The Great Housing Market Shift Has Begun

There are signs the housing market may be shifting, with mortgage rates starting to come down, inventory starting to go up, and home valuations, state after state, are reporting decreases. And as a fall housing market starts to wind down and we head into the holidays, a lot of you have asked me, is now a good time to buy or sell a home? And with everything going on in the market and the economy and politically, that is not an easy question to answer. So in this video, we're gonna dive into what's happening with mortgage rates, what's happening with home inventory and home prices, and what the experts think is going to happen as we head into 2025. Now let's start off by digging into mortgage interest rates. Now there has been a lot of changes over the last several months when it comes to mortgage rates. We've seen them skyrocket up to over 7%, and then all of a sudden tumble to the low sixes only to rebound back up to the sevens. And a lot of people ask me, why are the rates doing that? What would cause the rates to go up and down, especially when they're hearing conflicting reports on the news? So I wanted to kind of dig into that a little bit to kind of explain how that works, why that is happening. So I found this article in Investopedia, if the Fed cuts rates, why have mortgage rates been going up? It says, one of the most enduring myths of the past year is that once the Federal Reserve cuts or lowers the federal funds rate, it will finally pierce the mortgage rate bubble. When the Fed announced a 50 basis point cut in September that seemed to be working already, 30-year mortgage rates had been more or less steadily falling for weeks in anticipation of that meeting, that Fed meeting. And one day earlier, they reached 5.89%, the lowest average in just over two years. Yet a funny thing happened on the way out of the generational housing crisis, the very next day, mortgage rates went up. And by 10 basis points, mortgage rates have not only stayed elevated, but have reversed virtually all of the declines that began mid-summer, reaching as high as 6.73 in some states. So what happened? So what they're basically talking about there is that in anticipation of that meeting, before the Fed announced that 50 basis points, that half point cut back in September, the rates were already starting to drop. We saw that happen in July, August, rates were starting to soften. So they were already there. But then the funny thing happened is as soon as they made that announcement, the rates actually in October went the opposite direction. Mortgage rates hit two-year lows September 17th. Why are they up now? The article goes on to say that when the Fed issues its decision, it changes the federal funds rate. And this is super important, which is why banks charge other banks when lending the money, the money in order to meet their overnight reserve requirements. The Fed funds rate has a downstream impact on short-term debt products like personal loans and credit cards, but its effect on mortgage rates is more ambiguous. And this explains kind of how this all works. It says this helps to explain why mortgage rates were falling before federal chair Jerome Powell's press conference. In effect, the lower rates were already priced in. Instead of waiting on the advice of one regulatory body, lenders react to the constellation of other economic signals, which adds up to a minor temporary swing against the grain based on the riskiness of lending to today's mortgage market. So this kind of explains exactly why, what was happening at that point in time. It says the timeline bears this out. And they're talking about, kind of what happened during that time. A middling jobs report, the jobs report came out, the Bureau of Labor Statistics can also precede mortgage rate heights, rate heights as this can be seen in the week following the August 2nd jobs report. Lenders braced themselves for possibly an economic downturn. Likewise, the inflation report from the same agency showed consistently low inflation like the one released in September 11th. And it is often followed by lower mortgage rates as was the case in the lead up to the meeting. So because those jobs report, the jobs report, the inflation report was in a positive direction, the mortgage rates reacted immediately. It says, in other words, that the Federal Reserve and the mortgage lenders alike lowered their respective rates at roughly the same time was a case of correlation, not causation. In other words, they were doing at the same time, but not because of each other, but because of outside circumstances. They were responding to many of the same indicators. And that's the thing is, is one is not linked to the other. The mortgage rate is not linked to the Fed rate. They have similar indicators that caused them to go up and down, but they're not affecting each other. And then it says, here's where things get tricky. So what happens when those indicators get a little too hot? For example, the BLS were to release an unexpectedly strong jobs report, the Fed might decide the economy is doing just fine and opt to lower the rates by a smaller than hoped for amount. But if the Fed's fund rate and the mortgage rate are not directly connected, then why would a lower rate cause mortgage rates to explode again? And the answer is related to the 10-year treasury bond yield. Now, I'm not gonna get too much into the weeds on this, but this is gonna be stick just to the surface because this will help explain, help you understand why this matters, why this is something that directly related to the interest rates. It goes on to say that when the economy is humming along, investors typically sell off less risky assets like bonds and buy riskier assets like stocks. The consequence of this is to reduce the price of those bonds on the market, which raises their yields. And as banks and lenders use the yield of the 10-year treasury as a benchmark to set mortgage rates, adding in more conventional economic environments about a percentage or two on top, although the spread has gotten as high as two and a half percentage points this month. So in other words, typically because of those rates, because they're using the treasury bond yield as a stepping off point to determine what the mortgage rate is, typically