1 big thing: Buyers Gain $25k in Purchasing Power
Thanks to dropping mortgage rates, U.S. homebuyers can now afford $25,000 more toward a home purchase than they could three months ago.
Why it matters: With more purchasing power, lower mortgage rates, and increased inventory, things are finally looking up for beleaguered buyers.
We should soon be looking at a hopping housing market.
What happened: After hitting a five-month high in April at 7.5%, daily average mortgage rates have dropped to their lowest level since February — to 6.8%.
Lower rates = lower monthly payments: With a home loan now costing 0.7% less than it would have a few months ago, the typical U.S. homebuyer’s monthly housing payment will drop commensurately.
By the numbers: A monthly payment that would have been $2,837 in April is now $2,722.
And lower monthly payments = a bigger loan: Take a monthly housing budget of $3,000:
In April, the 7.5% rate meant the buyer could afford a $425,000 home.
Now, the 6.8% rate means they can afford a $450,000 home.
More good news for buyers: Inventory continues to rise.
New listings are up 6.4% year over year.
The total number of listings is approaching its highest level in nearly four years.
Yes, but: Curiously, buyers aren’t diving in … yet. The numbers suggest buyers haven’t started taking advantage of falling mortgage rates and increasing inventory.
Pending sales are down 5.6% year over year.
Redfin’s Homebuyer Demand Index (home tour and buying requests from agents) is down 15%.
Mortgage applications are down 3% week over week.
Buyers are still waiting to see what happens, likely because they’re hoping for a Fed interest rate cut in September, which could mean that mortgage rates will fall even further.
What’s next: “Waiting in vain.” Redfin’s Chen Zhao says mortgage rates aren’t likely to drop much lower:
“[M]arkets are already pricing in the expectation of a rate cut in September followed by several more at the end of 2024 and into 2025,” Zhao observes.
The bottom line: Now is the right time to encourage homebuyers to take advantage of their increased purchasing power and healthy inventory — which also gives them more opportunities to negotiate.
2. More Homes Are Sitting on the Market Longer
Redfin reports that 65% of homes that were on the market in June are still listed for sale a month later. That’s up from 60% at this time last year.
Why it matters: A stagnant market means inventory is piling up. Sellers may need to be more proactive to sell quickly.
These are pandemic numbers: The 65% of homes that have been on the market for at least 30 days is the highest share since the height of the COVID-19 pandemic in June 2020.
Not a one-off: June is the fourth straight month in which the portion of homes sitting on the market for at least a month increased on a year-over-year basis.
Yes, but: The stagnation seems to be happening for several reasons:
Record home prices
High mortgage rates
Increased inventory
Less-desirable listings
What’s next: Sellers willing to wait it out for the price they want
Buyers willing to wait out the high mortgage rates
It doesn’t have to be this way: Sellers who want to move their property ASAP in this market can do so if it’s:
Move-in ready
Priced appealingly
In a popular neighborhood
By the numbers: Most sluggish — Texas and Florida rank highest in listings sitting on the market for at least 30 days in June:
Dallas: 63% (up from 52% last June)
Tampa: 70% (up from 60%)
Fort Lauderdale: 77% (up from 68%)
Jacksonville: 70% (up from 61%)
Orlando: 69% (up from 60%)
On the flip side: Only five of the 50 most populous U.S. metros saw (slight) declines in stale home listings year over year.
Nassau County, NY: 57% (down from 58%)
New York: 70% (down from 72%)
Las Vegas: 59% (down from 60%)
Newark, NJ: (53.5%, down from 54.1%)
Warren, MI: (50.6%, down from 51%)
60-day data tells the same story: Forty-three percent of U.S. home listings sat on the market for at least 60 days in June.
This figure is up from 38% last year.
The bottom line: To move a house faster in the current market, sellers should consider reasonably upgrading the property and setting an attractive — but fair — price.
3. Catch up fast
3-D printed home construction is 30% cheaper than stick-built and could be the future of homebuilding. Bigger Pockets
Markets where the mortgage rate lock-in gap is worst and best. Realtor
How serious is the U.S. housing supply shortage? It’s getting better. Tampa and Orlando saw a flood of new inventory hit the market in June, registering increases of 92.7% and 81.8%, respectively. MPAMag
In a sign that the Fed’s higher rates are working to cool the economy, shifting us to a buyers’ housing market, existing home sales slumped an unexpected 5.4% between May and June to its lowest point in six months. However, the median sales price rose to $426,900, or 4.1% higher than last June. WRE
America’s GDP was healthy in Q2 at 2.8% even as the Core PCE inflation rate continued to coast down to 2.9%, edging closer to the Fed’s target rate of 2%. Americans’ income in the quarter increased by $237.6 billion or 1% over the previous quarter. Many analysts continue banking on a September rate cut from the Fed. Barron’s
4. Closing Thought
Flipping through AppleTV the other evening, I ran across that famous Jack Nicholson scene where he says with a sneer, “You can’t handle the truth!”
Why it matters: Too many business owners have this attitude about their employees.
They withhold financial information about the business.
They withhold production information.
They just say, “We’re doing great!” when asked how the business is doing.
Yes, but: This is unhealthy for several reasons:
It infantilizes your employees as if they’re too fragile to know that information.
It fosters suspicion and distrust if the “doing great” doesn’t align with what they see in the daily grind.
Employees don’t know if they’re winning or losing at the game of their jobs.
Authenticity is an important trait for business owners to possess.
That doesn’t mean you have to be blunt, rude, or unprofessional when communicating with employees.
It does mean you must be honest with them. They’re adults. Treat them like it.
Don’t hide the ball.
Transparency is vital to performance improvements.
When a team knows how many leads they have to qualify each day, how many social media impressions they need to produce, and how many widgets they have to create a day to “win” the day, week, month, and quarter, they’ll do it.
If the crew knows how much money the company (or at least their team) has to generate each week to keep the doors open, they will push to get there and then surpass it (profitability!).
The bottom line: The truth will set you(r business) free. Until you can be authentic and transparent with your crew about what they need to do for themselves, the company, and its customers to thrive, they’ll just wander aimlessly with no idea whether they’re winning or losing the game.
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