Hey there,

Have you noticed the frenzy in the housing market lately? Well, it's not just your street; it's happening everywhere! Let's dive into the latest stats and trends shaping the state of housing.

In February 2024, a whopping 42.7% of homes in California sold above their list price. And according to Redfin, California's home prices surged by 11.3% year-over-year in February. The demand is high, but the supply? Not so much. We're looking at only a 2-month supply of homes in California, leading to fierce competition among buyers.

But it's not just California feeling the heat. Across the U.S., 26.2% of homes sold above their list price. This scarcity of available homes is creating bidding wars, with sellers receiving multiple offers and driving up prices.

Now, let's talk about rates. With highly anticipated rate cuts on the horizon, we expect demand to soar even higher. But here's the catch: rising rates keep sellers cautious and buyers scrambling. First-time buyers, in particular, are feeling the pinch, making up around 27-29% of the buyer pool.

Despite the challenges, buying a home is still within reach. Listings are lingering a bit longer on the market, giving buyers some breathing room to make decisions. But don't wait too long, as opportunities won't last forever!

Here is why higher rates help while negotiating price and terms: The story looks different in a month-over-month comparison, though. “On a monthly basis, home prices continue to struggle in the face of elevated borrowing costs,” Luke said. “Seventeen markets dropped over the last month. Only Southern California and Washington D.C. have stood up the rising wave of interest rates and deliver positive returns to start the year: San Diego rose 1.8 percent in January, followed by D.C. with 0.5 percent and Los Angeles at 0.1 percent." (The quote above is written by Ruben Caginalp)

“The remarkable rise in mortgage rates is acting as a kind of golden handcuffs.”

— Mark Hamrick, Bankrate’s senior economic analyst.

By now, you’ve heard this many times, higher rates keep sellers on the sidelines and buyers in a bind, especially first time buyers, which make up for 27-29% of the buyer pool. The current real estate market is tough for both buyers and sellers. Unless there's a significant drop in home prices or mortgage rates, both sides need to adapt. Sellers must be flexible on price due to higher mortgage rates. Buyers may face sticker shock and might need to compromise on the size, quality, or location of a home to afford it. However, despite the challenges, buying a home is still possible. Listings are staying on the market longer, making it slightly less competitive for buyers. This gives them more time to decide, which is good news for those still looking to buy.

Now, let's look at what's on the horizon this week:

• ISM Manufacturing PMI Data: Insights into the health of the manufacturing sector.
• JOLTs Job Openings Data: Crucial info about labor market conditions.
• OPEC Meeting: Decisions that could impact energy prices and inflation rates.
• Fed Chair Powell Speaks: Clues about future monetary policy.

February Jobs Report: Critical data on job creation and unemployment rates.
Understanding Inflation Trends:
Recent data from February reveals a modest increase in headline inflation, with Personal Consumption Expenditures (PCE) climbing by 0.3% from January, marking a year-over-year escalation from 2.4% to 2.5%. The Core PCE, which excludes volatile food and energy prices and is closely watched by the Federal Reserve, also experienced a 0.3% monthly uptick. However, its annual increase slightly declined from 2.9% to 2.8%, inching closer to the Fed's ideal 2% inflation target. Despite the Federal Reserve's aggressive interest rate hikes aimed at curbing inflation, the economy continues to expand, and consumer spending remains robust, indicating that rates may need to stay elevated to temper inflation effectively.

Housing Market Resilience
The housing market has shown remarkable resilience in the face of challenges, with a slight decrease in New Home Sales and median home prices in February. This trend suggests that demand continues unabated, fueled by a lack of existing homes for sale and buyers' preference for more affordable housing options, thereby lowering the average sales price. Builders have responded to this shift by offering incentives and concessions to maintain sales momentum, a strategy less prevalent in the existing homes sector. Notably, the U.S. housing market's equity has surged to a record $32.6 trillion, reflecting significant gains in home values over the past five years.

Employment Sector Analysis:
The labor market presents a mixed picture, with a slight decrease in Initial Jobless Claims to 210,000, whereas Continuing Claims have seen an uptick. This scenario indicates a nuanced job market where finding new employment remains a challenge for many, despite a low number of new filings. Recent reports of job cuts and the current 3.9% unemployment rate suggest some slack in the job market, which could potentially counterbalance inflation pressures and support a case for future rate cuts.

The Value of Homeownership:
Over 60% of Americans own their homes, a testament to the enduring appeal of homeownership as a cornerstone of the American Dream, offering not only financial prosperity but also societal and emotional benefits. Homeownership is a path to wealth accumulation through equity building and property value appreciation. It also offers social rewards by fostering community engagement, enhancing well-being, and providing emotional satisfaction. Furthermore, significant tax incentives, including deductions on mortgage interest and property taxes, as well as exemptions on capital gains from home sales, underscore the financial advantages of owning a home.

Homeownership remains a compelling aspiration for many, promising financial security, personal fulfillment, and an integral role in community life. Evaluating these benefits against individual goals and circumstances can guide prospective buyers in making informed decisions about pursuing homeownership.

Stay tuned as we navigate through these market-moving events together!