March 30, 2024
While the weather here in Sonoma County hasn’t really behaved liked spring lately, we are entering the spring season for home sales and we have a glimpse of “the new normal.” It’s actually a modest evolution from where we have been, with a market still limited by inventory. However, there seems to be a mood shift, and with it, some newfound activity that was missing throughout 2023. We’re not psychologists, yet it feels like people are ready to resume the part of their lives that had been suspended, or temporarily frozen, and that is making some moves and decisions – and investments, about their lives. And that means buying and selling real estate.
We are also gaining some insight on where the mortgage market is heading – or settling into, and again, the market is beginning to accept the reality of mortgage rates in the 6s, which is historically an affordable number. Throughout March, rates have been around 6.75% (technically 6.87% during the final week of March). There has been widespread speculation that the Federal Reserve would start cutting its Federal Funds Rate, which currently sits between 5.25% and 5.5%, as early as this summer. Those forecasts have become a bit cloudier as inflation spiked again to over 3% in February, and consumer-index data has not projected that the Fed is getting much closer to its inflation-rate target of 2%. Like weight-loss efforts and physical-training goals like getting your marathon mile below 8 minutes, or lowering your golf handicap a couple of points, the last 10-15% is always the hardest. Remember, inflation peaked at 9.1% in June 2022, and has been declining since then.
Just a few days ago the Wall Street Journal ran a story with the headline: Mortgage Rates’ New Normal Will be Higher Than Hoped. The article was anchored by the fact that the yield gap between mortgage bonds and Treasuries is still around 1.5%, versus an historical average closer to 1%. That may not seem like much observed casually, but apparently that has a significant impact on the bond trading market, and specifically, mortgage-backed securities (bonds). Hence, economists at Freddie Mae recently increased their forecast for average 30-year fixed mortgage rates to be 6.4% on average in the fourth quarter 2024, from their prior view of 5.9%. They also are expecting an average rate of 6.2% in 2025. That’s disappointing to an industry that had hoped we’d be in the 5% range by 2025. It’s mindful to think that these are just forecasts, and as a wise man once said: “Economic forecasts have been wrong 9 out of the last 5 times.”
We close out this post with a brief comment on the big news of late, that the National Association of Realtors – and some of the other very large brokerage houses, have settled lawsuits associated with wrongful practices in the area of Realtor’ commissions. We don’t question the news value in these stories, as the events of late have been groundbreaking. However, to some degree – to us, this has been a case of “much ado about nothing,” as for the multiple decades that we have been buying and selling real estate on behalf of our clients, there was never a fixed fee for agents. If anything, we are happy to see that the new rulings will ensure that buyer agents get signed agreements to represent their home-buying clients, and this is a positive step toward ensuring compensation for the agents’ efforts.
As we roll into April and toward summer, if we can help our readers with buying or selling residential, commercial and associated real estate – including ranches and land, we’d love to have that conversation with you.
Serving Cloverdale, Graton, Healdsburg, Rohnert Park, Santa Rosa, Sebastopol, Tomales, Windsor and surrounding Sonoma County, CA areas.
The First step when selling your home is to set the right price for the current market conditions in your area.
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