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!

Fed Stays Put on Rates

(Also published on "Retire to Washington State")

The Feds met at the end of July and decided again to stand with the current rate. This annoyed the President, but I am feel like they did the right thing. That runs counter to my own financial prospects as a slight dip in rates could put energy into the real estate market that would directly benefit me personally. But the federal government continues to spend money like drunken sailors and it hasn't;t mattered whether it was the R's or the D's neither can seem to really cut spending. All we get are clever accounting tricks rather than real cuts. 

When the government prints money it tends to artificially inflate the economy in a somewhat unnatural way. The economy is not as hot as the President says it is, but it is not slow enough to justify rate cuts at this time. That is a bit of the ironic part of the desire for lower rates while claiming the economy is hot. You don't get lower rates in a hot economy in a normal universe. 

The rolling 54 year average for mortgage rates sits at 7.71% according to Freddie Mac, the leading tracker of mortgage rates. We are well below that average right now at about 6.8% Even if we do a rolling 30 year year average to get the 1980s high rates out of the equation we still are close to average right now. It has been a difficult transition for younger home buyers that never saw rates this high during their adult lives. But it is a bit more psychological than economical at this point. 

The economy is good right now, not great, not terrible just OK, and perhaps the Fed is on the right track. Having a slight downward adjustment would have been nice as a gesture to get housing back on track, but I do not expect the Fed to make any substantial adjustments. When the current chairman's term is up next year, I would not be surprised to see him replaced. That new chairperson might decide to bend to the President's will and cut rates a bit. That would likely happen mid-2026. If the economy starts to stagnate before that, the current Chair, Jerome Powell might adjust rates toward on his own terms.

Buyers looking to buy in this market will find willing sellers. The best "deals" are on larger two story homes that are mostly owned by aging boomers looking to downsize and get rid of the stairs. Younger buyers can get a lot of house, like a 2500 SF 4 or 5 bedroom home 20-30 years old at $600-$700k. The price per foot on these now unpopular styles of homes is only $240-$260 per foot. Compare that to the typical 1250 SF ranch house that fetches $450k and a whopping $360 per foot. Saavy young people can rent rooms out in the large house to offset the mortgage. Yes you have to qualify in the first place, but you can go in halfsies with someone if need be. There is risk in these arrangements but it could get you in the housing door where you might not otherwise be able to be. 

Peek you head up over the box lid and look around, there are some opportunities out there for clever buyers.

The Market Just Needs a Tiny Little Push

The real estate market just needs a nudge to get things rolling again. The market feels stagnant, not a crisis but just mulling about like grounded child pacing his room. Interest rates don't need to fall much, just a half point to actual rate and things would perk up nicely. But if rates must remain where they are, which may be the case since the recent Fed decision to hold suggests they will. Other market nudges could be an improved job market, local downward pricing pressure, or perhaps some of those folks hanging on to a 3% rate retire and downsize.  

The market does not need a major stimulus. The federal government could also improve the mortgage deduction to make it a bit easier. Getting homeownership back up and on track will also result in lower rents as rental pressure will shrink. 

In the mean time both buyers and sellers are experiencing near neutral conditions. Well priced homes will sell in about 30-45 days, Below market prices will bring multiple offers, and overpriced listings will sit for months and months. Listing agents need to actually do some marketing in these conditions. Some do some don't so prospective sellers will need to ask direct questions of their potential listing agent.

Buyers should keep in mind that rates are not likely to see much relief other than standard fluctuations as the federal government continues its drunken spending binge that keeps pressure on the Fed to keep things on the proverbial leash. 

Let's hope we see that nudge soon.