June 21, 2022 – The Fed Speaks-Loudly. We have heard it again and again. It is all about inflation right now.


Economic Commentary

The Fed Speaks—Loudly. We have heard it again and again. In a multitude of speeches across the nation, the Governors of the Federal Reserve Board have stated that they are standing strong in the fight against inflation. Therefore, it is not a surprise that the Fed raised short-term rates by three-quarters of one percent last week and issued a statement that recent economic news has not deterred their plans to consider further increases as the year goes on. It is all about inflation right now.

Thus far, the economic news has supported the Fed in their quest. The economy continues to produce a copious number of jobs. Consumers continue to spend, albeit they are borrowing more in order to keep up the pace. On the other side of the coin, the hottest sector of the economy has cooled significantly. Of course, that sector is real estate.

Some would argue that the real estate market had gotten too hot, and the pace of home price increases was not sustainable. The number of listings is finally increasing and this will hopefully provide more balance to the market. On the other hand, if the real estate market slows down too much, this factor might cause the Fed to pause their quest because, as we have seen in the past — as the real estate market goes, the economy is likely to follow.

Weekly Interest Rate Overview

The Markets. Mortgage rates surged in the past week and continued moving up after last week’s survey was released.  For the week ending June 16, 30-year rates rose to 5.78 from 5.23% the week before. In addition, 15-year loans increased to 4.81% and the average for five-year ARMs rose to 4.33%. A year ago, 30-year fixed rates averaged 2.93%, almost 3.00% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, marking the largest one-week increase in our survey since 1987. These higher rates are the result of a shift in expectations about inflation and the course of monetary policy. Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market.”  Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

Nearly 75% of Americans say that owning a home is a more significant measure of achievement than having a successful career or even raising a family, according to a survey from Bankrate.com of about 2,500 adults. Seventy-four percent of survey respondents rated homeownership as the highest gauge of prosperity. It topped being able to retire (66%); having a successful career (60%); owning a car, truck, or other automobile (50%); having children (40%); and earning a college degree (35%). Older adults are more likely to rate homeownership highest, the survey finds. Eighty-five percent of baby boomers and 78% of Gen X selected homeownership over other items compared to 59% of Gen Z and 65% of millennials, the survey shows. Most homeowners don’t have any regrets over their homeownership decisions. “Nearly three in four homeowners say they would still buy their current home if they had to do it all over again,” says Greg McBride, Bankrate.com’s chief financial analyst. “Paying down debt, building savings, and knowing the limits of what you can afford all provide the stable financial foundation on which ‘no regrets’ homeownership is built.” Source: The New York Times

New data suggests the U.S. housing market may have hit a turning point in its supply struggle in May, as active inventory recorded the first year-over-year increase since June 2019, according to the latest Realtor.com Monthly Housing Trends Report for May. Meanwhile, the median national home price surged to an all-time high of $447,000, and buyers snatched up listings a week faster than the same period in 2021. “Among key factors fueling the inventory comeback are new sellers, who are listing homes at a rate not seen since 2019, as well as moderating demand, with pending listings declining year-over-year in May,” said Danielle Hale, Chief Economist for Realtor.com. “While this real estate refresh is welcome news in a still-undersupplied market, it has yet to make a dent in home price growth, partially due to increases in newly-listed, larger homes and because the typical seller outlook is quite high, likely shaped by recent experiences of homeowners who sold. Importantly, as 72% of this year’s sellers also plan to purchase a home, seller expectations will likely start to reflect buyers’ needs. In an early sign, the rate of sellers making price cuts accelerated in May.” New listings reached the highest level of any month in nearly three years, as rising numbers of sellers might be more confident in pursuing plans to list than last Spring when COVID vaccines were just rolling out. Higher housing costs are spurring a moderation in buyer demand, reflected in May’s bigger year-over-year declines in pending listings –those at various stages of the selling process that are not yet sold– compared to April, a sign of softening in the turnover rate of for-sale homes. Nationally, the number of active listings increased 8.0% year-over-year in May, but remained 48.5% below typical levels in May 2020 at the onset of COVID. Source: DSNews

Pets have been playing an increasingly important role in shopping for a home. More Americans have become pet owners during the pandemic, and they’re prioritizing their pets’ needs when looking for a home or rental. Forty-three percent of pet owners say they’d be willing to move to accommodate their pet, according to a 2021 study from the National Association of REALTORS®. What’s more, 68% of pet owners surveyed by realtor.com® say they would pass on an otherwise perfect home if it didn’t meet their pet’s needs. “As we ease back into a post-pandemic lifestyle, we see residents and potential residents at our communities nationwide making significant changes to accommodate their pets’ needs—even more than they did in the past,” says Josh Hartmann, CEO of NexMetro Communities, a developer of luxury leased-home neighborhoods. A new survey from NexMetro found that more consumers say they’re spending more time with their pets and are showing an increased desire for more pet-friendly conveniences. The following are top amenities that pet owners say they’re looking for: Fenced-in backyard, durable flooring, trails and sidewalks, adequate square footage and outdoor play areas. “In the past, individuals may have been comfortable in an apartment with their pet,” Hartmann says. “However, once they began working from home, or spending more time at home—they sought more space for themselves and their pet. They are focused on what they perceive will create an enhanced quality of life for their pets.” Source: NexMetro Communities

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