cuts this year, and that really was fake news because official officials had said no such thing. This week the words fell directly from his lips, that if confidence on inflation continues and the risks to the labor market continue… “a reduction in our policy rate could be on the table as soon as the next meeting in September.”
Jobs Report Shows 114k jobs added.
And then we got the jobs report to make our Friday. At 5:30am I got my Wall Street Journal ping that only 114,000 jobs were added – we were expecting 175-185k – and the unemployment rate ticked up to 4.3%. That’s a very important number, which I broke down previously so be sure you understand why. Here’s the thing – we have been very focused on inflation but when we remember the Fed’s dual mandate, it becomes clear that employment numbers are going to be the real driver of a Fed rate cut. Powell wants that soft landing he’s been promising and there is no soft landing in a job loss recession. So in my humble opinion, he will not let the labor market break. Bets are now that we see a bigger rate cut in September – 50 basis points instead of 25.
What does this mean for buyers and sellers today?
We are likely going to see intense activity towards the end of this year. I chose the word intense carefully. I don’t mean more or less sales. I mean intense as in high pressure. Buyers who are aggressive in their plans to not be left behind again. Sellers who HAVE to sell in order to buy, or before the end of the year, or because of their debt. While there isn’t much logic to it, I do also get the sense that some people want to hang tight until the election regardless of rate cuts. This is definitely an opportunity for those who understand that we will wake up to the same reality on November 6th that we did on November 4th.
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