Happy Friday! Brian Manning here with the weekly update. Let's get right to it. Monday was a relatively quiet news day, not much to talk about there.

Tuesday, we've had a lot of volatility in the bond market. We've actually had a lot as of recently. We're going to look at a chart here in a few minutes and just look at the volatility. What's crazy though is that bond volatility is essentially like mortgage rates have been seven and a half times more volatile than bitcoin. And there's so much media about how volatile bitcoin is, but mortgage rates and bond markets have been 7.5% times more volatile than bitcoin right now. We'll look at that in just a second.

We also got the Fannie Mae Home Price Index. So, this is for Q3. For Q3, the home price index was up 2/10th of a percent. On a year-over-year basis, the home price index was up 13.2%. So... consistent appreciation across the board, definitely seeing a calm down exactly like we thought would happen. Wednesday this week, we got some new construction data. So, this was on housing starts. Housing starts were down 8% for a year-over-year. Not surprising to see that. Permits though, we're up 1.2%. So, this is for construction going forward. And then, new construction completions were up 6%.

We also got existing home sales. This is one of the biggest reports we're waiting for all week. This is on Thursday this week. So, existing home sales for the month of September were down 1.5%. And on a year-over-year basis were down 24%. We're going to look at that a little bit closer here on a chart as well. And we're still at a 4.7 million annualized pace for home sales. So still a decent amount of purchases taking place, but definitely calming down from the numbers that we're at before. And then, inventory.

Inventory is a big component of this report as well. Inventories went from 1.28 million homes for sale down to 1.25. Wasn't surprised to see that. We'll talk about that more in a second as well. And one thing I do want to say... is keep in mind if you look at this housing market right now, compared to where we were in 2008, 2009, when we had the housing collapse, right now, we're at 1.25 million homes for sale. Back then, we were at 3.4 million homes for sale. So, this market right now is nothing like what it was back in 2008, significantly less inventory for sale, just drastically different.

Today, we get some fed speaks. So, first we have Philly Fed president, saying that he doesn't think that the Fed has raised rates enough. He doesn't think that from their interest rate hikes that they have really done a good enough job yet to quell inflation. But... what's more important is extremely important person, the Fed vice chair, Lael Brainard, she says that she thinks that the Fed has maybe pushed it a little bit too far. And when you really need to see what the lagging consequences are going to be from the Federal Reserve hiking rates and perhaps, they've just raised a little bit too much.

So... So, we're finally starting to see now in the Federal Reserve some very important people question the Fed rate hikes that are taking place and have they done a little bit too much? Which is now good to see a little bit of resistance there. Because like we said in the past, right now, it's like the Federal Reserve is driving a car, looking in the rear-view mirror. They just keep hiking rates, hiking rates. But when you hike rates... from a Federal Reserve perspective, it takes six months or so to see what the implications are in the US economy. So, if you just keep hiking and hiking and you're not doing anything to see what happens, again, it's like driving a car, looking in a rear-view mirror.

One thing we really think though is we really think we're going to see inflation calm down, specifically starting in the month of January. The reason why we say this is because shelter or living expenses are a very high cost and a very high factor in the CPI report. It's like almost 30% is the factor of shelter. And shelter in the CPI report is really a lagging expense. So, by the time the lagging expense catches up and you get really more accurate feedback in the CPI gauge of inflation, we really think it's going to be around January.

So, we, kind of, predict it's going to be a rocky couple of months. It's going to be a rocky rest of the year as far as inflation readings are concerned, as far as mortgage rates are concerned. But we really do think that we're going to see inflation start to calm down starting in the month of January. And our prediction for mortgage rates going into 2023 is that we're going to see them come back down into that 5% range. So... let's watch what inflation does. We keep an eye on it. Of course, I'll keep you updated.

Before I get to the charts, one last thing. I just want to remind everyone about Fall Fiesta, 8th annual will take in place Thursday, November 10th at Rayback Collective. We are approaching selling out. If you have not RSVP, make sure you will. Ultimately, in the near future, we will be shutting down RSVPs because we will have capacity for event.

Let's look at some charts real quick and just give you some feedback here of what's going on in the market. Bear with me for one moment while I set up my screen share. Okay, so there are some charts out there that look at volatility in the markets. There's one called the VIX that looks at volatility in stock markets. This particular chart looks at volatility in the bond markets, which is, which is, you know, specifically volatility in mortgage interest rates. You look at this, so, back here was the beginning of Covid. Until we had the Federal Reserve step in and start infusing liquidity in the marketplace and we had a calming and the volatility of mortgage rates there.

But you look back from the end of 2021, through this year, we've had extreme volatility in mortgage rates, probably the fastest and the most volatile we've ever seen. What's interesting is that this is a chart of volatility for bitcoin. You look at volatility in the bond markets and mortgage rates versus volatility in bitcoin. And mortgage rates and bond mortgage have been 7.5% times more volatile than bitcoin. So, kind of crazy to see that mortgage rates have more volatility than bitcoin right now. This is something I really want to look at. This is a lot of feedback right now on the existing home sales report.

So... So, existing home sales... first of all, they were down 1.5% month-over-month basis. This is at a 4.71 million annualized pace, is still a decent amount of home sales. This is a good piece of the pie out there for everybody. This is slightly better than expectations. And then year-over-year, was calmed down 24%. I don't pay much attention to the median home price, I look more at the averages.

What is really important though is that we had inventory drop from 1.28 million last month to 1.25 million this month. This is a 3.2 months' supply. I would say a normal market is usually 4.6 months of supply. But something we're looking at in a second is that we had inventory crest this year as we have every single year. What's also interesting is that of the 1.25 million homes that are for sale, 732,000 of those homes right now are already under contract. So, 41% of available inventory is under contract right now. A normal market is that 25% is under contract. So, we have tightening in inventory. Still a lot of sales going through and this is really why we're seeing values hold strong.

So, right now, if you look at available inventory in the marketplace, we're only at a 1.9 months' supply. So, it's still a really tight market. Also, we've looked at this in the past and I just want to look at it again. And this takes into account this month's feedback. So, every single year, we show this. Every single year, you see inventory goes up, you hit a peak right around August and inventory comes down. Inventory goes up, you hit a peak around August, it goes down.

Last year, same thing, housing supply, inventory goes up, you had a peak in August and you have inventory drop. This year, there's all these people freaking out, the doom and gloom media about how bad inventory is. And then once again, you had inventory go up, you had inventory peak almost pretty much where we were last year. And now, you have inventory starting to come back down here for the month of September. We're going to continue to see the same thing for a decline in inventory going forward, just like we see every single year going forward, looking at these charts. So... I'm not surprised to see inventory come down right now.

I think it's going to be a tight inventory market going into winter. It's going to be tight in the spring. And then, if we start to see mortgage rates come down again and tight inventory, you know, you're going to see some challenges in the home market. I'm available all week. If you have any questions, let me know. I would love to help you. If you want to go through our pre-approval process or strategic buyer consultation, give me a call, call me on my cell phone, text me. Happy Friday. Have a great day.

-Brian

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