June Market Update with Ryan Lamana
Where to begin, where to begin.
Mortgage rates are still sitting at about 7%. In fact, as of the last read, 6.89%. They haven’t moved much since last October. Some economists believe that mortgage rates will come down soon, others believe that they’ll remain at the current levels and still some believe that they’ll go much higher. Super helpful huh? The camp that believes that they’ll be lower soon seems to be the consensus camp. They believe what they believe because the bond market appears to be oversold, due for a rally soon.
Stocks have rebounded to near all time highs. Sustained economic uncertainty is almost guaranteed to lead to a bond market rally and, therefore, lower mortgage rates. Lower mortgage rates will unlock a ton of demand. In fact, for every half point decline in mortgage rates, millions of new buyers enter the market. Even 6.5% mortgage rates will produce a ton of demand, never mind 6% and even 5.5% mortgage rates. Lower mortgage rates mean more buyer competition and higher prices. On the other hand, the camp that believes that mortgage rates will remain the same or even increase are of the mind that there aren’t enough buyers for US debt given the concern around the government’s massive budget deficits and ballooning national debt- and generally the uncertainty around the US dollar’s dominance in the world market.
As far as inflation is concerned, year over year CPI sits at 2.4% or 0.1% month over month and core CPI sits at 2.8% or 0.1% month of month. While it’s nice to have a two handle on inflation, core CPI, which is the Fed’s preferred metric, is still nearly 50% higher than the Fed’s 2% target.
As far as our local real estate market is concerned, Jackson County sales volume is up over 6% year over year. Days on market are up slightly from 16 days on market to 20 days on market. Pricing is up 1.7%. New construction sales volume is down significantly as the new construction boom winds down. Developers are also subject to the same higher interest rates. High interest rates mean less development as higher interest rates erode developer’s margins and discourage development generally. Inventories are up over 30%. Much of that increase is owing to a nearly 100 unit increase in the rural space from 229 units last year to 338 units this year. That’s a 42% increase in rural inventory year over year. In looking at only urban inventory, inventories are up 24%. Some might be surprised to hear that sales volumes are up. However, it’s not that surprising given the comparison is such a low bar. Last year, we had very low sales volumes, so it’s no wonder that we’ve seen an increase, not to mention the impact of additional supply. Additional supply affords more transactions. A basic thought experiment is that if there is no inventory, how many transactions can occur? Of course, the answer is zero. If there are hundred units on the market, how many transactions can occur? Obviously, more than zero and likely many more than that.
Thank you very much for reading, and as always do not hesitate to contact me should you have any questions, comments and/or concerns.