Friday Market Update: March 3rd 2023

January Pending Home Sales Were Stronger Than Expected 

Happy Friday! Brian Manning here with the weekly update. Let’s get right to it. So, Monday this week, we got pending home sales. Pending home sales was signed contracts for the month of January. Expectations were that pending home sales would be up 1%, but pending home sales were up 8% in January, which is unbelievable. We really totally understand that interest rates come down significantly in the month of January. When interest rates came down, it sparked a lot of buyer activity. So really exciting to see pending home sales increase there.

We also understand that moving into February, rates move higher. I’m not going to be surprised to see a lighter pending home sales for the month of February. But January does just prove to you that when rates come down, buyers jump back into the marketplace. What’s going to happen? And we’ll talk a little bit more about that in a minute.

Tuesday this week, we got feedback on from Apartment List. This is on rent. This is a year-over-year basis that rents are going up at 3%. You know, not long ago, rents were going up at 18%. What I want to show you here is just some feedback on the rental market. So… We’ve talked about consumer price index a lot. We’ve talked about rents. We’ve talked about why this is impacting inflation and why mortgage rates really haven’t come down just yet.

So, right now, if you look at this line right here, the pink line, this shows you Apartment List. And right now, you have rents going up 3% year-over-year. Not long ago, we were at 18%. The challenge that we have is that CPI looks at the shelter costs and CPI which is this blue line, is about a twelve-month lag. So, the inflation component with CPI shows that rents are going up at 7.9%. So… What’s crazy is you have the difference between rents going up at 3% per year on paper this is the actual number.

Then, you have rents showing in CPI going up 7.9%. This is really negatively impacting the inflation numbers. It’s going to take a minute for it to catch up there. We also got Case-Shiller. This gives us feedback on home appreciation for the month of December. Home depreciation was down 3/10th of a percent in December.

We also get FHFA, this is for December as well. So, Case-Shiller looks at home sales that took place for every transaction. So, cash transactions, FHA mortgages, VA, etc. It’s just every transaction possible. FHFA which was down 1/10th of a percent, only looks at purchases that were made that obtained a conventional mortgage. So really more, you know, in that middle price range, not high-end super jumbo, not cash transactions. And that was only down 1/10th of a percent. So still really holding strong, really based on inventory in the marketplace, which we’ll talk about that more in a minute.

Wednesday this week, we had a handful of Fed voting members going around talking about employment, and we got some feedback on job openings there. Let’s take a look at that real quick. So, the first thing I want to look at is… Federal Reserve talking about job openings and how we’re in such a hot, robust employment market, but we also had Indeed and ZipRrecruiter come out and the CEO of ZipRecruiter talking, saying that job openings are down, right.

If you go back to the high of where we were before, if you look at openings across the US, regardless of the report that we look at, job openings are down right now. Everywhere I look in the news, I’m seeing information about companies that are laying off employees. Yet… You got Fed Voting member Kashkari in the news on Wednesday talking about how hot the labor market is and that they need to calm the labor market down and they need to keep hiking interest rates. And I don’t mean to be the dead horse of this, but this is all going back to that employment report that we got on February. This is either February 2nd or 3rd, it was for the month of January, and it showed like 500+ thousand jobs created in the US. I think what we really have to look forward to is employment reports that we’re going to get next week.

So, next week on Wednesday, we get the ADP report. On Friday, we get BLS. Finally, you know, when we get these reports, this would be for the month of February. Unlike the month of January, it’s not going to have seasonal adjustments. It’s not going to have a population control in there. It’s just going to be the true actual employment data. I’m really curious to see if the employment reports catch up with really what we’re seeing in real life right now. And then let’s see. Hold on one second.

Thursday this week was a relatively quiet news day. Not a lot to talk about there. Today, actually, Friday is a pretty quiet news day. But what I really want to look at today is just if you were buying a home or you’re considering buying a home and you’re worried about interest rates right now, I truly think that right now is a great opportunity to buy a house. And I’ll share some information with you, and I’ll just show you why.

So, we’re always looking at inventory, and if you buy home right now, what is the long-term hold look-at? So, from the National Association of Realtors, right now there’s 980,000 homes for sale in the marketplace. But… of the 980,000 homes that are for sale, 402,000 homes are already under contract, which means available inventory across the United States right now is only 578,000 homes. And then if you look at active listings… So, okay, yeah. So, right now… You know, we’re a little higher than we were at the all-time lowest two years ago.Everyone is going to agree that we never want to go back to the inventory levels from two years ago because it was the worst.

But… If you look at available inventory right now, only 578,000 homes, and you go back to 17, 18, 19, our inventory levels are still running at half of where they were going into Covid. So… You know, If I look at this and I think about being a buyer in the marketplace, yes, you’re going to pay a higher interest rate right now. Eventually the Federal Reserve and their federal hikes will work. Inflation will come down, mortgage rates will come down. You’re going to see lower interest rates. And with already existing low inventory levels, when rates come down and you get even more buyers into the marketplace, it’s going to create even more competition.

Whereas if you look at purchasing a home right now, get into the home at the higher interest rate, of course, we still want to make sure it’s affordable for you and it meets your own personal budget. But if you buy a home right now at a higher rate, really great chance you’re going to get to refinance. And when you look at what’s going to happen this year, you know, sometime in the summer or a little bit later when mortgage rates come down, if inventory levels are still at record lows, interest rates come down, more buyers jump in, it’s going to make it harder to purchase home at that point in time.

So, if we look at January and we use that as kind of our leading indicator, right, mortgage rates came down in January. Pending home sales skyrocketed. It only expected 1%. Pending home sales, we were up 8%. If you use that as the indicator of what’s going to happen, and you go into the summer months when rates hit that, you know, potential 5% range, you’re just going to see a bump in buyers. It’s going to make it harder to get a good deal. Whereas right now, if you’re a buyer, you got some negotiating power, you could probably get good deal. If you want to talk more about this, give me a call. If you want to go through our fast-track approval, get a pre-commitment so you can compete with cash offers, close in twelve days, call me. I’d love to help you. 

Happy Friday. Have a great day!



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