August 8, 2024

The next 46 months will be interesting indeed. If you’ve been on the sidelines waiting for the right time to buy a home, it’s time to come off the bench, before prices begin to rise. Prepare now. Get ahead of the curve. Meet with a mortgage broker or lender. Go through a verified pre-qualification process. Determine what level of mortgage payment you are comfortable with. The payment is more important than the price. Hire an experienced and trusted REALTOR® to launch your home search.

In Sarasota County, prices are at 3-year lows with the most inventory we’ve seen in 5-years. Prices have been trending down, but we are close to reaching a floor. If you buy now at a 6.5% mortgage rate, when rates break below 6%, home prices will go higher.  As the rate approaches 5%, you’ll refinance. You will have lowered your carrying costs while your home’s worth will have risen.

If you are fortunate to be a cash buyer, the same scenario holds. Take advantage of the current and temporary deaccelerating market. 

According to Altos Research, for the week ending August 2, 2024, the median list price of all single-family homes in Sarasota County was $529,000; the median list price of all new listings for the week was $499,999; and the median list price of all listings that went pending  was $460,625. That’s a 7.8% difference between the median price of last week’s new listings and pending listings, and 12.9% spread between the median price of all listings and last weeks’ pending listings.

The MLS reports that in July the median list sold price was $435,000, 9.4% less than a year ago, although the bulk of the drop, 7.4%, was over the past month.  Nevertheless, it is still 61.1% higher than 5-years ago.

Within the past week mortgage rates dropped from 7% to 6.5% range. If the job market and inflation continue to cool, which most economists see as likely, by September the Federal Reserve will shift its bias from restrictive to neutral and begin to unwind the currency of an elevated interest rate environment. The Fed will be cautious. It will occur over several months. I expect 6-8 consecutive ¼% to ½% drops. If trending data bears fruit, the Fed Funds Rate, unchanged since July 2023, at 5.25% to 5.50%, could fall as much as 2%, to 3.25% to 3.5% range.

The yield on the 10-year Treasury bears a closer correlation to mortgage rates than the Fed Funds rate.  Generally, as the yield goes, so go mortgage rates. The yield, which is market driven, is moving lower, ahead of the Fed. Today, the 10-year yield closed at 3.96%. Last month, it was hovering around 4.27%. Virtually all data is driving the yield and mortgage rates lower.

Typically, the gap between the yield on the 10-year Treasury and the 30-year fixed rate mortgage is 1.5% to 2%. During times of economic stress, as we have had over the past year, the spread has been higher.  However, if my assessment is correct that inflation and jobs are cooling, as economic stress eases, then over the next several months I expect mortgage rates in the 5% range. If rates stay in the 5% range for an extended period (as I have said in prior commentaries, a stable market is more important than higher rates and a volatile market), it will lift demand for housing and prices. 

It’s said you cannot time the market. Although real estate is cyclical, it is interest rate sensitive. And its predictability is predicated on a mountain of data. Since 1980 interest rates have been on a downward trend. There have been 6 recessions since 1980. Home prices appreciated in 4 of the 6 recessions.  Nationwide housing prices fell only twice: in the 1991 recession, prices fell 1.9%; and in 2008, prices fell 19.7%, but the 2008 recession was caused by predatory lending, which is no longer prevalent. Accordingly, when the economy slows or goes into a recession, it does not mean home prices fall. Rather, rates historically fall 1.8% from the peak, and it is housing which usually plays a key role in the recovery.    

Please Note: As a result of a recent National Association of REALTORS® Anti-Trust Settlement, when buying a home, effective August 17, 2024, any buyer working with a REALTOR® as their representative will be required to sign a Buyer Broker Agreement. This is not just for the State of Florida, but all buyers and all REALTORS®  nationwide. The terms of hire are always negotiable. I certainly welcome your inquiries and the opportunity to discuss the particulars without any obligation on your part.