Friday Market Update: January 27th 2023

Pending Home Sales Show A Resilient Market

Happy Friday! Brian Manning here with the weekly update. Let’s get right to it. So, Monday this week, we had the National Association of Business Economics released a survey. There’s a survey of the top 60 firms. What I love seeing here is that most firms predict that we’re going to see a decline in inflation.

We’ve talked about this in the past. Inflation is the arch enemy of interest rates. As inflation comes down, cost of goods comes down, mortgage rates come down. So, that’s why I’m always excited to see good inflationary information. So, that was awesome to see.

Tuesday this week, relatively quiet news day, not a lot to talk about there. Wednesday this week, and actually every single Wednesday, we get feedback from the MBA, the Mortgage Bankers Association. This is on new mortgage applications. You know, two weeks ago, new purchase applications were up 25%. This week they were up another 3%. So, we are seeing a substantial gain and movement in new purchase applications. This is people applying for new loans. So, super excited to see this.

Thursday this week. we got new home sales. So, new home sales are new construction sales signed contracts for the month of December. On a month-over-month basis, this was up 2.3%. So, we’re actually seeing more and more traction in new home sales, which is really exciting to see. And then we also look at inventory. You know… You got to watch out for inventory because the media really latched on to the inventory. And the initial report says that there’s nine months of inventory for new construction homes.

The challenge is if you look at all the inventory that’s available across the country, there’s only 71,000 homes that are able to be purchased and moved into. So, that’s actually 1.4 months’ supply. The media looked at what’s available is nine months’ supply. I mean, these are homes that maybe haven’t even had a hold dug yet for a basement. So, you got to be careful watching the media because what they say about available inventory and the true numbers… you know, they’re always looking for the negativity, unfortunately.

Today Friday, we get the PCE. This is the Personal Consumption Expenditure. This is the Federal Reserve’s favorite gauge of inflation. It gives us a month-over-month and an annual reading. So, they specifically look at the core reading. The reason why the Federal Reserve looks at the core reading is because it strips out volatile items such as food and energy. So, on a month-over-month basis, the core reading moved from 4.7% down to 4.4%, exactly as we expected. So, 3/10th of a percent change there. It’s pretty much on track. You know, like we said, we think we’re going to continue to see easing in inflation.

We really think we’re going to really see, you know, substantial movement inflation end of the spring, early summer of this year, which means mortgage rates are just going to keep going down. We also got some feedback on personal spending. This is for the month of December. Personal spending was down 2/10th of a percent. Expectations were that it would actually only be down 1/10th of a percent.

So… Consumers definitely feeling the pinch as far as how much goods are costing, and there’s less and less consumer spending taking place. We also got pending home sales. This is for the month of December. Pending home sales were up 2.5%. Better than expectations. Also, they went back to the month of November. November was originally down 2.5%, and now, they revised only being down 1.4%.

So… I truly think that we’ve kind of seen the low of the housing market. I think Q4 is the low. The apex of interest rates was in November, right in the holidays. We’re seeing higher mortgage applications, stronger new home sales, better pending home sales reports. If I was a buyer, I will be buying a house right now. I’m telling you, right now is the time to buy a house. I know there’s limited inventory, but as rates continue to lower, there’s hundreds of thousands of buyers sitting on the sidelines and rates move lower, then you have more and more people are going to jump into the housing market. Inventory is going to remain low.

We’re still going to see an unfortunate imbalance of supply and demand going into this home buying season. And I really think right now is the time to buy a house. If you buy right now, you can always refinance, but rates are actually pretty amazing. We’re locking rates right now from anywhere from like, 4.5% to the low sixes. So… Interest rates are not even a challenge right now. If you want to learn more about what’s available, give me a call. If you want to go through our pre-approval process and our strategic buyer consultation, I’m available seven days a week. Call me. 

Happy Friday. Have a great day!



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