Jason Joumblat 9/4/24 Jason Joumblat 9/4/24

How the Federal Reserve’s Next Move Could Impact the Housing Market

Now that it’s September, all eyes are on the Federal Reserve (the Fed). The overwhelming expectation is that they’ll cut the Federal Funds Rate at their upcoming meeting, driven primarily by recent signs that inflation is cooling, and the job market is slowing down. Mark Zandi, Chief Economist at Moody’s Analytics, said:

“They’re ready to cut, just as long as we don’t get an inflation surprise between now and September, which we won’t.”

But what does this mean for the housing market, and more importantly, for you as a potential homebuyer or seller?

Why a Federal Funds Rate Cut Matters

The Federal Funds Rate is one of the key factors that influences mortgage rates – things like the economy, geopolitical uncertainty, and more also have an impact.

When the Fed cuts the Federal Funds Rate, it signals what’s happening in the broader economy, and mortgage rates tend to respond. While a single rate cut might not lead to a dramatic drop in mortgage rates, it could contribute to the gradual decline that’s already happening.

As Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), points out:

“Once the Fed kicks off a rate-cutting cycle, we do expect that mortgage rates will move somewhat lower.”

And any upcoming Federal Funds Rate cut likely won’t be a one-time event. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“Generally, the rate-cutting cycle is not one-and-done. Six to eight rounds of rate cuts all through 2025 look likely.”

The Projected Impact on Mortgage Rates

Here’s what experts in the industry project for mortgage rates through 2025. One contributing factor to this ongoing gradual decline is the anticipated cuts from the Fed. The graph below shows the latest forecasts from Fannie Mae, MBA, NAR, and Wells Fargo (see graph below):

So, with recent improvements in inflation and signs of a cooling job market, a Federal Funds Rate cut is likely to lead to a moderate decline in mortgage rates (shown in the dotted lines). Here are two big reasons why that’s good news for both buyers and sellers:

1. It Helps Alleviate the Lock-In Effect

For current homeowners, lower mortgage rates could help ease the lock-in effect. That’s where people feel stuck within their current home because today’s rates are higher than what they locked in when they bought their current house.

If the fear of losing your low-rate mortgage and facing higher costs has kept you out of the market, a slight reduction in rates could make selling a bit more attractive again. However, this isn’t expected to bring a flood of sellers to the market, as many homeowners may still be cautious about giving up their existing mortgage rate.

2. It Should Boost Buyer Activity

For potential homebuyers, any drop in mortgage rates will provide a more inviting housing market. Lower mortgage rates can reduce the overall cost of homeownership, making it more feasible for you if you’ve been waiting to make a move.

What Should You Do?

While a Federal Funds Rate cut is not expected to lead to drastically lower mortgage rates, it will likely contribute to the gradual decrease that’s already happening.

And while the anticipated rate cut represents a positive shift for the future of the housing market, it’s important to consider your options right now. Jacob Channel, Senior Economist at LendingTree, sums it up well:

“Timing the market is basically impossible. If you’re always waiting for perfect market conditions, you’re going to be waiting forever. Buy now only if it’s a good idea for you.”

Bottom Line

The expected Federal Funds Rate cut, driven by improving inflation and slower job growth, is likely to have a positive, though gradual, impact on mortgage rates. That could help unlock opportunities for you. When you’re ready, let’s connect. That way you’ll be prepared to take action when the time is right for you.

Jason Joumblat 8/22/24 Jason Joumblat 8/22/24

Today’s Biggest Housing Market Myths

Have you ever heard the phrase: don’t believe everything you hear? That’s especially true if you’re thinking about buying or selling a home in today’s housing market. There’s a lot of misinformation out there. And right now, making sure you have someone you can go to for trustworthy information is extra important.

If you partner with a real estate agent, they can clear up some common misconceptions and reassure you by backing them up with research-driven facts. Here are just a few misconceptions they can help disprove.

1. I’ll Get a Better Deal Once Prices Crash

If you’ve heard home prices are going to come crashing down, it’s time to look at what’s actually happening. While prices vary by local market, there’s a lot of data out there from numerous sources that shows a crash is not going to happen. Back in 2008, there was a dramatic oversupply of homes that led to prices crashing. Across the board, there’s an undersupply of homes for sale today. That makes this market a whole different scenario (see chart below):

So, if you think waiting will score you a deal, know that data shows there’s not a crash on the horizon, and waiting isn’t going to pay off the way you’d hoped.

