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Appraisal Gaps, Masks, Inflation, Savings….It ALL Matters

Appraisal Gaps, Masks, Inflation, Savings….It ALL Matters

Everyday I talk to clients and Realtors who are trying to make sense of it.  Trying to win the battle and get a home or an investment.  The market is just starting to open up.  You say you are seeing more inventory come online. I can tell you from personal experience, more buyers with loans are getting under contract.  The numbers won’t show it yet, as they record what is done, and can only hint at what is starting.  But we will watch new listings, list to close ratio, percentage of appraisals coming in low, mortgage applications, etc to tell us where we are headed.  We are moving into the season where more inventory comes online; at a time when more people (potential buyers) are diverting their long awaited attention elsewhere, outside the home. Rates are also starting to pick up slowly.  Freddie Mac noted last week that rates went from 2.94% to 3.0% .. small increments up.  Inflation which I talked a lot about last week will push rates up as it’s mathematically irrational that the 30 year fixed mortgage rate falls below the CPI Inflation Index.. and the CPI is set to go up to 3.5-3.6% this summer.  

Demographics and intensely increased savings rates will continue to fund the housing market. We don’t have to worry about the demand drying up, just easing.  When it eases, we will first see the number of bids per home reduced and the percentage of appraisals coming in low go down as buyers are less willing or less pressured to bid up to extremes.  We will then see price to list fall back towards 100% from it’s current 104.6%.  We will see DOM elongate and appreciation as well as average and median price growth slow from their 11%, 24% and 20% respectively.  But we will not see units closed go down.  There are still more buyers than homes and not one economist I can think of is expecting home sales to go down this year.. only up.

The economics of this market are fascinating and telling.  If you missed this week’s Market Trends Update because is was part of Agent Ignite and not on Friday… we went through Yellen, Powell, rates, economic growth, savings and how new builds are not going to save us yet. Make sure to watch buy hopping over to our Agent Ignite FB Group and clicking the pic below… 

ShowingTime Shows Denver as #1 Intense Demand

While we are seeing the market shift slightly under our feet, the news cycles continue to warn buyers of the intensity of this market. ShowingTime released a report showing Denver as the most intense buyer demand market in the nation with an average of 25 showings per listing in April.  New cycles and stats are mostly in the rear view mirror.. they give perspective and help formulate options.. but remember to keep them in perspective.  Your buyers are seeing this.. wanted to make sure you did too… Click the picture below for the full article.

ShowingTime article Link

Are Buyers Waiting Out the Appraisal Gaps?

I had a great conversation with a buyer this week talking about waiting out the extreme market. He was wanting it to calm down before he jumped in given the intense appraisal gaps.  We talked a lot about the numbers..  how I completely understood his frustration, but with interest rates rising, appreciation forcing home prices higher, and the opportunity cost of principle reduction, those out measured the “over asking” amount he might have to go in with. That in fact, he would make that up in months not years.

 

Understanding how to put these together when describing the strategy you are employing with your buyers is a huge advantage.  I sent several templates for the Cost of Waiting sheet below after Thursday’s Agent Ignite.  Want to see these for your zip code? price point?  Let me know as I’m happy to get them to you!  Ultimately it helps all of us if your buyers understand the entire cost/benefit structure verses focusing on just one aspect of it.  

Graphs showing the cost of waiting is much more expensive

 

 

Nicole Rueth has been passionately advising clients on their wealth building and home financing strategies for over 17 years. Her path has been non-conventional and it is a benefit to her clients.  www.TheRuethTeam.Com.
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