Weekend Talking Points - 'Wealth'

The inventory of homes for sale is up 28% year-over-year (more choices for buyers!), but 30-yr mortgage rates are back near 7% (affordability issues for buyers). It’s tough for consumers to think about making a move right now. Remind them how homeownership builds wealth, and that getting started is the key.

October CPI reading was just ok. “Core” CPI (Consumer Price Index = inflation for you and me) rose 0.3% month-over-month in October, keeping annual inflation flat at +3.3%. “Headline” CPI (which includes food & fuel prices), however, climbed from +2.4% YoY → +2.6%. [BLS]

TP: Keep in mind that the Fed pays more attention to “core” PCE (another measure of consumer inflation) than the “core” CPI. The October PCE report will come out on November 27. The next Fed meeting is on December 18.

October PPI rose. “Core” PPI (Producer Price Index = inflation for businesses) edged higher, rising from +3.0% YoY in September to +3.1% YoY in October. However, “Headline” PPI jumped from +1.9% in September to +2.4% in October. [BLS]

New NAR forecasts. The National Association of Realtors sees mortgage rates easing to around 6% in 2025, boosting total transaction volumes (existing + new homes) 11% YoY in 2025, and 8% YoY in 2026. Home prices are forecast to rise just 2% annually as supply/demand becomes more balanced. [NAR]

Higher rates cooled housing activity. MBS Highway’s National Housing Index dropped 9 points to 31 in November as the brief (and unseasonal) rise in buyer activity we saw in October was crushed by the rebound in mortgage rates.

Housing market sentiment at 2.5-year high. Fannie Mae’s HPSI index continued to rise on mortgage rate optimism, but 80% of consumers still said it’s a “Bad Time to Buy.” (In contrast, 64% of consumers said it was a “Good Time to Sell.”) [Fannie Mae]

2024 NAR Profiles of Buyers and Sellers

As a real estate data geek, I’m always thrilled when the new version of this mammoth report comes out. It covers everything, from the reasons why buyers move to the ways people save up for their down payment. You’ll see a lot of this data in future Shareables, but I thought I’d share a few interesting tidbits here:

• The median age of first-time buyers rose to 38 (up from 35 in 2023).
• The median age of all buyers jumped to 56 (from 49 in 2023).
• 88% of buyers transacted through a real estate agent or broker.
• The median age of all sellers was 63 (up from 60 in 2023).
• 90% of sellers sold with the help of a real estate agent (up from 89% in 2023).
• FSBO (For Sale By Owner) sales dropped to 6% of transactions, an all time low.
• 87% of sellers said they would definitely (72%) or probably (15%) recommend their agent for future services.

So 63 year-olds are selling to 56 year-olds? On average, yes. But what’s really happening here is: 1) many first-timers have been priced out of the market by high home prices and mortgage rates, 2) Boomers own lots of homes and have been selling/downsizing, and 3) that it’s only older people and investors who have the money to make all-cash purchases.

Just don’t forget: housing builds long-term wealth; a lot of it!

Mortgage Market

The rapid rebound in rates has (obviously) slowed loan demand. According to the Mortgage Bankers Association, weekly new applications to refinance are still running 43% higher than the same time last year, but new purchase applications are now just 1% higher than last year.

Here’s what the fed futures market is currently pricing in for future rate cuts. Note that the current Fed Funds Rate policy range (AFTER the 25 bps cut announced on November 7) is 4.50–4.75%.

• Dec 18 FOMC Meeting: 79% probability of another 25 bps cut. (This was 66% last week). 21% probability that Fed will stay on hold.
• Jan 29 FOMC Meeting: 60% probability that the Fed will stay on hold. 25% probability of a further 25 bps cut (in which case the policy range would be 4.00–4.25%).

They Said It

“Last month we saw the green shoots of increased buyer activity, but the sharp upward move in mortgage rates during October mowed them down. Recent conflicting data on the strength of the job market, and limited progress on inflation, saw 10-year treasury yields rise to near 4.5%. Nonetheless, the Fed stayed the course, cutting short-term rates by 25 basis points two days after the election.” — Barry Habib, MBS Highway’s Founder and CEO.

“Homeowners’ wealth steadily rises while renters’ wealth does not. If you don’t enter the housing market, you are in the renter class where wealth is not being accumulated. If you want to participate in the housing market, the sooner you get in, the sooner you accumulate wealth.” — Lawrence Yun, NAR’s Chief Economist

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