Will Spring be Hot for Real Estate?

Real estate professionals and potential home buyers seem to hold their collective breath each month for the consumer price index (CPI) to be released, which happened again yesterday (Feb 13th, 2024). The CPI is a primary measurement of our economic health, showing where inflation is at, and a potential factor in improving mortgage interest rates if inflation stays down. The Fed would like to see the CPI around 2.4%. It was as high as 9% in the summer of 2022.

Yesterday, the Bureau of Labor Statistics announced that the CPI fell in January to 3.1% year-over-year, down from the 3.4% rise in December, but higher than analyst’s predictions of 2.9%. This caused the market to react negatively, but in the bigger picture is the lowest increase since June 2023 (see historical data). The vitality of the spring housing market may hinge on the direction of mortgage interest rates and the overall US economy.

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The overall positive economic indicators like the consumer price index from the last several months have sparked optimism among real estate professionals for an active spring. The sensitivity of homebuyers to rate fluctuations, especially given the current elevated home prices, was evident in a 7.2% weekly decline in mortgage application activity following a slight rate increase last week.

Orphe Divounguy, a senior macroeconomist at Zillow, remarked, “So long as core inflation and economic activity continue to moderate, mortgage rates aren’t expected to rise further. If layoffs remain low, and mortgage rates ease, housing market activity should rebound modestly this spring — meaning more listings coming on the market and more sales.”

Hal Bennett, a Redfin Premier agent expressed optimism this spring, stating, “I believe this year’s market will launch in the spring, once 6% rates are even more entrenched in buyers’ psyches, and more homeowners list their houses.”

Notable financial institutions and industry experts, including Wells Fargo and Fannie Mae, anticipate rate cuts in the near future. Wells Fargo’s 2024 annual outlook predicts a moderation in the economy by mid-2024, prompting a 225 basis points rate cut by early 2025. Fannie Mae’s housing experts project mortgage rates to dip below 6% by the end of 2024, stabilizing around 5.8%.

Lower interest rates may not be the only catalyst needed to create a strong and sustainable housing market through 2024 and 2025. Joel Kan, MBA’s deputy chief economist, noted, “Low existing housing supply is limiting options for prospective buyers and is keeping home price growth elevated, resulting in a one-two punch that continues to constrain home purchase activity.”

www.visualcapitalist.com/chart-u-s-home-price-growth-over-50-years/

Intercap Lending continues to provide interest rate and down payment assistance options for home buyers who want to take advantage of today’s lower demand and more competitive pricing before interest rates decline and demand rises, potentially increasing home prices even more. Options like Intercap’s FREEFI, temporary rate buydowns, first-time buyer grants, Veteran grants, Community Lending Programs, and Home Transition Bridge Loans can help buyers get ahead of the possible spring rush, and still take advantage of lower rates down the road.

Intercap also provides real estate agent coaching to assist agents with lead generation and real estate technology advancements in digital marketing, virtual reality, and artificial intelligence. Taught by a professional coach, author, and agent, Captivate Sales Coaching has helped agents like Leslie Clement attract more clients, particularly sellers, who view the current housing market as an opportunity before rates move down, and to fill her pipeline now with those who plan to wait until rates drop. After four new listings and multiple offers with rates over 7%, Leslie commented, “I have just loved doing this plan. It helps me to feel like I have a checklist and I’m not missing something.” Captivate classes are open in Flagstaff, Arizona, Sandy and Logan, Utah. Spring and summer classes are planned in St. George.

Sources

• www.mba.org/news-and-research/newsroom/news/2024/01/31/mortgage-applications-decrease-in-latest-mba-weekly-survey
• www.zillow.com/research/mortgage-rates-18722/
• finance.yahoo.com/news/mortgage-rates-drop-for-the-second-time-in-2024-180307956.html
• www.realestatenews.com/2024/02/01/mortgage-rates-dip-slightly-as-fed-continues-its-pause
• www.visualcapitalist.com/chart-u-s-home-price-growth-over-50-years/