Back in the late 1970’s, Americans repeatedly found themselves watching picnic attendees desperately wanting to enjoy a hamburger slathered with a large dollop of ketchup. The only problem was that it took an exceedingly long time for the condiment to make its way from bottle to plate. Urged onward by the Top-40 encouragement of Carly Simon, the grilled patty was eventually dressed and a sense of satisfaction washed over the guests. The message was, “good things come to those who wait”. Similarly, this sense of anticipation, mirrored in today’s real estate market, reminds us that patience can lead to satisfying outcomes, even if the delay seems endless.
As we approach the two-year anniversary that heralds Jerome Powell’s decision to raise interest rates, “Anticipation” has become an earworm ringing through my head. As he drove borrowing costs upward, the Fed Chair assured us that inflation would quickly fall and, he promised, so would elevated mortgage rates. Well, the real estate recession that began in 2022 continued throughout 2023. This past December, we were told that interest rate cuts would finally occur in March. Then, May. Now it looks as though we may not enjoy any reduction in borrowing costs until June- at the earliest.
Until rates begin their descent, homeowners will continue to be reluctant to list their residence for sale. “Sure, I can sell for top dollar but why give up a mortgage rate of 3% to buy a house and tie myself to a mortgage in excess of 7%?” As a result of this mindset, inventory rates are at historic lows and Rochester leads the country in the percent decrease in properties listed for sale. Currently, there are 58% fewer homes for sale today than there were in 2019! It’s as if Carly Simon was hosting two barbecues- one, a rager, attended by homeowners and sellers enjoying all that a summer picnic has to offer. The other, populated by buyers, has been overrun by an army of ants, picking at the few crumbs left behind. Yet, I remain optimistic…
Last week, the Federal Government announced that the Personal Consumption Expenditures (their favorite measure of inflation) clocked in at 2.8% vs. 4.6% last year. Meanwhile, the Institute of Supply Management signaled easing price inflation which caused the 30-Year Mortgage rate to fall to 7.03%. Although it’s been painfully slow, we are inching closer to the Fed’s target rate for inflation. It’s just taking longer than expected.
Hopefully, more good news is on tap later in the week when the Labor Department announces February jobs data. Investors are hoping that the report will indicate that the job market is cooling. If fewer jobs are being created, you can expect mortgage rates to drop below 7% and, when that happens, more buyers will enter the market. However, do we really need more buyers?
Last week, my colleague, Katy Hanrahan, listed an adorable 2,400 square foot home on Babcock Drive in Brighton for $385,000. More than fifty prospective buyers walked through the open house. God knows how many viewed the property through private showings. Ultimately, it sold for more than $200,000 over asking price! While I’m thrilled for Katie and her clients, I have to ask, “How much more can home values increase before we have to start worrying about a bubble?”
At the moment, there are fewer than 200 desirable single family homes available for sale in Monroe County and there are 20 towns that comprise the county. This helps to explain why we are the second fastest selling metro in the country. On average, our properties are selling in only nine days. Additionally, 66.2% of all of our listings sell with multiple offers- the highest in the nation.
Despite the tight market and lack of inventory, as I stated, I remain optimistic. I honestly believe that economic news will continue to be (conversely) positive and I really do believe that, in the second half of this year, mortgage rates will start to come down. If you’re a homeowner, you have and will continue to have plenty of reason to celebrate. Let’s just hope that the market doesn’t become too frothy. Nobody wants a bubble. If you’re a homebuyer- especially a first time buyer- you probably have no idea who Carly Simon is. Let’s just say that she was a prophet who told us that “Anticipation is keeping us waiting”. It’s just going to require a bit more patience and I’m glad to report that, by year’s end, the worst will probably be over. Hang in there!
If you have questions or concerns in regard to real estate please give me a call. 330-8750.