January 5, 2024
Christmas came a little early this year, when Jerome Powell’s early December speech following the Federal (Reserve) Open Market Committee meeting featured a strong orientation toward the position that the Fed is done raising interest rates (after pauses in its past four meetings) and that the door was open for rate cuts in 2024. The media went crazy, using one of our language’s most active nouns to describe a significant shift: Pivot. As in, the Fed is pivoting from constraining the money supply to bring down inflation to easing monetary policy to avoid a recession.
In the following days, the stock market set records (the Dow closed at more than 37,000 for the first time in history, the S&P 500 nearly returned to its 2021 high), and for those of us in the residential real estate industry, we caught a clear glimpse of daylight. We are still not predicting the future, yet it seems increasingly probable that mortgage rates peaked a few months ago, and financing home purchases will likely be more affordable by the time we hit the spring selling season next year.
By mid-December, the national average 30-year fixed-rate mortgage declined for 7-straight weeks to 6.95%, according to Freddie Mac, and our friends in the mortgage industry advised us that there are rates out there as low as 6.26%, if a buyer is willing to pay a full percentage point toward the loan closing. Evidence that home buyers are tiptoeing back into the market emerged from a data point issued by the Mortgage Bankers Association: mortgage applications increased nationwide for 6-straight weeks on a seasonally adjusted basis (through mid-December).
Our expectation for the remainder of the winter Sonoma County residential real estate market is that we continue to muddle along (homes are being sold) and that the current inventory will remain low until spring, but even then, don’t look for a plethora of new listings. By the numbers, as of the end of November there were 1,083 active homes for sale in Sonoma County, down 8.7% from a year earlier, when we had 1,186 listings, according to Rocket Homes.
That said, with the Federal Reserve’s pivot on its Federal Funds rate toward a lower figure in 2024, there is cause for optimism. Buyers still have to dig deeper to come up with down payments on homes and demonstrate good earning power to qualify for loans, yet that is about to get a little easier.
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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