01/20/2023
Market Update 01/20/23
Inventory is moving lower since peaking in Aug (1.3M). This should continue as buyers come out of hibernation, waiting for rates to fall. Furthermore, builder sentiment is up, and purchase applications are up. Let me be clear about this. We expect rates to continue to fall as we head into the Spring months (busy home buying season). Using a little common sense, when rates come down about 1% (which we feel they will by Spring) in a tight inventory situation – what do you think will happen to home prices?
The buyers that step away from the cattle mentality and buy today vs. waiting for rates to come down will be rewarded for not following the masses. “Mary the house, date the rate” – almost everyone is offering a “free” refi for buyer who pulls the trigger today on the purchase.
How are we so confident that rates will continue to come down? Because of DATA. Core PCE (reflects changes in the prices of goods and services purchased by consumers in the US) year over year is 4.68% compared to 5.05% last month. The updated PCE number will come out in a week (next Friday) and we expect that to land at 4.40%-4.30%. This will further solidify that we are moving in the right direction causing rates to fall more. Furthermore, this trend should continue in coming months.
“But the jobs are good” – Are they?? Just in 2023, there have been some big layoffs and we haven’t even closed out January! So, what does this mean for our industry? When the economy slows down and unemployment numbers go up, interest rates come down. As these numbers start reflecting in the jobs reports you will see an undeniable truth that the economy is slowing down, inflation is also down (not as many dollars in the system), in turn rates will follow. To highlight our point, below is a list of some names that have announced layoffs recently.
1. Google Parent Alphabet cutting 12,000 jobs
2. Wayfair cutting 1,750K jobs
3. Goldman Sachs cuts 3,200 jobs
4. Microsoft cuts 10,000 jobs
5. Amazon cuts 18,000 jobs
6. Salesforce cuts 8,000 jobs
7. Blackrock cuts 500 jobs
8. Bank of New York cuts 1,500 jobs
9. Coinbase cuts 950 jobs
Sapna Kochuparambil Joseph Abou Jaoude
