So what’s going on with the housing market? This market is keeping experts and economists scratching their heads. Warren Buffet was on CNBC last week saying he didn’t understand why the housing market wasn’t better because there are a lot of good things going on in the economy. The second ½ of 2018 shook the market and had both buyers and sellers scared. I don’t need to spend any time on this as I have reviewed it several times. But some of that trails into the beginning of this year. Solds have been down and appreciation limping into 2019. Buyers are scooping up new inventory as soon as it comes on the market keeping months of inventory low but we are still historically light on both inventory and new listings. So what’s going on?
I want to talk about two things … the “Wealth Effect” and “Quantitative Easing” and how they affect housing.
We wrapped up 2018 with the stock market taking a beating, dropping over 20%. During this same time, unemployment was reaching a 50 yr low, job creation in Colorado was up 2.4% and income was up 1%. The 4th quarter GDP numbers were released at the end of February showing a strong 4th quarter 2018 of 2.6% growth. This rounded out 2018 at 3.1% annual growth.. the first time the GDP was over 3% for the year in 10 years. This all sounds blissful. Yet... spending was down .5% and savings rate also increased to one of the highest levels we have seen in quite some time. This is what’s called the wealth effect. When people are seeing their investments go down in the stock market and appreciation slowing down in their biggest asset, i.e. their home; their spending levels slow down.
2019 has shown a swift rebound in the stock market now back up over 18% from it’s loss… which will increase consumer confidence and spending. Mortgage purchase applications came out this past week up 6% week over week and 3% year over year. Low interest rates will also continue to support homebuyers. As you know, from December through February our interest rates have retreated to where they were a year ago… 4.35% national average with a half point origination.
So where do we expect interest rates to go this year? Some big news was released mid-February from Federal Reserve meeting January 30th stating they intend to stop reducing the Federal Reserve asset holdings later this year. What does this mean? Through the FED’s Quantitative Easing efforts, they amassed a $4.5 Trillion balance sheet. They did this after the great recession to spur the economy and keep rates low. After they stopped buying bonds, they continued to reinvest the proceeds that fell off their balance sheet of about $50B a month. We all know what happened when they dropped that number from 50 to 40 to 30, 20, 10, then 0 in October 2018… our mortgage interest rates went up dramatically, a full percentage point. Stopping the reinvestment reduces the Fed’s balance sheet roughly $50B each month. Now, the Fed came out saying they think both rate hikes and balance sheet normalization is coming to an end. Their goal is to keep their balance sheet at $3.5T. Right now it is slightly under $4T. This means later this year, we will probably see the FED repurchasing mortgage backed securities.. great news for you and your buyers as this will keep mortgage interest rates low.
Let’s wrap up this month’s market trends review with a few numbers showing how strong we are right now..
This is an exciting market for those of us in the business and the clients we serve! If you want to stay ahead of the changes and continue building wealth in real estate… call me! This is exactly where our team excels!
The Rueth Team of Fairway Mortgage
The Rueth Team is dedicated to our clients success. It is this driving mission that keeps our team constantly learning and pushing beyond our boundaries. We find the solutions other lenders simply can’t (or won’t). We make a commitment to each borrower, fulfilling it with hard work, constant communication and creative problem solving. When a referral partner gives our name, they are confident knowing they are giving their clients the best chance of a smooth, successful experience.Learn More
NO OBLIGATION TRAINING: Market Mastery & “Done for You” Marketing tools delivered every 3rd Thursday (occasionally Tues) of the Month so you MAKE MORE MONEY! Nicole Rueth with Fairway Independent Mortgage Corporation, together w/ guest speakers from a range of professional disciplines, will be presenting monthly updates on industry statistics and market news you can use to help educate and motivate your buyers and sellers. Walk away with talking points, slides & information to set yourself up as an industry expert.
Alison P. from Wheat Ridge, CO
Nicole was wonderful to work with! The experience was so much better and more personal than working with a large company where you might not have contact with the same person throughout the process. Nicole was extremely communicative, easy to reach and talk to, and went out of her way to make this the most positive experience for my family. She worked so hard to meet our tight deadlines and made the entire experience smooth and stress free. I would 100% recommend working with Nicole and the Rueth Team!
stacieandtomwedding from Denver, CO
Nicole and her team were responsive, professional, and supportive as they walked us through every step of the loan process. We highly recommend the Rueth Team and will reach out to them with any future needs!
Natalie W. from Idaho Springs, CO
We’ve used The Rueth team twice now and have had a seamless experience both times. She and her team are knowledgeable, friendly and helpful. When I contact them they are very quick to respond. I would continue to work with The Rueth team in the future!
Shelby from Denver, CO
I used Fairway and Rueth’s team when purchasing a home recently and they were outstanding throughout the entire process. One of the staff on the team was even out on leave for most of the process and you wouldn’t have even noticed. Everyone I worked with provided very friendly, personable and knowledgeable service. I knew what my options were and everything was done in a very timely fashion. They even were able to find me some closing clost assistance so that I was able to have some money in my pocket left at close to do some work on the house. This was the third home I’ve bought and Rueth’s team was by far the best mortgage company I’ve worked with and I would recommend them with my full confidence.
Andrew C. from Wheat Ridge, CO
Nicole was fantastic to work with. She's responsive, knowledgeable, and able to make last minute changes when necessary. Working with her was a nice change from big-box mortgage companies. When last minute things needed to be fixed she did them promptly, and made sure we made it to closing without a hitch!
Mr. and Mrs. Walls from Idaho Springs, CO
We were impressed with the professional, personable service we received from Nicole and would recommend her to other home buyers. She helped us get pre-qualified quickly, making our search more productive.
Kathleen Cain from Palmer Lake, CO
Excellent team! Would highly recommend! If I ever have to do this again I would call Nicole Rueth! Her response to any of my questions was answered immediately and with great accuracy! Couldn't have been any better!
Paige M from Morrison, CO
Nicole and her team did an amazing job not only in keeping me informed of all the processes that go into selling and buying a home, but they were professional and knowledgeable! They answered all my questions, and made it easy to understand! I will never use anyone else!
april3lynz from Colorado Springs, CO
Absolutely AMAZING group! I had a really rocky start with my home buying experience. I had a horrible realtor and I was going to go through a different lender. I dropped my horrible agent and found an amazing realtor who was just phenomenal, and she referred me to The Rueth Team. My experience with them was quick, painless and simply amazing. I had very little stress and their team was so helpful. I had a moment of panic and I called, they were able to explain everything to me without confusing me more and went over every detail of my process moving forward with me. They had no hidden fees and were straight up and up front with me the whole way. I'm extremely grateful to them. In less than a month I am moving into my new home!!
Jeff D. from Denver, CO
I've closed two mortgages prior to this one with The Rueth Team, and this was by far the smoothest lending process I've had. Nicole, Peter, Emily, and Robbin were terrific communicators, provided me with honest feedback, and were simply easy to work with. They're true professionals and I'd happily work with then again on my next loan.