it ends up being between two to two and a half percent between the Fed rate and the mortgage rate. They kind of cruise along in unison, which you're gonna see in a second here. It says on October 4th that the above scenario is exactly what happened. The BLS released its preliminary employment situation data for September, showing an increase of 254,000 jobs, which was way more than they were expecting. And then experts revised their Fred rate cut predictions to 25 basis points, which helped cause a bond sell-off. See, it's not directly related because the mortgage market reacted to what they thought the Fed rate was going to be. They thought the Fed was only gonna cut the rate by 25 basis points, so they reacted with their bond sell-off based on that information. It says that that sell-off sent the 10-year treasury yield to over 4% when markets opened the following Monday. Unfortunately for would-be new homeowners, mortgage rates soon followed. This week, the mortgage rates have consistently been over 2% points higher than the 10-year treasury yield. Now, this article does go on to make a few predictions, some general predictions. Bob Driscoll, who is the Senior Vice President and Director of Residential Lending over at Rockland Trust Company goes on to say that although they expect to see rates drop in 2025, they're not predicting a drop to historic lows, but rather a modest drop in rates settling into a tight band with less volatility. In other words, nothing crazy. Nothing's crazy, no drastic drops. We're not going to get down to 4%. We're not gonna get down to 4.5% or 3%. We may not even see 5%. It's going to take a little bit of time, especially with everything that is involved. We might see a little bit more movement if depending on the jobs report, depending on the inflation report, and depending on consumer confidence, if mortgage applications rise, it'll be something to watch, but stay tuned because either which way it's gonna have a big effect on the housing market. Now, the other area of shifting has been the area of inventory and home values. And we've seen home values starting to shift because of inventory. The more inventory, again, it's supply and demand, just like with the mortgage rates, the more inventory you have, the more that it's going to impact pricing. The less inventory, the more demand, which typically drives up home values. As we're seeing more inventory, we're starting to see those home values soften. Now, if we look at the most recent housing data, and this was actually released as of October 1st, and this is the stlouisfed.org website that tracks across the country, we can actually see that that uptick in inventory is continuing to grow. So you can see right here around the beginning of the year, January 2024, you started to see that upswing in inventory. You know, if we look at where we were pre-pandemic, which would be right around, say, say if we're looking at a year ago, excuse me, you know, this time pre-pandemic, October 2019, 1.2 million homes on the market is where we're headed towards. You can see that that point is getting closer and closer, which is a good sign that gets us more back into a more balanced market. We were not balanced in 2019, but we're getting closer and closer to that point as we nudge up. As of right now, October, we're at 900, roughly 953,000 homes on the market for the entire country. But the most important thing, not so much the number, is the upswing. This upswing is positive. Now, we did have an upswing last year. We had a little bit of a downturn. Now, this is normal. You know, when you hit the holidays, and I would expect to see a downswing coming into November, December, January. It happens every year. And you can see, you know, you can see that downswing almost every year. So you've got January and January. This is the down, this is the, the lull of the market is always during the off season, during the winter. It's typically where it is. Now, when we hit into the pandemic, the pandemic was an anomaly because of the fact of how the state of chaos that the housing market was in, the way the world was, there was all the things that were typical for across the board last 50 years were out the window. So this was an atypical situation, but we're getting back to that, finally getting back to that where we're going to see, as of last year, we're starting to see more normalcy in the market to get back to where we were pre-pandemic. Now I came across this great article by Fast Company that gets into the detail on exactly where we are at right now across the country in terms of inventory and home values, and what metric to watch as we head into 2025 to see how that will change going forward, what we can look forward to seeing going into the new year. So the article is titled The Key Local Housing Market Metric to Watch Heading into 2025. It says heading into 2024, ResiClub, which does a lot of the data, does the data for this particular article, says that it noted that the key metric to watch for home price momentum was monthly active inventory levels compared to the same month in pre-pandemic 2019. Today's analysis shows that this metric is still very much the key metric to watch for next year as well. So that was something that I mentioned just a few minutes ago when we were looking at the 2019 versus now on the overall home inventory, and they are saying that that is a key metric going forward as a predictor relating to the overall health of the housing market. It says, generally speaking, housing markets were active inventory has returned to pre-pandemic 2019 levels, have seen home price growth soften and even decline outright from their 2022 peak. Conversely, housing markets where active inventory remains far below pre-pandemic levels, which is where we're at in Massachusetts, have generally seen home prices remain more resilient than since 2022. So this may be depending on how you're, whether you're watching this on your television or your mobile device. I will have links to all of these articles in the description below. So you can take those, check out where your local area is because with each of these areas, you can hover over them. It'll tell you exactly where in relation for that particular area, how the housing market is for home prices, what the home prices look