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Today’s top stories…
The spring housing market is blooming: inventory rising and price growth slowing
The Fed's rate-cutting crystal ball
A new bill in Congress has real estate investors shaking in their boots (and not in a good way)
🔥 Deal of the Day! 🔥: 2 bd | 2 ba | Langley, WA
Today’s mortgage rate (30 Yr. Fixed): 6.85%
Housing Market Heats Up as Inventory Rises
In February 2024, the housing market was hot. Active listings jumped 14.8% YoY, with the $200-350K range on fire. Total unsold homes climbed 8.8%, but still down 39.6% from pre-pandemic levels. Sellers were busy bees, with new listings up 11.3%. Median listing price held steady at 0.3% growth YoY. Homes spent 61 days on the market, 4 days less than last year.
The South led the charge, with active listings soaring 17% in large metros. Plus, over half of all available inventory was in the South!
Some standout markets:
Orlando, FL: +38.5% active listings
Seattle, WA: +41.7% new listings
Las Vegas, NV: -25 days on market
But it's not all upside. Price reductions hit a 4-year high of 14.6%, and the income needed to buy a median-priced home jumped $4,400 to $86,100.
The takeaway? Strike while the iron's hot, but keep an eye on those price tags!
Fed Watch: When Will Rates Fall? Investors Want to Know!
When will the Fed finally give us a break and start slashing those interest rates?
The tea leaves point to the second quarter of 2024, with June being the odds-on favorite for that first cut. But don't just take my word for it – that's the consensus among the majority of economists, based on the latest economic and market projections.
Now, let's rewind for a second. The Fed's been on a rate-hiking spree since March 2022, all in the name of taming that pesky inflation beast. We're talking a whopping 5 percentage point increase in the federal funds rate, from a measly 0.25% to a hefty 5.25%. And let's not forget the $1.3 trillion worth of long-term securities the Fed's dumped along the way.
The good news? Inflation's down to 3.1% as of January 2024. The bad news? That's still above the Fed's 2% target. And the Fed's not about to start cutting rates until they're confident inflation's well and truly in the rearview mirror.
But wait, there's more! The Fed's also got to keep an eye on the economy, which has been feeling the pinch from all those rate hikes. GDP growth slowed from 3.1% in 2022 to 2.6% in 2023, and the CBO's projecting a sluggish 1.9% for 2024. Meanwhile, unemployment's ticked up from 3.5% in December 2022 to 3.8% a year later, and could hit 4.1% by the end of 2024.
So, what's a Fed to do? Some analysts think they could jump the gun and start cutting rates as early as March or May if inflation cools off faster than expected or the economy starts looking shaky. Others reckon they might hold off until July or September if inflation proves stubborn or the economy shows some unexpected resilience.
And once the cuts start, how low will they go? Aggressive types are betting on a 2 percentage point drop by the end of 2024, followed by another 2 percentage points in 2025. The more cautious crowd's calling for a gentler 1 percentage point cut by end-2024, with another 1 percentage point in 2025. I’m betting on the latter.
Investor Beware: New Bill in Congress Could Spell Trouble
The so-called "Affordable Housing and Homeownership Protection Act" is supposed to help the little guy compete with the big boys on Wall Street. But let's be real – it's just another way for the government to stick it to hardworking investors.
Here's the deal: if you own between 16 and 25 single-family rentals (SFRs), get ready to cough up an extra 1% of the purchase price every time you buy a new property. Got between 26 and 100 SFRs? That'll be 3%. And if you're sitting on more than 100 SFRs, Uncle Sam wants a whopping 5% cut.
Now, the politicians are trying to spin this like it's all about sticking it to the big institutional investors. But last I checked, owning 15 rental properties doesn't exactly make you BlackRock.
The truth is, this bill is going to hurt the folks who are out there doing the hard work of rehabbing blighted properties and providing housing in low-income areas. Investors have the know-how and the capital to take on fixer-uppers that most homebuyers wouldn't touch with a ten-foot pole.
If you tax something, you get less of it. That's just basic economics. So if this bill passes, expect to see a lot more boarded-up houses and a lot less investment in the neighborhoods that need it most.
Oh, and let's not forget about the renters. With fewer investors buying up properties to fix up and rent out, the supply of rental housing is going to take a hit. And you know what happens when supply goes down? Prices go up.
So, to recap: more blight, less affordable housing, and higher rents. Sounds like a real win for the little guy, huh?
Look, I get it. Housing affordability is a real problem. But punishing investors isn't the answer. If the government really wants to make a difference, they should focus on cutting red tape and making it easier to build more housing.
In the meantime, let's hope this bill dies a quiet death in committee. Because if it doesn't, it's not just investors who are going to feel the pain – it's the communities we serve.
🔥 Deal of the Day! 🔥
Price: $815,000
Nestled in the serene landscape of Langley, WA, with breathtaking views and elegant design, this property promises a tranquil and luxurious retreat for those seeking an escape from the bustle of everyday life, making it an ideal vacation rental.
Airdna data:
Estimated monthly payment: $4,781/month (if financed)
Estimated monthly revenue: $5,291/month
Cashflow excludes additional operating expenses. Always confirm local regulations, HOAs and permits before purchasing a property.
See you tomorrow!
✍️ Brett