Friday Market Update: April 22nd 2022 with BRIAN MANNING

Happy Friday! Brian Manning here with your weekly update. Let’s get right to it.

So, Monday this week, we had Freddie Mac coming out with a statement. This is in regards to new construction homes saying that we’re 3.8 million homes behind on actually delivering to the public what’s needed for new purchase transactions. You know, kind of difficult to keep our finger on the pulse here or really to determine the accuracy of that statement, even if it is a high number. Still, whether you’re, you know, 2 million, 3 million, 3.8 million homes behind on delivering new construction homes to the public, certainly still seeing challenges in the new build area with homes being behind on delivery to the public. So… now, I’m certainly just playing more and more into the challenges with inventory that we’re seeing.

Tuesday this week, we had the World Bank giving a statement and they were cutting their global forecast for growth, went down from 4.5% down to 3.6%. So… you know, for sure, the World Bank, an incredibly important institution definitely seeing recessionary pressures around the world, you know, that we’re likely to be pulling into here in the next year or two.

Also Tuesday this week, we had Fed President James Bullard speaking. He was talking about a 75 basis point or a 0.75% rate increase with the Federal Reserve. You know, may be unlikely that we would actually see a 75 basis point rate increase. Perhaps, they’re just saying this to soften the blow so when they raise them by 50 basis points or half a percent, it doesn’t really feel that bad. But certainly, it looks like the Federal Reserve without admitting, just admitting that they are behind the eight ball here on taming inflation because… you know, we have some fed presidents voting members as of February saying, oh, we don’t even need to raise interest rates. And now you’re seeing some fed presidents come out and say 75 basis point increase. So… definitely a disconnect there.

Wednesday this week, we got existing home sales. So… existing home sales looking at the month of March. So, this was home sales that took place. You know, existing home sales in March is really looking at properties that went under contract depending on where you are in the country. Sometime between mid-January and mid-February, existing home sales were down 2.7%. Actually, better than expectations. Expectations were that existing home sales to be down 4.5%. So, still just inventory challenges everywhere we look. An interesting component of this report though was about cash buyers. So… cash buyers went from making up 25% of all purchase transactions to 28%. You know, historically, they used to be below 20%. So… It’s interesting to see that we’re just seeing more and more cash buyers in the marketplace.

Also Thursday this week, we just got more and more talk about inflation. And now, we’re starting to hear about what’s called the wage inflation spiral. So, what a wage inflation spiral is, and it’s something for us to pay very close attention to, is that you have employers that are looking at the cost of inflation, right. You have the cost of goods increasing. As the cost of goods increase, you have an employer that has to raise the wages that they pay their employees so they can afford the cost of goods going up.

And then you have the cost of goods going up even higher and then you have employers that have to continue to raise their wages as well. So… A wage inflation spiral would be really bad because it’s very hard to tame inflation when you have inflation costs escalating and then you have employers trying to increase this. I was actually just reading an article this morning about wage pressure inflation. And Florida for example, top five markets for wage pressure inflation. Sarasota alone was up like 20%. So, certainly, something to pay attention to and it’s going to be impactful in the marketplace.

But really the challenge is, you know, what is the Federal Reserve going to do? The Federal Reserve is so far behind. You know, now, they’re looking at raising rates you know, around 3 to 3.5% this year. You know, it certainly pushes the US economy into a recession. And perhaps, that’s what they need to do to really tame inflation. You know, from us and the mortgage side and the real estate side, this isn’t necessarily a horrible thing. You know, recessions are usually very real estate friendly. So, when you see the federal reserve hike rates like that, when you see them push us closer to a recession and you see that have an impact on inflation and inflation comes in check, that really just means that mortgage rates will come down and that usually is very beneficial for the housing market as well.

So, we’ll have to keep an eye on this. I definitely don’t envy the Fed’s position because they’re in a tough spot right now. I’m around all weekend. If you have any questions, let me know. If you want to go through our strategic buyer consultation, give me a call. Call me on my cell phone or text me I would love to help you any way I can. Happy Friday. Have a great day.