October 12, 2023
This month’s market update, to steal a line from Yogi Berra, is like déjà vu all over again. Very little has changed since September’s update. Rates remain at their highest levels in more than 23 years, inventories remain stubbornly low, and buyer demand is relatively strong despite the high rates.
The last two days have brought hotter-than-expected inflation data, putting pressure on the FED to continue their rate hikes despite pausing at September’s meeting. According to the recently released Fed minutes, they expect at least one more hike and a more extended period of high rates. There are some troubling economic signs (rapidly shrinking personal savings and record-high credit card debt exceeding $1 Trillion) that don’t get much coverage but could point to tougher times ahead, as the high gas, food, and shelter prices are taking their toll. Many households are running out of savings and relying on credit cards to survive.
Inventories are expected to remain very low for the foreseeable future until we get some rate relief. As I mentioned in last month’s update, most people are “rate-locked” in their current homes and unwilling to sell them. The current high-rate environment is expected to last at least through Q1 of 2024, so I don’t expect to see any meaningful increase in inventories for quite a long time.
Buyer demand is still healthy, but buyers remain picky when purchasing a home. Homes in good condition that are nicely updated are selling much quicker than homes that require work. Pricing a house correctly in this market is very important, as overpriced homes tend to sit on the market for extended periods and sell for less.
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