Boots on the Ground Perspective - July 2023

It appears the “spring selling season” has come to an end. The market showed a surprising amount of resilience through the first half of the year, with prices having largely returned to the record highs that we saw in 2022 – despite mortgage rates nearly doubling since that time.

As I’ve pointed out, most of this can simply be attributed to supply and demand. With new listings down 30% over last year, the pool of buyers that are in the market have been forced to compete for what’s available.

That said, buyers aren’t willing to just buy whatever’s out there. Either the home is perfect (location, updating and condition…etc.) or it has to be a great deal. Anything in the middle has been and will, sit on the market until something is done to make it fit into one of those two categories.

So far – the majority of homes that are selling are the ones that are “perfect” with a handful of great deals mixed in. By now though, anything in the middle is moving towards great deal territory through price reductions which will start to show up in the data going forward.

We also have the ongoing issue of mortgage rates to contend with. Despite wishing and praying and dancing for the mortgage gods – all signs point to rates moving higher and not lower for the rest of this year.

I’ve seen the conversation start to shift from “when will rates come back down?” to “how much higher will rates go?”.

We had a few months of “positive” economic news, but the most recent jobs report and other indicators point to a scenario where future CPI readings will show inflation once again rearing its ugly head and causing a prolonged or even more drastic response from the Fed. This outlook drove mortgage rates from around 6.8% to 7.25% over the July 4th holiday before settling now to about 7.09%.

If future inflation readings are higher than expectations then we’ll almost certainly see rates continue to climb until we get data that shows inflation slowing again.

If we get better than expected news, then we might see rates move back into the mid-high 6% range, but I don’t anticipate that they’d move much lower for the remainder of the year.

Whatever happens with rates, my focus remains on how I can help clients overcome and adapt as things change.

So far, the tools that I’ve seen coming from the lending side have done wonders to keep everything as affordable as possible. If rates keep on rising, we’ll see more of these tools start to emerge.

Right now, the best deals can be had with products like a 7 Year ARM that come with a free Refi attached.

I’m sure for a lot of people the idea of an adjustable-rate mortgage might elicit the same reaction as throwing holy water on a vampire – but it can make a lot of sense when you look at the numbers behind it.

As we creep over the average for 30-year mortgage rates (6.8%), it seems a pretty safe bet that rates will be around this number sometime in the next 7 years (before an adjustment is made is on this kind of loan).

So, would you take a 30-year fixed at 7.25% over a 7/1 ARM at 6.65%? Tack on an additional rate buy-down from the seller and suddenly you’ve dropped your payment a significant amount!

Point being – there are a lot of moving parts that go into buying or selling a house and as long as you have me on your side, I’ll be paying attention to all of the parts that equal the whole to keep you informed and prepared for if/when you need to make that next move!