Is the housing market immune to high interest rates?

4/22-4/26 Recap

?It's no secret that interest rates haven't acted as expected this year. Many experts predicted that we'd have 30 year fixed rates in the mid to high 5% range today and instead we're sitting at average rate for a 30-year fixed rate conventional loan is currently at 7.22% (up from 7.17% last week).

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While interest rates have headed backwards, the housing market is heading forward as activity is rising (and so are home prices).

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It's my belief that more and more people are getting tired of putting of their home purchase waiting for rates to fall and instead of buying what they can afford today.

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Let's look at some of the big news that came out last week.

New Home Sales Surge Higher

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The persistent lack of inventory on the existing home market has buyers still flocking to purchase new construction homes. These buyers are highly motivated by the "discounts and seller credits" that homebuilders are offering. ?March sales were up 8.3% from one year ago and were at their highest levels since last September.

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But don't get too pulled in by the flashy numbers when it comes to discounts and seller credits. Keep in mind that homebuilders set their prices based on the expected profit they'd like to make on the home's construction. That means that if they wanted to sell at home at $500,000 they could easily set a purchase price at $520,000 and then offer you a "$20,000 credit" to buy now - resulting in them winning and you potentially losing.?

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If you're opting for new construction, make sure you're working with a buyer's agent who can negotiate the best deal for you - which may or may not be the deal the builder is offering. A builder is no different than any other seller and you don't have to take the deal off the shelf. Customize, negotiate and make your own deal.

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Pending Home Sales Have Their Best Month in a Year.

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Despite the higher interest rates, more people are going under contract to purchase a home in March than they had in a year. That's even more wild considering the fact that economists thought there would be no uptick (and even a .3% drop) as a result of higher rates.

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The median price of single-family homes under contract is now $398,000. That jumped by 2.4% jump this week and is, in fact, a new all-time-high, surpassing the sale prices of two years ago!

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The news sent mortgage rates higher as a hot housing market is one of the biggest contributors to our current inflation concerns.?

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But this news begs the question, are people becoming de-sensitized to rates in the 7-8% range? If so, expect home prices to continue going up as demand climbs while home supply is still far too low.

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Mortgage Demand is Falling

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Applications for a mortgage to purchase a home fell 1% for the week and were 15% lower than the same week one year ago. But what's that really mean?

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Applications are a sign of NEW demand. I can tell you from experience that we have THOUSANDS of potential buyers who have already filled out an application with us over the last year and still have a general sense of their qualifications (especially since interest rates today are lower than they were in September 2023).

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These buyers have been scrolling through Zillow, waiting for their opportunity to pounce on the right home - so while mortgage applications are down, I don't believe that the buyer pool has dramatically shrunk. We'll still see home transaction volume above where it was last year as we roll into busy season.

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Finally Inflation News that didn't disappoint

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The Personal Consumption Expenditure Index reported last week and actually pushed interest rates LOWER. A nice surprise from what we've seen the last month. All the numbers, including income and spending, came in right around expectations - putting some optimism at the end of what could have been another terrible week for rates.

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BIG Fed meeting this week...

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Everyone is expecting no rate cut this week (and also no rate hike), but the Fed meeting could have a big impact on interest rates depending on what Chairman Powell says during his 2:30PM ET press conference on Wednesday. I'll be watching so don't forget to join us on Instagram for immediate reactions!?

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Source: Bureau of Economic Analysis

Key reporting dates this week:?

Mon, 4/22: None

Tues, 4/23: S&P Case-Shiller home price index (20 cities)

Wed, 4/24: ADP employment, Job openings, Fed Interest Rate Decision, Fed Chair Powell press conference

Thurs, 4/25: Initial jobless claims, Factory orders

Fri, 4/26: U.S. employment report

I'm always available to chat and always here for you! Call or text me at 512-701-1819 or send me an email.

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Don't forget - buying a home isn't just about getting the lowest rate - it's about being comfortable with the decision and loving your home.

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Talk soon!

Eric