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Housing Market Outlook After The Feds Cut Interest Rates

By Gustan Cho, NMLS 873293 On Aug 7, 2019

Housing Market Outlook After The Feds Cut Interest Rates

This ARTICLE On Housing Market Outlook After The Feds Cut Interest Rates Was PUBLISHED On August 7th, 2019

What is the Housing Market Outlook After The Feds Cut Interest Rates

Housing prices have been increasing for the past three years due to inventory shortage.

Despite record-high mortgage rates since the 2008 Great Recession in 2018, home pricing keeps rising
The housing inventory shortage with added competition by home buyers resulted in gains in home prices throughout 2018 and into the first half of 2019
In June 2019, housing inventory hit a new low
New home listings in June increased to 2.8% annually
This figure was lower than the 2.9% increase for May 2019
Housing inventory gains decreased in 2019 to 6.4% growth in January 2019 to 5.8% growth level in February 2019
Housing inventory gains are continuing to slow month after month
Industry experts predict it is going to reach its first decline in the coming months in 2019
Competition for homes still remain strong and was expected to decrease until the Feds announced last week they cut interest rates by 25 basis points
However, mortgage industry experts are predicting a strong home purchase and refinance markets for the remaining 2019 going strong into 2020

In this article, we will cover and discuss the housing market outlook after the Feds cut interest rates.

Competition On Housing Market Outlook

what is the Competition On Housing Market Outlook

Competition in the housing market was expected to slow down this year until the news of the Fed interest rate cuts.

In April 2019, listings on the national MLS increased substantially and home prices stabilized
Home bidding wars on purchases seemed to cool down a bit and not too many buyers offered higher than listing price on homes
Then mortgage rates have started sliding downwards
Mortgage Rates have been sliding since the start of 2019
Federal Reserve Board Chairman Jerome Powell announced the Feds will not increase interest rates this year
Then the Feds decided to cut interest rates
Interest rates have not been cut by the Feds in almost a decade
The Fed Chairman Jerome Powell hinted that the Feds may be cutting rates in the coming months and into 2020
This news drove mortgage rates below 4.0%
All signs signal mortgage rates will be heading lower
Both the home purchase and refinance markets are exploding to record levels

Most mortgage lenders are behind in turnaround times. Average closing dates are now averaging 40 days versus 29 days 60 days ago.

Housing Inventory Shortage Is Reaching Historic Levels

Homebuilders nationwide are thriving. They are getting homes sold out prior to even breaking ground. Home prices are increasing in most parts of the country. Supply is scarce and many industry experts are expecting housing inventory to hit a new record low.

According to Alex Carlucci, a senior vice president at Gustan Cho Associates and housing market analyst, he said the following:

It was only 18 months ago that the number of homes for sale hit its lowest level in recorded history and sparked the fiercest competition among buyers we’ve ever seen. If the trend we’re seeing continues, overall inventory could near record lows by early next year. So far there’s been a lackluster response to low mortgage rates, but if they do spark fresh buyer interest later in the year, U.S. inventory could set new record lows this winter. Part of the issue is that fewer owners are now listing their homes for sale, and there are several reasons why. It’s likely a combination of rate-lock, recently decreased consumer confidence and older generations choosing to age in place. Mortgage rates are still pretty low, but so many homeowners refinanced their loans when rates were even lower than moving would mean paying more for the same mortgage, on top of paying more for a move-up home. Even those sellers who want to downsize would be moving into a pricier market. Home price gains had been shrinking, but the gains increased again in June for the first time in 14 months. Interest rates on fixed-rate mortgages fell by nearly one percentage point between November 2018 and this May. This has been a shot-in-the-arm for home sales. Sales gained momentum in May and annual home-price growth accelerated for the first time since March 2018.

Demand For Homes And Housing Market Outlook

what is are Demand For Homes And Housing Market Outlook

Many millennials are buying their first homes. Housing Market Outlook looks promising for first time home buyers. Many are seeking to purchase homes in the suburbs. The suburban markets cannot keep up with demand. Many elderly homeowners are selling their homes and downsizing. The economy is doing great. The lowest numbers of unemployment data have been registered in the history of the United States. Many have accumulated wealth with the increase of their 401k due to the record high stock markets. Many folks are buying second and/or vacation homes. Many lenders like Gustan Cho Associates have launched Non-QM and Alternative Financing Loan Programs. Bank Statement Loans for self-employed borrowers are making self-employed borrowers qualify for home loans.

Alex Carlucci adds the following statement about the 2019/2020 Housing Market Outlook:

All real estate is local of course, and inventory is leanest in some of the nation’s most affordable markets. In the 46 major markets tracked by Redfin, a real estate brokerage and analytics company, inventory fell in June annually for the first time since last September. Cities like Memphis, Tennessee, Pittsburgh, and Oklahoma City saw double-digit declines in the supply of homes for sale, while much pricier markets like San Jose, California, Seattle and Boston were still seeing inventory gains. Lower interest rates are bringing buyers back, but without enough homes for sale to meet demand, we expect to see more bidding wars, which will push prices up this summer. We expect small, inland markets where a typical home is still affordable for a middle-class family to heat up the most.

For more information about the content of this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.