like versus 2019 and how the inventory compares. So say for example, Miami, Miami, Fort Lauderdale, which is interesting because Florida has had such a, has been in the news, has been in the news because of insurance and HOA. And it's been in the news because of all the natural disasters. And there's a lot of talk about the market and overall as a whole, the state has seen decreases in home value and increase in inventory. Newark, New Jersey, New Jersey has been doing notoriously well and not surprisingly, the local home prices since the market peak, they're still 8.8% up above that. And inventory compared to the pre-pandemic, they're at negative 47.5%. So they are almost 50% below where they were in 2019. It's a ton, you know, they've got a long ways to go. Conversely, if we look at Austin and Austin has been, you know, in the news a lot, home prices since the market's 2022 peak, they are down 19.8% and the inventory compared to pre-pandemic is up 40.3%. So this is interesting, you know, like I said, this link, this article will be in the description. You can check out your local area to see where you stack up, but it'll be interesting to see what happens going forward with these home values, home prices, as these areas start to catch up, as you know, the more the market, the slower the market becomes in relation to the mortgage interest rates. If people aren't taking applications on mortgages and the interest rates continue to rise, that's going to put some pressure on buyers to, you know, hit the pause button, which is also going to mean that a lot of home sellers will do the same. And this could stall, this could move that line so that we have more inventory and more price drops going forward. Now the article goes on to say, you know, why is active inventory such a great metric for following home prices? And they said, think of active inventory and month's supply as the local housing market's equilibrium of supply and demand. If housing demand surges and homes start selling quickly, local active inventory may begin to fall. And then that, if that demand surge goes beyond what's seasonably typical, it may suggest a heating up housing market. That's exactly what we saw during the pandemic housing boom for summer 2020 to spring 2022. Conversely, if the housing market demand pulls back and homes are no longer selling as quickly, local active inventory may begin to rise. That suggests a cooling in the housing market. And if it cools enough, home prices could fall. We've seen this in some housing markets since the pandemic housing boom fizzled out in 2022. I think this is super important to know and understand if you are thinking about selling a home in the next 12 to 24 months, this is something to keep an eye out in your local market, because depending on what your plans are, if your plans are to sell and rent or sell and travel, and you're not taking that money and putting it into another purchase, then you could be in a situation, depending on where you are, if you're getting down close to that line, things are really starting to soften, you could lose money. You could lose money in the next year to two years if you wait. Now, if you are selling and you're buying, it's not going to be as impactful because if you get a hit on the sale side, you're going to take advantage of that hit on the buy side. The only difference would be is if you're moving from a market that is significantly getting, significantly closer to the 2019 levels, the market is really struggling and you're moving to a market, say, if you're moving from Austin to New Jersey, Austin to Massachusetts, that's going to be tough. That's going to be really tough because you've got one market that is at 2019 levels or before and a market that is not even close to catching up. So something to definitely watch out for very, very, very closely. Now, my goal is to always educate so you can advocate for yourself. And this is why I want to teach this information and want to get this information out so that you can do a lot of this research on your own that you don't have to rely on a professional real estate agent or a mortgage broker or a financial advisor 100%. You should absolutely have these professionals ready to go, but it's good to understand and have this information readily available so that you can understand that on a whim. You can understand by just opening up YouTube and open up this data and get that information. However, at the end of the day, the professional is the one that's going to give you not only the data, but the explanation of the analysis of that data. And I think that's where most people get caught up. And that is what separates, in my opinion, I talk a lot about the 80% agent and the 20% agent on this channel, where I firmly believe that 80% of the agents in the real estate industry are not fully qualified. They're not providing full level service and they don't have a full understanding of what the market is doing, what the impacts of the market. And some of it is unintentional. A lot of it is unintentional and a lot of it is not, unfortunately. However, that being said, 20% of the agents in the industry are worth their weight in gold. They are professionals that have been in the business for some time. They have significant experience, but not only that, they know how to interpret the data. They've studied the data. They've taken classes. They have certifications. They understand what it is that's going on in your local market better than you would. They'd be able to interpret that so that you don't make a decision. So if you have an agent that you've interviewed and can give you that advice, I would say, after you do your homework, you check with them. But if you don't, click the link in the description. I'll connect you to one of my personally vetted list of 20% agents. These are agents that I have vetted over the years. I have over 200 across the country and I will connect you with one of those agents. It doesn't cost you anything. I get paid a referral fee from that agent if you decide to use them, but it doesn't cost anything out of your pocket. So you click the link in the description, I'll get in touch with you and get you in touch with the right agent. So now the question is, is what do the experts think is gonna happen with the housing market as we