Are Lower rates Helping the Local Market?

Mortgage rates have seen a slight drop and low to mid sixes are available to highly qualified borrowers. With a little help from the seller, rates in the 5s are easily attainable. One might expect some favorable movement as a result. So has it helped?

That's tough to quantify at this point. I am seeing an uptick in buyer activity, but we are also seeing an uptick in new listings. If both of those metric continue to rise it will keep the relative market stable. It will be good for agents of course as transactions will go up :) But for buyers and sellers the balance of inventory to buyers needs to change for there to be any movement in values. 

At this point our market remains a little soft on price and enough inventory to keep the buyers busy. technically our inventory levels still slightly favor sellers but certain sub-markets and neighborhoods may be hotter than others. 

A savvy buyer should open up the neighborhood range to capitalize on deals that may appear due to more seller activity. Neighborhood turnover can be a sign of trouble, but sometimes it's just a sign of normal turnover. Neighborhoods that were built 10-15 years ago in desirable school districts may now have a lot of empty nesters moving out, not because of any trouble but just the normal retirement move. That can work in the favor of buyers.

Buyers should always do their own due diligence and check things out, check with an agent about the area before making an offer. Things are looking up overall after a couple almost stagnant years. 

Home Prices Rise Despite Less Demand, What Gives?

One of the biggest drivers in price is in fact supply and demand. But the cost of building new homes is going up mostly due to government over regulation. Builders continue to face new laws forcing compliance with various environmental, local infrastructure, and safety that all seem great but absolutely increase the price of construction. Many builders are pulling out of over regulated areas like the three West Coast states. Despite having fewer buyers in the market place, there is also fewer new homes and this drives the price up on the remaining available resale homes. 

The median home price in Clark County currently sits about $550,000 depending on the source of data. That median price buys a pretty solid house, such as a 30 year old two story 4 bedroom house with 2000 SF or a really nice 30 year old ranch house with 1700 SF. New homes similar to these on any kind of decent sized lot are at least $100k more.   

Younger people struggle to afford to buy homes largely based on social tendencies more than actual costs. Homes have appreciated at significantly more than inflation in general over the last 40 years and many YouTubers point this out. But I was a 20 something in the 1980s and can assure you that buying a house back then was more difficult that it is today. Interest rates in the 1980s started out at 18% and dropped into the 11's by the end of the decade. That's a huge hurdle. But the 1980s had much higher costs on most things we buy today. Where the modern homebuyer faces higher education costs, higher healthcare costs, but lower costs on gasoline, utilities, food, electronics, and appliances. We did just come off a high inflation period that has brought some of these "lower" costs to parity with the 1980s but we also are seeing pretty strong wage increases in recent years that match it.

The general gist here is to stop complaining about how hard it is to buy a home, it has ALWAYS been hard to buy a home. I see people complaining about their inability to afford a home and then realize they have a brand new $1000 phone, a brand new car with $500 payment, they are drinking 4-5 energy drinks every day at $2-$5 a piece! They are wondering where all the money goes? 

Buying a house has always required some difficult penny-pinching and that still holds true today. I help young people all the time to get into a house, It is rarely easy unless that young person managed to find a six-figure job, but it isn't as hard as the internet is telling you.

Fed Hints at Reduction for Next Month

There has been tremendous pressure for some easing by the Fed. The Trump Administration has been very vocal about getting some relief on rates. The economy is not the roaring lion it was several years ago when the Fed made some aggressive moves to tighten the money supply. 

I have not been as concerned about Home Mortgages as I have been about the availability of financing for big projects that help boost the local economy. Sure a little softening for my typical home buyers will be greeted with a grin, but more importantly is opening up capital for larger commercial and residential projects that seemed otherwise be stalled waiting for funding. 

Vancouver's Downtown and Waterfront have several very large projects that have made it through all the preliminary approvals for design and zoning. These projects will be valued in excess of $500 million which is a direct injection into the local construction trades and tax coffers for the city. 

The Fed meets next month and there has been some suggestion that a rate drop is likely coming. Should we see some easing we could see mortgage rates dip a little as well. Rates tend to be running in the mid 6's for quality borrowers and a dip to the lower 6s will have a positive impact on the local real estate market. 

Sales volume has been light over the last 24 months and we are seeing a stead increase in inventory as well. Buyers are actually in strong positions right now aside from qualifying. We a reduction in rates the number of qualified buyers will increase and could very well jump start the sluggish sales numbers.

Here's to a solid 4th quarter!