2. I Won’t Be Able To Find Anything To Buy

If this nagging fear about finding the right home if you move is still holding you back, you probably haven’t talked with an expert real estate agent lately. Throughout the year, the supply of homes for sale has grown. Data from Realtor.com helps put this into context. While there are still fewer homes on the market than in a more normal year like 2019, inventory is still above where it was at this time last year (see graph below):

So, if you’re remembering all that media coverage about record-low supply during the pandemic, you can rest a bit easier. While the market isn’t back to normal just yet, inventory is moving in a healthier direction. And that means as your options improve, you can let go of this now outdated myth because finding a home to buy won’t feel quite so impossible anymore.

3. I Have To Wait Until I Have Enough for a 20% Down Payment

Many people still believe you need a 20% down payment to buy a home. To show just how widespread this myth is, Fannie Mae says:

“Approximately 90% of consumers overstate or don’t know the minimum required down payment for a typical mortgage.”

And if you look at the data from the National Association of Realtors (NAR), you can see the typical homeowner isn’t putting down as much as you might expect (see graph below):

First-time homebuyers are typically only putting down 6%. That’s far less than the 20% so many people think they need. And if you’re looking at that graph and you’re more focused on how the number for repeat buyers is closer to 20%, here’s what you need to realize. That’s only because they have so much equity built up in their current house that can be used to make a larger down payment for their next move.

This goes to show you don’t have to put 20% down, unless it’s specified by your loan type or lender. Many people put down a lot less. Not to mention, depending on the type of home loan you get, you may only need to put 3.5% or even 0% down. So, if you’re buying your first home, you likely don’t need nearly as much for your down payment as you may think.

An Agent’s Role in Fighting Misconceptions

If you put your move on pause because you heard one or more of these myths yourself, it’s time to talk to a trusted agent. An expert agent has more data and the facts, just like this, to reassure you and help break through any misconceptions that may be holding you back.

Bottom Line

If you have questions about what you’re hearing or reading, let’s connect. You deserve to have someone you can trust to get the facts.

Jason Joumblat 8/20/24 Jason Joumblat 8/20/24

How To Choose a Great Local Real Estate Agent

Selecting the right real estate agent can make a world of difference when buying or selling a home. But how do you find the best one? Here are some tips to help you make that big decision as you determine your partner in the process.

Check Their Reputation

Start by gathering information about agents in your area. From there, try to narrow down the list. Ask the people you trust if they have someone they’d recommend. You’ll want to find an agent with a strong online presence, plenty of positive reviews, and someone whose great reputation truly precedes them. As Freddie Mac explains:

“. . . you may want to look for a real estate agent who specializes in the type of home you’re searching for. For example, if you are looking for an energy-efficient home, look for an agent who has experience with finding and negotiating offers for those homes. If you are looking for new construction, you’ll want to find an agent who has experience with new construction and isn’t affiliated with the builder . . .”

Look for Local Market Expertise

A great agent should have in-depth knowledge of what’s happening at the national and local level. That way they can clear up any misconceptions sparked by what you’re reading or hearing in the news. And they can tell you how your area compares to the national data. As an added perk, they’ll also be familiar with the neighborhoods you’re interested in and community amenities. As a recent article from Business Insider says:

“Spend some time talking with prospective agents about the local real estate market and how it could impact your purchase or sale. You want to get an understanding of how knowledgeable they are about local market conditions. Whether they're helping you sell or buy, their strategy for you should account for those conditions.”

Get a Feel for Their Communication Style and Availability

Effective communication is key in real estate transactions. Choose an agent who listens to your needs, answers your questions quickly, and keeps you informed throughout the process. If an agent is juggling too many clients, they might not be able to give you the attention you deserve. You want someone who will be readily available and responsive. So, what’s the best way to get a feel for their communication style and preferences? Bankrate offers this advice:

“Interviews also give you a chance to find out the agent’s preferred method of communication and their availability. For example, if you’re most comfortable texting and expect to visit homes after work hours during the week, you’ll want an agent who’s happy to do the same.”

Trust Your Gut

Last, rely on your instincts. If you feel like you do or don’t click with one of the agents you’re talking to, that matters. Choose an agent you feel at ease with and who inspires confidence. The right agent should be someone you trust to guide you through one of the most significant transactions of your life. As Business Insider says:

“As long as you've properly vetted the agents you're considering and ensured they have the necessary expertise, it's ok to go with your gut . . . Maybe you have a better rapport with one of the agents you're considering, or you just feel like they're easier to approach. You're going to be working closely with this person, so it's important to choose an agent you're comfortable with.”

