Wealthy AF Podcast

Global Events Shaping the Housing Market | 1-Minute Market Update w/ Martin Perdomo

October 13, 2023 Martin Perdomo "The Elite Strategist" Season 2 Episode 305
Wealthy AF Podcast
Global Events Shaping the Housing Market | 1-Minute Market Update w/ Martin Perdomo
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Show Notes Transcript

What's causing the peculiar dynamics of the current US housing market? Is it the falling demand or shrinking listings? And how does the conflict between Israel and Hamas fit into this puzzle? In this episode, we dissect the paradoxical state of the US housing market, examining the latest Redfin data revealing a puzzling contraction in both demand and listings. We discuss how homeowners, enjoying low mortgage rates, are resisting the shift to higher rates, creating a peculiar market scenario.

The plot thickens as we shift focus to the repercussions of the Israel-Hamas conflict on energy prices and the looming threat of inflation. Discover how the war could disrupt oil supplies, leading to rising energy costs, and how this connects back to the US inflation. The Federal Reserve's role in managing these pressures, the potential impact of these events on interest rates, and the housing market are all crucial elements of this complex discussion. We're in the midst of interesting, unpredictable times, and we're here to help you make sense of it all. Join us for a deep dive into a fascinating exploration of how global events can impact local real estate markets.

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Speaker 0:

Israel Hamas War could affect the US housing market. Find out more in this week's Real Estate Market Update. But before that, here's this week's housing market data, courtesy of Redfin. Mortgage purchase applications are up 1% from a week earlier and down 19% from a year earlier. 19%, that's a big number for mortgage application. That's a lead indicator of whether buyers are buying or not, or if it's a buyer's market or a seller's market. Obviously, in my personal opinion, in my market, it has turned into a buyer's market. It has no longer a seller's market. Google searches for homes for sale is down 12% from a month earlier and down 12% from a year earlier. Median home sales price was $370,000, up 2.7% from a year earlier. Prices are up partly because elevated mortgage rates were hampering prices during this time last year. The median asking price of newly listed homes was $388,223, up 5.2% from a year earlier. That's the biggest increase in a year. The monthly mortgage payment on a median asking price was $2,736 at a 7.49% mortgage interest rate. Pending home sales were down 11.6% year over year. This is a big deal, guys. Another indicator that it has flipped into a buyer's market and not a seller's market. Right, pending home sales are down. Loon listings of homes for sale fell 3.9% year over year, the smallest decline since July of 2022, in part because, newly, listings fell rapidly this time in 2022. Active listings dropped 14% from a year earlier, remaining the same from last week. So here's where it gets weird. Here's where it gets really weird. Active listings dropped 14% from a year earlier, really. And then you have mortgage applications, so you got less inventory going to market. You got mortgage applications is down significantly. I think it was what 20% or 22% or something like that. Mortgage applications were down, but we have pending home sales, we have active listings dropped from a year earlier. So it's weird because you got demand falling and you got listings falling, and that's because the people that have these 3% mortgages aren't trying to go into a 7.5% mortgage rate at these prices. It doesn't make any sense. So this is part of what's making this market totally weird. However, I believe in fundamentals, and the fundamentals are the fundamentals. When rates go up, prices must come down and demand goes down, prices must come down. It's just the fundamentals, but it certainly is a weird time. 39.5% of homes that went under contract had an accepted offer within the first two weeks on the market. Homes that sold were on the market for a median of 32 days and 30.7% of homes sold above their final list price, and reported by Bloomberg. Israel Hamas War threatens energy prices, adding to inflation risk. A little over a week ago, oil prices seemed to finally be in retreat. Now the war in the Middle East threatens to keep them high and inflation along with it. The unfolding war between Israel and Hamas risk disrupting the regular flow of oil from the region, stroking volatility in the global energy market. Oil fell today after surging earlier in the week, while European gas rose a few days ago after Chevron shutdown major Israeli gas field. Amid the uncertainty over whether the conflict will spread to other nations and whether there will be additional sanctions on Iran, one trader said oil could even reach $100 a barrel. That's not good for the American folks, for the working class people. The volatility could complicate the picture of for the Federal Reserve, where policymakers have been working hard to tame price pressures. Energy costs have been a central driver of US inflation as of late. The jump in gasoline prices in late July flowed through into overall consumer prices in August, which rose at the fastest pace in over a year. Producer price data showed that trend continues into September with the jump in gasoline costs accounting for a sizable chunk of the unexpected strength in wholesale prices, energy gains could push up monthly inflation gauges. For the Fed, already juggling a lot of headwinds in the spike out in prices could make their job even trickier. Fed policymakers tend to focus on so-called core measures of inflation that strip out energy food, because they're seen as better gauge of underlining inflation. But households very much experience price gains in gasoline and grocery costs. You're telling right about that. We are all experiencing it when we go to the pump and when we go to the supermarket when gas prices head from. Here is important for both consumers and the feds, but it's largely up to a crisis, up to the crisis unfolding halfway around the world. Guys, we are living in interesting, weird times. The feds have a even trickier job. This complicates things for the feds. Do they continue to raise interest rates? We have two wars, not one. Two wars in two separate places in the world Russia, ukraine and now Israel and Gaza, which is the Hamas government and the Hamas terrorist group that they're fighting against. We might be drug into this thing. There's potential for a world war and I reject that wholeheartedly. Reject that, and I hope that both of those wars get settled quickly with less tragedy. There's already been a bunch of people that have already been casualties of war. However, the biggest challenge that the feds have here is what do they do? Do they continue to make increased interest rates to tame inflation? There's a war going on. War typically tends to get the economic engine going. Historically, this is tricky man. It's really, really interesting to see what the feds will do in the coming months, in the next few quarters in 2024 and the rest of this year. Personally, I don't think that they're going to increase the rates again Again. I've been incorrect before. I think it would be irresponsible for the feds to raise rates again this year. I think they hold, I think, the last meaning they had. They're half of the feds were, half of the board was against raising rates and half of the board was for raising rates. So that's actually a good thing, in my opinion, because they might just hang tight and wear what they are. And this has been your weekly Real Estate Market Update. I'll see you guys next week. Peace out.