Mortgage Update - February 12th, 2024
Good morning, team! How about that Super Bowl last night? I was secretly rooting for a 49ers victory, they just couldn’t pull it out. Next big event is Valentine’s Day on Wednesday. You still have time 💌
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Read time: ~5 minutes
Boring Week as We Wait for Tuesday 🦗🦗
There wasn’t much market-moving news this week as we wait for the next CPI (inflation) report tomorrow morning.
The Richmond Federal Reserve President Tom Barkin was interviewed on Barron’s last week. Here are the bullet points from his conversation:
He declined to provide a timeline on when the Fed might cut rates saying “it makes sense to be patient”.
Barkin wants to see a sustained period of cooling price growth. He would like to see disinflation (the reduction in the rate of inflation) beyond goods and into rents / services. Notice he didn’t say deflation…
With the January jobs report adding 353,000 new jobs and higher wages, the economy is on fire and complicates any rate cut timing.
He’s worried about commercial real estate especially downtown office space.
He’s not worried about a banking crisis for regional banks that have recently shown weakness.
Key Takeaway : This interview with Barkin underscores the notion that rate cuts may be in the cards later in 2024, but we shouldn’t expect anything of substance soon. Cooling inflation, a slow down in new jobs and commercial real estate will all take time to play out, which may frustrate everybody looking for relief in interest rates.
2024 Starting to Look Better Than 2023 🧐
We all know 2023 was ROUGH as homes sales was the lowest since 1995.
Surprisingly, membership at NAR only fell by 2.08% from January 2023 to January 2024 (1,548,058 to 1,515,837). Resi Club points out that we didn’t see as much a decline as savvy agents shifted from existing to new home sales due to builder incentives and commissions.
We may have touched the bottom on annual existing home sales at 3.78M. Fannie Mae expects 4.46M in existing home sales in 2024 and 5.02M in 2025. The Mortgage Bankers Association is expecting 4.61M in 2024 and 4.90M in 2025.
According to Resi Club, it looks like new listings may have bottomed. January 2024 was up 2.8% over January 2023 (295,178 vs. 287,140). We are still down 26% to January 2019 (399,032), though.
With rates down about 1% from the peak in October 2023, affordability is a bit better.
Key Takeaway : We have reasons to be optimistic that the worse is in the rear-view mirror. Anecdotally, we are having more and more conversations with borrowers that are ready to move even though they are giving up a strong rate. Some are opting to move and keep their low-rate property as a rental. Folks are getting savvy and life is giving them reason to move.
Unpopular Opinion from a $500M Realtor 🤑
Stop presenting "buyer love letters" with offers on properties. Spring market heats up, increasing competition and multiple offers. A "buyer love letter" will not help your offer stand out.🚫💌 It will put the home seller at risk of violating fair housing laws.
Instead, do this. 👇
Here's one of my creative strategies for making our clients' offers stand out.
End your offer's purchase price with a unique number that's special to the seller.
Look around the property for clues.
the property address ('123' Main St)
graduation years (Class of '1999')
their wedding anniversary date
kid sports jersey numbers
This helped my clients win a home that had 27 offers.
I noticed the seller's kid played baseball. There were high school and college jerseys framed on the walls. #54. So we presented our purchase price as $2,500,054 and explained why. The sellers shared their emotional ties to baseball, which played a part in their lives, making their move a poignant chapter closure.
My clients got the house.🔑
Creativity with intent and purpose will make them fall in love with your offer, not a cheesy letter.💡
– Tommy Choi, a REALTOR® in Chicago for 15 years, was the National Association of REALTORS® Vice President of Association Affairs in 2021 and serves as one of our many coaches through GO! Coaching.