Bottom Line

By following these tips, you can pick an agent who’ll provide the support and expertise you need to help make the process as smooth as possible. It’d be an honor to apply for that job. Let’s connect so we can have a conversation and see if we’d be a good fit for working together.

Jason Joumblat 7/8/24 Jason Joumblat 7/8/24

Not a Crash: 3 Graphs That Show How Today’s Inventory Differs from 2008

Even if you didn't own a home at the time, you probably remember the housing crisis in 2008. That crash impacted the lives of countless people, and many now live with the worry that something like that could happen again. But rest easy, because things are different than they were back then. As Business Insider says:

“Though many Americans believe the housing market is at risk of crashing, the economists who study housing market conditions overwhelmingly do not expect a crash in 2024 or beyond.”

Here’s why experts are so confident. For the market (and home prices) to crash, there would have to be too many houses for sale, but the data doesn't show that’s happening. Right now, there’s an undersupply, not an oversupply like the last time – and that’s true even with the inventory growth we’ve seen this year. You see, the housing supply comes from three main sources:

Homeowners deciding to sell their houses (existing homes)
New home construction (newly built homes)
Distressed properties (foreclosures or short sales)

And if we look at those three main sources of inventory, you’ll see it’s clear this isn’t like 2008.

Homeowners Deciding To Sell Their Houses

Although the supply of existing (previously owned) homes is up compared to this time last year, it’s still low overall. And while this varies by local market, nationally, the current months’ supply is well below the norm, and even further below what we saw during the crash. The graph below shows this more clearly.

If you look at the latest data (shown in green), compared to 2008 (shown in red), we only have about a third of that available inventory today.

So, what does this mean? There just aren't enough homes available to make values drop. To have a repeat of 2008, there’d need to be a lot more people selling their houses with very few buyers, and that's not the case right now.

New Home Construction

People are also talking a lot about what's going on with newly built houses these days, and that might make you wonder if homebuilders are overdoing it. Even though new homes make up a larger percentage of the total inventory than the norm, there’s no need for alarm. Here’s why.

The graph below uses data from the Census to show the number of new houses built over the last 52 years. The orange on the graph shows the overbuilding that happened in the lead-up to the crash. And, if you look at the red in the graph, you’ll see that builders have been underbuilding pretty consistently since then:

There’s just too much of a gap to make up. Builders aren’t overbuilding today, they’re catching up. A recent article from Bankrate says:

“What’s more, builders remember the Great Recession all too well, and they’ve been cautious about their pace of construction. The result is an ongoing shortage of homes for sale.”

Distressed Properties (Foreclosures and Short Sales)

The last place inventory can come from is distressed properties, including short sales and foreclosures. During the housing crisis, there was a flood of foreclosures due to lending standards that allowed many people to get a home loan they couldn’t truly afford.

Today, lending standards are much tighter, resulting in more qualified buyers and far fewer foreclosures. The graph below uses data from ATTOM to show how things have changed since the housing crash:

This graph makes it clear that as lending standards got tighter and buyers became more qualified, the number of foreclosures started to go down. And in 2020 and 2021, the combination of a moratorium on foreclosures (shown in black) and the forbearance program helped prevent a repeat of the wave of foreclosures we saw when the market crashed.

While you may see headlines that foreclosure volume is ticking up – remember, that’s only compared to recent years when very few foreclosures happened. We’re still below the normal level we’d see in a typical year.

What This Means for You

Inventory levels aren’t anywhere near where they’d need to be for prices to drop significantly and the housing market to crash. As Forbes explains:

“As already-high home prices continue trending upward, you may be concerned that we’re in a bubble ready to pop. However, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024.”

Mark Fleming, Chief Economist at First American, points to the laws of supply and demand as a reason why we aren't headed for a crash:

“There’s just generally not enough supply. There are more people than housing inventory. It’s Econ 101.”

And Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“We will not have a repeat of the 2008–2012 housing market crash. There are no risky subprime mortgages that could implode, nor the combination of a massive oversupply and overproduction of homes.”

Bottom Line

The market doesn’t have enough available homes for a repeat of the 2008 housing crisis – and there’s nothing that suggests that will change anytime soon. That’s why housing experts and inventory data tell us there isn’t a crash on the horizon.

How the Federal Reserve’s Next Move Could Impact the Housing Market