Friday Market Update: September 22nd 2023

The Federal Reserve DID NOT hike rates this week!

Happy Friday Brian Manning here the weekly update. First, I want to invite you to our ninth annual Fall Fiesta taking place Saturday, November 11th! We’re super stoked to do this again, it’s going to be an incredible event. It’s also a benefit for Conscious Alliance, the local food bank, nonprofit, we’d love to have you come out, please make sure to RSVP. All the info is in this email. We’d love to see you there.

Let’s talk about what happened this week. Monday was a relatively quiet news day because the Federal Reserve was meeting this week. So everyone just kind of waiting to see what was going to happen their their meetings started on Tuesday. We’ll talk more about that in a moment.

Tuesday this week, we got housing starts for new construction homes, they were down 11%. This is really mostly in the multifamily area. If we look at single family residences on a month over month basis, they were down 4% on a year over year basis. So they’re up 2% completion. So this is a single family homes that were done, were down several percent on a month over month basis, it almost feels like what we’re seeing right now is that you’ve had these Federal Reserve rate hikes. The hikes are causing pain in the construction market a little bit as far as financing costs are concerned, their borrowing costs have gone up, and they’re pushing through the homes that are being completed. But there there’s really less on the table for more completions in the future. Unfortunately, this is going to impact housing inventory, which is already at record lows. But that’s kind of what we’re seeing in the new construction side.

Wednesday, this week, we had the conclusion of the Federal Reserve meeting. So started on Tuesday ends on Wednesday, then you get a press conference, which was Jerome Powell speaking, As widely expected, they did not move rates. What’s always important about the press conference, though, is the q&a after he has to kind of the prescribed speech. And they asked him, you know, how do you know when you tighten too much. And the response was, Well, we’ll know when we get there.

You know, unfortunately, it’s like the Federal Reserve is just driving a car look in the rearview mirror right now there’s so data dependent. But if you look at the CPI reading, you look at this 40 to 43% of this is made up from shelter costs, while shelter costs lag by 12 to 16 months. If you look at real time, shelter costs are very different than what the report shows. And if we want to have real time numbers, inflation is really in that like two and a half percent range right now. So it’s going to be interesting to see what happens.

And we also look at the dot plot. The dot plot is anonymous information from the voting members. It shows what they anticipate for rate hikes or rate reductions. It’s pretty unanimous that they all saw one more rate hike this year, and then reductions moving into next year, we’ll have to wait and see what happens. I’m not sure I actually truly believe them. And there was an article in the Wall Street Journal today. They basically said the Federal Reserve is full of it. They said if you look at all the cycles they’ve gone through in the past, they always overtighten at least to a recession, then they’ve over tighten and then they have to just drop rates very quickly and rates plummet. And I probably think we’re gonna see the same thing moving into next year. I won’t be surprised if we see that Thursday.

This week, we got existing home sales existing home sales on a month over month basis, we’re down seven tenths of a percent. But inventory is also down 1% on a year over year basis. So I’m not surprised to see less existing home sales because inventory is at record lows. And when you have inventory record lows, there’s just not much out there to choose from. If you separate out overpriced sell for just homes that really aren’t that great based on condition, location, etc. And the overpriced there’s really not a lot of inventory to choose from out there. So I’m just not surprised to see a lower number and existing home sales. Not much to talk about today. Markets are kind of recovering today from the reaction from Jerome Powell is comments on Wednesday. It’s good to see we got a lot more news coming out next week. So I’ll have to wait and see what happens. I’m around all weekend. If you want to learn how we’re closing purchase transactions in 15 days, give me a call. I’d love to help you.



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