Let’s compare a $350K home in March of 2022 with a $300K home in October 2022. An agent friend of mine asked me to put this together for their seller so they could see the buyers perspective and why a comp from March might not reflect what a buyer wants to pay in October. It also shows a potential win/win strategy for seller and buyer. Reach out if I can help you with something similar for your clients!
Mortgage rates increased marginally over the last week as the price of Mortgage Backed Securities oscillated wildly but are now in a similar territory that they were last week. Rates are up 3.625% from this time last year.
Bond Market – volatility index (MOVE index) has sky rocketed to the levels of March 2020 when the economy was first shut down and the Fed stepped in with massive amounts of purchasing to stabilize things. Last time it was this volatile was for a very short period, right now we are in a more prolonged period of volatility. Currently the bond market is 7X more volatile than the bitcoin!
Rents – Zumper reported that rents are up roughly 11% for both 1 and 2 bedrooms. In Portland the median 1b rent is $1,510 (up 7.1% year over year) and 2b rent is $1,800 (up 1.1%).
Freight – the cost of delivering goods across the US rose 1% in September and are up 16% year over year. Cass also reported that supply/demand balanced has loosened significantly this year and freight rates are expected to slow sharply in the next few months. Shippers expect to see cost relief next year.
Inflation – the Bureau of Labor and Statistics reported that the Consumer Price Index (CPI) rose 0.4% in September (August was 0.1%) and all items increased 8.2% year over year. The core rate (which strips out food and energy prices) increased 0.6% in September and 6.6% year over year.
Stocks and Bonds Down? Since WWII there has only been 3 years this happened: 1969, 2018, and 2022 (so far). If the year ended today it would be the first time stocks and bonds both dropped over 10% in a year. Historically when both markets are down the following year is a significant down year for the US Treasury yield. In 1970 it dropped 18% and 2019 it dropped 29%. If this were to happen in 2023 it would be good for mortgage rates… hypothetically if the UST dropped 24% that would put mortgage rates around 5%.
Mortgage Applications to purchase homes fell 2.1%last week and are down 39% year over year. Refinance applications decreased 1.8% and are down 86% year over.
Homeownership is a cornerstone of generational wealth building. There is a lot of media noise predicting a recession – but supply is on the decline and demand will continue to be strong supporting values. Appreciation will decline but even 2% appreciation on a $400,000 home with 10% down is a 20% return on investment – the beauty of leverage. Reach out if you want a copy of this slide deck!