Affordability > Not good
Inventory > Still low
Rates > Still “high”
My weekly US Housing Market update is in the attached pdf or can be accessed at https://housingnewsletters.com/terry-roberts/64bae1e16c53a311d67802d8?s=em
Some claim that our challenge lies with low inventory levels. While they are at historic lows, Ragan Dutra https://www.facebook.com/RaganDutraRealtor/ with Hurd Real Estate & Co. brought up a great point while I was meeting with her and the Hurd Team last week. Ragan wonders if inventory is really the problem. Maybe its rates. Here’s how: if mortgage rates drop, existing homeowners who already have a low mortgage rate would be more likely to sell their home. This would bring more inventory back to the market.
The Fed meets this week (July 26th) and instead of rate cuts, most are anticipating another rate hike. If rates drop, demand for housing will only increase. Increasing demand when inventory is far lower than needed may exacerbate the problem. However, if the Fed was willing to put a longer pause on rate hikes in order to observe how the market responds over time (not just 30 days), we may find that the U.S. economy is not as strong as some politicians claim it to be. Rate hike pause and potential rate cuts may be the solution to slowly add more inventory without driving demand up faster than the incrementally added inventory can support.
If you have clients who are scheduled to close in the next week and haven’t locked in their rates, it may be worth advising them to consult with their loan officer prior to this week’s updated Fed announcement, as the rate market may continue into volatile headwinds.
Affordability appears to coincide with the U.S. inflation dilemma. While the U.S. Inflation Rate is 2.97%, compared to 4.05% last month and 9.06% last year, the damage is done and can’t be fixed overnight. According to Andy Walden, VP of Enterprise Research at Black Knight, 20% of rate locks in the Los Angeles metro area was for REFINANCE. Unfortunately, some homeowners feel forced to refinance their home now and forfeit a historic low rate so they can liquidate their home equity to afford the current cost of living. There is no other logical reason to refinance right now. To make this matter even worse, they will be forced to refinance to a higher balance with a higher mortgage rate.
According to Black Knight’s originations market monitor report, home mortgage purchase lock counts were down 31% year over year.
As a result of “There are over a million unproductive agents in America, and most LOs aren't productive enough to justify their costs.” That’s how the folks at Housingwire see it. https://www.housingwire.com/articles/datadigest-there-are-too-many-real-estate-agents-and-los-its-a-problem/
Our industry was flooded with new agents and loan officers in 2020 & 2021; back when it felt like fishing in a barrel. Things are a bit different today. Everyone is feeling it and it’s not good; especially for the newer industry professionals who don’t have a very large or reliable book of referral business. For those pros, it appears that their remaining days as an agent or loan officer may be numbered.
As for the hard-chargers and seasoned bulldogs out there who aren’t willing to let go, know that I will remain right there beside you!
As our industry begins to thin out to better balance the number of agents and LO’s with the foreseeable levels of inventory and rates, we may notice a bit less competition. Rocket Companies just initiated its third round of voluntary buyouts to employees. https://nationalmortgageprofessional.com/news/rocket-offers-3rd-round-voluntary-buyouts#:~:text=Offer%20specifically%20targets%20employees%20of,its%20workforce%20in%20April%202022.
Real estate moguls Redfin and Compass announced layoffs last month, stating that it had cut 8% of its employees and Compass planned to reduce its workforce by 10%. https://www.cnn.com/2022/06/15/homes/compass-redfin-layoffs/index.html
Like what you’re reading? Reply and let me know! Needing a fast and legitimate preapproval for your client? Call me or direct your client to www.TerryRoberts.com
Terry Roberts, USMC Veteran Sr. Mortgage Broker NMLS 397987 E Mortgage Capital, NMLS 1416824
Terry Roberts is a U.S. Marine Corps Veteran and specializes in residential mortgages, including new construction, conventional, FHA, and VA home loans. He has helped more than 10,000 clients start the home buying process across America.
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