Clark County Special Edition: Assumable Loans and Why "Buy Now or Pay More Later" works

Newsletter - 3/18/2024

Week of March 11, 2024 in Review

Both consumer and wholesale inflation were hotter than expected last month. Plus, retail sales in February rebounded from January’s sharp decline, but not as much as economists had forecast.

Here are the headlines:?

-Clark County shows an increase in sales, inventory decrease to 2.5 months

-Clark County Median sales price up 2% to $510,000

-Release of our newest home valuation tool

-Buy today or pay more tomorrow

-Assumable Home Loans 101

-Upside Surprise to Consumer Inflation

-Wholesale Inflation Comes in Hot

-February Retail Sales Below Estimates

-New Seasonal Adjustments Impact Jobless Claims

Clark County Market Report

In February 2024, the real estate market in our area showed some exciting changes compared to last year. We saw a significant jump in new listings, with 602 homes hitting the market, a 30.6% increase from February 2023, and a 10.1% rise from January 2024. Sales also picked up, with 402 homes sold, marking a 3.6% increase from last year and a substantial 30.1% rise from the previous month. The number of pending sales, those awaiting closure, reached 569, up 13.8% from last year and 27.9% from January 2024.

However, the inventory of available homes dipped to just 2.5 months' worth, suggesting a tighter market. The total time homes spent on the market edged up to 77 days.

Looking at the year-to-date figures, the first two months of 2024 saw a 15.8% increase in new listings compared to the same period in 2023. Meanwhile, pending sales slightly declined by 0.5%, and closed sales essentially remained flat, with a minor 0.1% increase.

In terms of pricing, both the average and median sale prices have seen growth. The average sale price rose by 1.8% to $562,100, and the median price increased by 2.0% to $510,000, comparing the start of 2024 to the same timeframe in 2023. These numbers paint a picture of a market that's bustling with activity, showing both challenges and opportunities for buyers and sellers alike.

Are you thinking of selling anytime soon?

Hey, have you ever wondered, "What's my house actually worth?"

Well, guess what? Our team just rolled out this nifty new tool that's basically like having a crystal ball for your home's value. It's not just about finding out what your place could sell for; we're talking about unlocking the secrets to your home equity, figuring out how to shrink your mortgage payments, and a whole lot more. So, why not give it a whirl and see the possibilities for yourself? I've been comparing it to my appraisals when they are complete and they are very accurate, especially compared to Zillow or Redfin which have been grossly off lately- check out out and let me know how your value compares to Zillow.

Where did the buyers go?

Pent-up demand is growing- in 2023 42% of shoppers left the market due to high interest rates.

All right, let's dive into some real talk about the current housing market because there's something crucial you've gotta know.

Imagine this: rates take a nice dip from 6.875% down to 5.875%. Sounds great, right? But here's the kicker – this drop slashes your monthly payments by a sweet 10%, which in turn, boosts your buying power by the same amount. Now, think about what happens when everyone's been holding off and decides it's time to jump in because of these lower rates. We're talking about a serious rush of pent-up demand hitting the market all at once. We have proven data to show this in Dec. 2024 when rates touched 5.99 for a few days.

What does that mean for you? Well, with more buyers in the mix, all vying for their dream home, prices are likely to get pushed above the asking. So, here's the hook: buying now and refinancing later when the rates drop could be a smarter play. Why wait and pay more in a bidding war, when you could secure your home today and still benefit from a rate drop in the future especially when we can negotiate seller to pay for a 2-1 buydown- Food for thought, isn't it?

Here's a potential scenario for Elliot Gray- a Pacific NW Engineer who is part of that "pent-up" demand.

Assumable Home Loans for those with 10% down or more

Got that itch to move but feel locked in by the "golden handcuffs" of a mortgage rate under 4% in Clark County or Cowlitz County?

Here's a game-changer for homeowners caught in this dilemma: Imagine moving into your dream home without your payments skyrocketing, even with today’s rates hovering around 7%.

How? By snagging a property with an assumable loan. This savvy move lets you step into the shoes of a lower interest rate, keeping those payments manageable.

So, if you're sitting on $50-$200K in equity and dreading the payment jump with a traditional move, consider the assumable loan route.

It’s your golden ticket to upgrading your living space without doubling your mortgage payment.

As mentioned above- for every 1% drop that's a 10% drop in payment- so instead of a 7% today you capture an existing 3% today that is 27Y term and that payment would be 40% less than starting a new loan!!!!

You even qualify with the new mortgage payment- giving you more buying power.

What's the Catch?

Assumable loans can be a bumpy ride for those who are not experienced in managing FHA, VA, and USDA assumable loans. Our team has made it a priority to educate and prepare all of our buyers with over 10% down to be ready to streamline these opportunities for both buyers and sellers- if you are interested in how these work reach out anytime.

On to the Mortgage Market

The latest Consumer Price Index (CPI) showed that inflation rose 0.4% from January to February, coming in right around forecasts. CPI also rose from 3.1% to 3.2% year over year, which was above the expected unchanged reading. Core CPI, which strips out volatile food and energy prices, increased 0.4% while the annual reading fell from 3.9% to 3.8%. Both figures were slightly higher than estimates.

Rising shelter and energy costs were two key factors that helped push inflation higher last month.