head into 2025? And I found a great article by Bankrate, was published just last week, October 25th, that answers some of these questions by some pretty reputable sources. So the question of what will happen to the housing market in 2025, it goes on to say that a year after rising just above 8% in October, 2023, the average 30 year rate sat at 6.78% as of October 23rd, 2024. An improvement to be sure, but not the big dip many were hoping for. Many experts do foresee mortgage rates decreasing slowly over the next year. We heard this earlier. And then this expert Bernard Markstein, President and Chief Economist at Markstein Advisors, goes on to say that lower interest rates will unleash some of the pent up demand for housing in 2025, we hope. This will help keep mortgage rates above their ultra low rate of just a few years ago, but rates will be lower than current levels. So in other words, because of the demand and all the things around it, the economy and the jobs market and so forth, we're not expecting those rates to go down to those exceptional levels of 2.75, 3%, but they will be lower. Goes on to say that housing inventories have been improving as of late with a 4.3 month supply at the end of September in 2024, according to existing home data from the National Association of Realtors. Month supply of inventory, just to let you know, is the number of months it would take to sell all the inventory in a given area. So in other words, if your area has a 2.4% or 2.4 month supply of inventory, then that means it would take exactly 2.4 months if absolutely no inventory came on the market at that, on a given day, how long would it take to sell everything on your market to zero? And that's what that 2.4, 2.9% represents. And it goes on to say that while there's still well below the five to six months are typical, and that's the goal, five to six months of inventory is what the goal is to give you a more balanced market. You know, we're well on our way. It back during, to give you a point of reference back during the pandemic, you were looking at 0.1 month of inventory. It was like that way in Massachusetts for a long time, long time. We're still only at about 1.4 per, probably 1.4 months of inventory here in Massachusetts or in Plymouth, I should say. It's very, very low. In some areas, it's even lower. Now, if we go on to home sales, will home sales decline? It says the number of homes sold has fallen off in 2024 with the most recent existing home sales sliding both month over month and year over year, according to the National Association of Realtors. Buyers staying on the sidelines, anticipating lower rates and hoping for prices to moderate. Quite frankly, it's just to be more affordable. Lawrence Yoon, who's the chief economist at the National Association of Realtors, who has a history of excellent reporting, accurate data, has always been very on the, Johnny on the spot when it comes to data, says that home sales have been essentially stuck at around a 4 million unit pace for the past 12 months, but factors usually associated with higher home sales are developing. There are more inventory choices for consumers, lower mortgage rates than a year ago, and continued job additions to the economy. It's kind of what we were talking about earlier. CoreLogic, who predicts that total home sales will increase by 9% in 2025 compared to 2024, chief economist, Selma Hemp, says that in addition to lower mortgage rates helping drive home sale activity next year, she says greater availability of homes for sale will help home buyers' choices and improve availability as it reduces the probability of bidding wars and escalating home price appreciation. You know, we only need one house per buyer, but at the end of the day, people want options. And even if that one house, the only house on the market is the one that you ultimately buy, I know from experience, I will wait until I have a few to choose from just to make sure that that's the one that I absolutely will buy, if that's the right one for me. So 100% greater availability will help not only bring people out, but it'll bring people to the point of decision-making. And they go on to say that the lower the rates go, the more likely we'll see home buyers, homeowners locked into lower rates finally feeling comfortable about selling their current home to buy a new one. Roughly 70% of mortgage debt is currently below a 5% interest rate. And that number is shrinking as people sell their homes. If rates continue to decline, we'll likely see a lock-in effect soften, which I think we're already starting to see that, and consumers will be more willing to purchase a home and take on a higher rate than they currently have. Will housing inventory increase? I think this is all tied together, 100%. Inventory has been increasing very slowly, but if it is to grow meaningfully in 2025, don't expect it to come from existing homes. And this is something that I've been talking a lot about on my live streams, is that we need new construction. We need more new homes. The existing homes is not enough to get us out of this unaffordability mess that we're in. Now, at the end of the day, the decision whether you should buy or sell a home is always going to be a personal decision. It is not going to be a question that's answered by market conditions. It's always going to be a question that is answered by your own personal decisions, and whether that be walking away from a low interest rate because it makes sense for your family, and maybe you're moving out of an area that has high appreciation, and you're going to take advantage of an area that has some depreciation to give you more house and more financial security going forward, you're not going to necessarily allow a rate lock, a lock in effect, keep you in your current situation. And it's important to look at your situation as a whole to make sure that all the most important questions are answered, not just whether you should buy or sell a home, because at the end of the day, your personal economy is always going to be the first and foremost thing above whatever the national economy is doing. But if you want more information about what else is happening in the housing market, you may want to check out these videos. I'm Jen Sylvester, and I'm here to help you be a savvy home seller.