It Feels Like More of the Same…But is It? | Guest Post

The Federal Reserve met at the end of July amidst great anticipation. It was assumed they would cut the Fed rate for the first time since 2008 but expectations for future rate cuts led to a flurry of market excitement leading up to Chairman Jerome Powell’s comments.

Here are the key takeaways from their session:

• Expressed concern over global economic strength and the ongoing trade disputes
• Manufacturing is down and inflation is muted
• Powell added that business investment “has been soft” though household spending “has picked up from earlier in the year”

From a one-track perspective, yes, manufacturing output has declined for two straight quarters, which fits the technical definition of a recession. Still, personal income is up 0.4 percent and spending is up 0.3 percent. This strong consumer spending is the primary reason the GDP growth rate has been within the 2.0 percent to 3.0 percent healthy range since the Great Recession. The first release of Q2 GDP just came out with an increase of 2.1 percent. Consumer confidence is also at a nearly 18-year high. Unemployment remained unchanged at 3.7 percent.

So, what does all of this mean for housing?

The drop in the Fed rate by 0.25 percent reduces borrowing costs (including short-term consumer costs, credit cards, car loans, HELOCs and short-term Mortgage ARM loans as well as manufacturing/building costs).

Meanwhile, looking at the bigger picture…

Inventory continues to regain strength as active homes for sale increased year over year by 22.5 percent to 9,359. The last time inventory broke 9,350 was in November 2013. More homes for sale gives buyers time to be discerning and to wait for the perfect home, confident that more will become available. 

Mortgage rates continue to remain low. At an average of 3.75 percent (with a 0.5 percent discount), rates today are less than a half-point higher than the historic lows of 2012 and 0.75 percent better than they were a year ago. These low mortgage rates are helping affordability!

Appreciation remains muted, but positive. #DMARstats utilize median sold price as the measure of home values. At the end of July, it landed at 1.2 percent year-to-date gains and 4.58 percent year-over-year. We all know, real estate is hyper-local. A quick look at the 90 Metro Denver zip codes will demonstrate a wide range of price changes from +21 percent to -18 percent.

Year-to-date sales units are down 1 percent while volume is up 1 percent...super exciting, I know. But the reality is, last year was a great year! The fact we are tracking with 2018 confirms this is still a strong market.

Days on market are up 37.5 percent. WOW…but why? Median days on market is up from 8 days to 11 days. More inventory = more choices = buyers taking more time to consider choices. It makes sense that days on market would increase as a result.

Close to list price is just under 100 percent at 99.4 percent but this is highly dependent on purchase price. With homes over $1,000,000 at 97.6 percent, $750,000 to $1,000,000 are 99 percent, $500,000 - $750,000 are 99.3 percent and $300,000 - $500,000 are 99.75 percent price to list sold. Sellers who want to sell fast need to be smart about how they price their homes. This has never been truer than now.

Are your clients questioning if this is still a buyer's market? It doesn’t feel like it, but months of inventory only hit 4.93 for single-family and 4.36 for condos over $1,000,000. All other price points are at or below 3 months of inventory.

Powell stated the Fed made a “mid-cycle adjustment.” What does that mean exactly? Is he expecting ten more years of this already longest-running expansion? What I wouldn’t give to look into a crystal ball right now.

Could your clients benefit from a team who knows how to read the market, a team who can help them take advantage of this slow-moving shift? Anyone in the market – buying or selling – could benefit from working with a lending team who excels at utilizing these facts and figures to help clients make sound real estate decisions. If this sounds like your clients, send them to The Rueth Team. We are experts in helping clients build wealth through real estate.

Nicole Rueth
The Rueth Team of Fairway Independent Mortgage Corporation

The views, opinions and positions expressed within this guest post are those of the author alone and do not necessarily represent those of the Denver Metro Association of REALTORS®. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.