Well, that was a fun time in January when interest rates dropped for about a minute. The holidays were behind us, it was a bright new year, and the leading economic brains were bullish on the Fed’s war on inflation, so mortgage rates took a nice dip. Until they didn’t.
February’s data changed the outlook somewhat. Mortgage rates, in the most general sense, are influenced by speculation in the bond market. Those speculators (think of guys yelling “buy buy buy! No, sell sell sell!”) had until recently been espousing the idea that the Fed has been kind of wrong in their assessment of the market, and that it’s not as bad as they’ve been making it out to be. Often, in months past when economic news has come along that leans positive, the Fed would say “yes that’s good, but…” while the bond market has just taken “yes” for an answer.
February brought news that the bond market couldn’t dismiss, and lent credibility to the Fed’s message of caution. First there was the jobs report, and as it happens the economy produced far more jobs than anyone was expecting (low unemployment = higher wages = employers paying more money = businesses charging more for stuff = inflation = bad news for mortgage rates). Next was the CPI (consumer price index), which measures how much the prices for stuff we need have changed. Again, the numbers came in hotter than anticipated. What’s notable about CPI is that housing (purchases and rentals) make up about 1/3 of that index, and it was the primary contributor to the growth in those numbers. The PPI (producer price index) also came in strong, but there’s no need to bring more acronyms into this right now.
All of that information caused mortgage rates to spike, since it indicated that the Fed would continue to be aggressive in their approach- and possibly even more aggressive than expected. Prior to February, most prognosticators were baking in two more increases to the Fed funds rate for the year. Now the sentiment is leaning to three, hence the corresponding rise in mortgage rates.
All eyes are now on the next couple of reports, due over the next couple of weeks. They can either throw gasoline or cold water on the fire. On March 10 we’ll see the next jobs report, March 14 will bring the CPI numbers for February, and the Fed will have it’s next meeting March 15-16, when they’ll announce if there’s a change to the Fed funds rate (it’s expected to be a .25% increase). Between the data that comes from the reports and the comments that Fed Chair Jerome Powell (friends call him JPow) not-so-casually makes, we’ll see what movement occurs in mortgage rates.
That’s the macro, here’s the micro. How have things been looking in our local real estate market, now that we’re comfortably in a new year? Hey Eli, how’s inventory? Well…
The pattern is for listings and sales to drop over the holidays, then thaw out as we get into Spring. February was a speedbump- it should have had more new listings than January- but those of you in the Portland area can probably guess why that didn’t happen: we lost nearly 1/4 of the month to a near-record snowstorm. That’ll take inventory down a notch right there. Nobody wants to put chains on the car just to go to an open house.
Year-to-date, we’re running at about 3/4 the level of new listings as last year. Part of that was the snow, part was the reluctance of sellers to list. They’re either reluctant to list because they’d need to trade in their 2.5% interest rate for a 7% when they move, or because they believe the market is weak. That’s a misconception.
Buyer demand may have weakened but it’s still there. The seasonal lull in prices rebounded once we hit January, and you can ask any Realtor who has been active since then and you’ll hear about the busy open houses, multiple offer situations, and houses selling over list price. Sure, some of that was the brief moment in mid-January that interest rates dropped a whole half a percent. It was also an indication of something that has always been true: there is always a market for good houses in good locations at reasonable prices. The buyers are there.
The median sale price this February was down about 3% from last February. That’s pretty sticky, considering the roller coaster we’ve been on the past year. Houses still sell, and still sell for decent prices. Now can we please get some more of them?
I am a licensed real estate broker in the state of Oregon with ELEETE Real Estate. Data is sourced from RMLS, and all analysis is mine and mine alone. If I can be of assistance in your home search or sale, please contact me at eli.cotham@eleetere.com or via the contact page.
