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- Housing, Rates and Sentiment Shifts
Housing, Rates and Sentiment Shifts
"Until you make the unconscious conscious, it will direct your life and you will call it fate."
highlighting this as we’ve seen our first two consecutive weeks of improvement
"Sentiment and psychological shifts play a significant role as we react to the world around us. We tend to model others' behaviors rather than acting independently. This week, I've heard multiple stories about people finally listing their houses, possibly due to lowering interest rates, and refinancing to consolidate debt. I've also seen news reports of consumers walking through houses that they now feel they can afford."
this is how sentiment shifts…
We might be at Stage 1 of the "flippening" where consumers observe others taking action, and then everything compounds. It's important to communicate to consumers that a 50 basis points rate cut could lead to more cuts, but it could also result in inflation, making it a one-time cut. I suggest taking advantage of small wins rather than waiting for a big opportunity that may never come if someone is considering refinancing or buying a home they've been eyeing for a while.
almost in positive territory
rates coming down from record low activity last recorded in 2000 tech selloff
correlation clearly visible
I have a favor to ask… if you find this valuable and you’d like me to keep doing it, please share this with one person today, anyone that you think would find it interesting as well.
a BORROW SMART CONCEPT
Housing Outlook / Interesting Macro Look
Sentiment can be visualized through charts, which show the actions taken by individuals. When you have a set of charts, you get a comprehensive understanding of the current situation.
I recently reviewed a housing market outlook that provides essential insights for financial advisors managing client portfolios. Here's the key takeaway:
Low Supply Keeping Prices Up: Housing supply is low, and even though demand is softening, prices are holding strong. This means your clients’ real estate assets are likely staying stable, if not appreciating.
High Mortgage Rates: Buyers are getting hit with rates over 7%, which means fewer are jumping in. If your clients were thinking about investing in real estate or refinancing, the window’s tight.
Rising Unemployment: Job growth has been strong, but unemployment is creeping up. This could impact future housing demand, which might shake up your clients’ real estate or REIT exposure.
Aging Buyer Demographics: The average homebuyer is now much older. First-time buyers are delayed, meaning the market dynamics are shifting longer-term.
Affordability Crisis: Housing affordability is near record lows. If your clients are sitting on property, this might be the time to hold—there’s simply not enough supply to meet demand.
Low Inventory Blocking Sales: With such a limited number of homes on the market, liquidity is tight. It might be tougher for your clients to sell or find attractive real estate deals right now.
Interest Rate Lock-in: Over half of mortgages are locked in under 4%. Many homeowners aren’t selling, which limits opportunities for new buyers—this could affect your clients’ ability to upgrade or liquidate.
Investor Competition: Investors remain steady in the market, especially for single-family homes. Your clients need to know they’re competing with institutional money in key markets.
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Summary of Consumer Actions:
Prepare for Competition: Low supply and high investor activity mean buyers must be ready to act quickly and face competition.
Consider the Cost: High mortgage rates and low affordability demand careful liability planning as part of your overall financial planning.
Evaluate Stability: Rising unemployment may impact market dynamics; secure employment is critical before buying.
Understand Demographics: The market is shifting toward older, wealthier buyers, making it tougher for younger consumers to enter.
I used to draw cartoons for our college newspaper, couldn’t resist this one…
LIABILITIES and DEBT
What’s Happening.
expectations for lower rates
immediate impact of rate cuts
Source: Nick Gerli - nice visual of rates and activity
growing opportunity to refinance and buy!
Fed Funds projections
the big risk, recession driving unemployment but so far so good!
great example of payment impact based on rate drops from KCM
UNREAL project from Google - only for science papers now, but it takes the paper, summarizes it, and creates a podcast discussion so you can listen to anything as a conversation. Example: I took a paper on houses that are valued based on rates and it created this podcast conversation:
“Between stimulus and response there is a space. In that space is our power to choose our response”
REAL ESTATE
What’s Happening?
this is shifting the balance of power in real estate IMHO
these from Calculated Risk - home sales balancing at support
inventory going up
another view of inventory
foreclosures ticking up will add to inventory
“Much of what we call personality is not a fixed set of traits, only coping mechanisms a person acquired in childhood”
ASSETS and INCOME
What’s Happening?
big weeks again crazy volatility - in one week we get one year moves!
tons of cash, but that will likely stay cash until rates drop further
investing can be simple = what happens to builders when rates go down? their stock prices go up! Great hedge for lenders, invest in what you know.
if earnings go up stock prices go up
rate hikes can do funny things to markets
especially if the rate hikes are tied to a recession
many feel we are already in a recession
unemployment going up in all but a few states
which could lead to another stimulus (more money)
@bret_eth - this one is most concerning
@Charlie Biello - hard assets go up when soft assets (the Dollar) go down
“One is a great deal less anxious if one feels perfectly free to be anxious”
ON BEING HUMAN
What’s Worth Sharing?
“Relax. Nothing is under control”
Artificial Intelligence
And the Future of Work…
Prompt Idea: Take the Housing Report above, download it, and upload in CHATGPT, then use the following: [edited from The Daily Prompt]
[Examine the attached 15-page research paper “attached” to identify concise key points, learnings, and takeaways.
For each point, describe the context and provide a detailed explanation of its relevance in less than 60 characters.
Create a distilled report that organizes these findings, including exact locations, into simple summations context, and an analysis of the role each plays in the document's overall message or purpose.
Aim for a distilled, clear, and thorough explanation to help the user understand the document's findings on the specific topic that could be shared with consumers thinking about buying a house.]
Bonus: Drop the findings above back into ChatGPT, and ask for an image that embodies these findings. Here’s what I got!
Curious about how long you have left?
https://www.deathclock.co/
UNREAL project from Google - only for science papers now, but it takes the paper, summarizes it, and creates a podcast discussion so you can listen to anything as a conversation. Example: I took a paper on houses that are valued based on rates and it created this podcast conversation:
https://illuminate.google.com/library?utm_source=theneuron&_bhlid=6598f09de1f5a665109e408548ea9f785567a8b1&pli=1&play=VQagDq1_Qaqi5
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