Mortgage Update - July 1st, 2024
Good morning, team! We have officially entered election season. Based on the reaction from mainstream and independent news channels, the debate was not a win for America. It was missing a lot of constructive dialogue from both sides. The next four months could introduce quite a bit of uncertainty into the marketplace. Kreg and I will be here to break it all down for you 💪💪
Happy early July 4th 🎆 If you are celebrating with family and friends, have fun and be careful. I can remember a few times as a kid almost blowing my fingers off with M-80 firecrackers 🧨
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Read time: ~4 minutes
Will Home Sales Surge After the Election?
With Thursday’s presidential election in the rearview mirror, it’s prime time to consider how such events typically shake up the housing market. Historically, post-election periods often see a boost in home sales. This spike usually stems from increased consumer confidence, translating into significant financial moves like home buying. The stability a settled election brings makes folks more eager to invest in real estate. Anecdotally, we do hear clients suggest waiting until the election to decide whether to buy a home, too.
For 2025, interest rates will be key. Lower rates could drive more buyers, while higher rates might dampen enthusiasm. Housing affordability remains a concern; if home prices keep rising faster than wages, many buyers might struggle.
Don’t forget the overall economic landscape. While elections can boost market confidence, broader economic conditions like job growth, inflation, and consumer spending will ultimately shape the housing market’s path. Keep these factors in mind as you advise clients and navigate the market in the coming months.
Key Takeaway: If history is an indicator of the future, there is reason to believe 2025 will be a stronger year for the housing market post-presidential election. Uncertainty is reduced making it easier for consumers to make an educated decision on whether to pull the trigger on a new home.
New & Existing Home Sales Slowing 🛑
Sales of newly built homes dropped last month to 619,000, according to government data Wednesday. That’s down from an expectation of 647,500. New home sales make up about 13% of the market, which is trending higher than normal due to builder incentives and super low rates offered by their in-house lenders.
Housing starts dropped 5.5% and building permits pulled back 3.8%.
Sales of previously occupied homes fell for the 3rd straight month in May, which was down 0.7% to 4.11 million. Oddly, home prices have risen against slowing sales and inventory levels at a 4 year high. The median sale price jumped to $419,300 - the highest price ever recorded.
The median new home is selling for $417,400. It’s now CHEAPER to buy a new home than an existing home. According to the Kobeissi Letter, the last time this anomaly occurred was in 2021 and 2005.
New homes are more attractive next to old homes making it harder for owners to sell. Something is clearly wrong when new is cheaper than old.
Additionally, demand for second-home mortgages dropped to a 6-year low in 2023 with 2024 expected to be even worse. Vacation home mortgage demand has dropped by 65% vs. 2021. The housing market is even rough for the affluent Americans.
Key Takeaway: It definitely feels like we are switching quickly from a seller’s market to a buyer’s market based on the inventory levels that are starting to grow across the nation. Ohio is in a nice pocket of continued growth and stability, shielded from other areas of the nation that are definitely turning a scary corner.
It’s Jobs Week!!
We have a ton of important data points to start the 3rd quarter of 2024. Below is a snippet of the newsworthy events:
Tuesday: Job openings report (expected 7.9M, previous 8.1M)
Wednesday: ADP employment data (expected 170K, previous 152K), initial jobless claims
Thursday: July 4th Holiday
Friday: US employment report (expected 195K, previous 272K), US unemployment rate (expected 4.0%, previous 4.0%)