What’s the bottom line? Inflation has fallen considerably after peaking in 2022, with the headline reading now at 3.2% (down from 9.1%) and the core reading at 3.8% (down from 6.6%). However, CPI was hotter than expected for both January and February, meaning inflationary pressures have been more persistent than the Fed would like.

Wholesale Inflation Comes in Hot

The Producer Price Index (PPI), which measures inflation on the wholesale level, rose 0.6% in February, doubling market estimates. On an annual basis, PPI rose from 1% to 1.6%, well above the 1.1% that was forecasted. Core PPI, which strips out volatile food and energy prices, was hotter than expected with a 0.3% rise. The year-over-year reading remained at 2%, just above forecasts.

What’s the bottom line? Despite the upside surprise in the data, wholesale inflation is still well below 2022’s peak. February’s 1.6% year-over-year reading is a sharp drop from the 11.7% high that was reached a few years ago.

Remember, the Fed began aggressively hiking the Fed Funds Rate (the overnight borrowing rate for banks) in March 2022. These hikes were designed to slow the economy by making borrowing more expensive, lowering the demand for goods, and thereby reducing pricing pressure and inflation. After eleven hikes in this cycle, the Fed pressed pause at their last four meetings as signs of cooling inflation grew.

While the Fed is still expected to start cutting the Fed Funds Rate this year, these hotter-than-expected inflation readings could push back the timing of their plans. We will likely receive more guidance on Wednesday once this week’s Fed meeting concludes, and they release their latest Statement of Economic Projections.

The last update in December showed that Fed members projected a median of three rate cuts for this year. It will be important to see whether recent inflation and employment data impact these forecasts.

February Retail Sales Below Estimates

Retail Sales rose 0.6% from January to February though this modest rebound was below estimates of an 0.8% gain. Sales in January were also revised downward from the originally reported 0.8% decline to a 1.1% decline when compared to December.?

What’s the bottom line? After a strong holiday shopping season, consumer spending has cooled in the first quarter of this year. While January’s harsh weather certainly impacted sales at the start of the year, the growing use of credit cards and buy now pay later programs could also be contributing to slower spending as consumers pay back holiday season and other debts.

The Fed will be closely watching future Retail Sales reports, as the strength of our economy will also impact their monetary policy decisions this year.

New Seasonal Adjustments Impact Jobless Claims

There were 209,000 Initial Jobless Claims filed in the latest week, marking a decline of 1,000 applications for new unemployment benefits from the previous week. Continuing Claims rose by 17,000, with 1.811 million people still receiving benefits after filing their initial claim.

What’s the bottom line? The latest Continuing Claims figure is much lower than the 1.9 million readings we’ve been seeing, but the decline is not due to improving conditions in hiring. The Bureau of Labor Statistics changed its seasonal adjustments, which has caused big revisions throughout the prior weeks’ reporting. Yet even with these adjustments, Continuing Claims are still trending higher compared to a year ago, showing that it’s become harder for some people to find new employment once they are let go.

On a related note, the latest small business optimism survey from the National Federation of Independent Business showed that small businesses are struggling on the labor front, with plans to hire and plans to increase compensation both hitting three-year lows.

What to Look for This Week

Housing data will share headlines with the Fed, starting with builder confidence for March from the National Association of Home Builders on Monday. Tuesday brings news on February’s Housing Starts and Building Permits, while Existing Home Sales data follows on Thursday.

The Fed’s meeting begins Tuesday, with their Monetary Policy Statement and press conference coming on Wednesday. Investors will be closely listening for news regarding the timing of rate cuts later this year.

Also of note, the latest Jobless Claims and an update on manufacturing for the Philadelphia region will be reported on Thursday.

Technical Picture

Mortgage Bonds broke beneath their 25-day Moving Average and ended last week testing the next floor of support at the 100.427 Fibonacci level. The 10-year is trading in the middle of a range with support at its 100-day Moving Average and a ceiling at 4.35%.

Crypto- Corrections create red bubbles in last week

Last week in the crypto world, the UK announced they're working on rules for handling crypto fairly, aiming to start by the end of 2024. Wu-Tang Clan's Ghostface Killah is dropping exclusive tracks as Bitcoin Ordinals, mixing music with crypto in a cool way. Binance is asking its partners to make sure they know who their customers are, especially to avoid accidentally serving US investors due to strict rules there.

In the US, investors are moving their money from one big Bitcoin fund to newly approved Bitcoin ETFs, showing how people are choosing to invest in crypto. Coinbase, a big name in crypto exchanges, is fighting for clearer rules from the SEC, and they're getting support from the crypto community.

Bitcoin's price shot up, hitting its highest since 2021, making people wonder if it'll break records. But there's also been a lot of selling off of Bitcoin and other big cryptocurrencies like Ethereum and Dogecoin, which shows how quickly things can change in the crypto market. As we get closer to Bitcoin's "halving" event, where the reward for mining gets cut in half, miners are gearing up by getting more efficient equipment and finding cheaper ways to run their operations to keep making money.

All these events from last week show just how fast-moving and exciting the world of cryptocurrency is, with new developments in regulation, innovative uses of crypto, big shifts in investment trends, and the constant evolution of the market.