Good News for the Real Estate Market
After a slow second quarter of falling home sales and increasing interest rates, real estate news may finally be improving. Luxury home sales at Lake Tahoe traditionally mirror activity in the stock market. In the second week of August, the Dow, S&P, and Nasdaq futures remained optimistic after Wednesday's rally. Investors poured money into tech stocks like we haven't seen since 2008 and stocks are up for the 4th consecutive week.
Additionally, interest rates fell below 5%. With volatility still in the mortgage market, many homebuyers were quick to jump into rate locks.
The stock market jumped Wednesday after reports that the inflation rate had finally cooled off. Many investors are hopeful that the odds of another FED rate hike in September may not materialize.
The mortgage industry also seems to be betting that interest rates have stabilized. According to Freddie Mac, the average 30-year fixed interest rate dropped from 5.30% on July 28 to 4.99% on Aug. 4, 2022.
An article in Redfin on August 5th, described how more homebuyers are returning to the market. Because of recent drops in mortgage rates and a large amount of listings with price reductions, homebuyers are also rallying.
Redfin uses a Homebuyer Demand Index, which measures requests for tours and other home-buying services. It rose 7 points during the last week of July. Mortgage applications are finally rising again after 5 weeks of a reduction in activity.
Have Interest Rates Stabilized?
The Federal Reserve will next meet in September. Jerome Powell, the Fed Chair, has said that more interest rate hikes could be expected throughout 2022. However, if inflation continues to improve, they may pull back or reduce the amount of future rate hikes.
In July, Powell stated: "We are highly attentive to inflation risks and determined to take the measures necessary to return inflation to our 2% longer run goal.” Despite the large hike in July, we’ve seen mortgage rates decline for the second consecutive week. This is the first time rates have fallen below 5% since April of 2022.
Interest Rate Volatility
In the first half of 2022, we saw interest rates rise a whopping 2.48%, as mortgage rates rose as high as 5.70%. The Federal Reserve’s hike in June led to an increase in mortgage rates of 0.55%. The jobs report was strong, which many feared was bad news for inflation. But the July inflation report seems to have alleviated investor’s concerns.
As the FED balances fear of recession against rising inflation, many experts are in disagreement about whether the 30-year mortgage rate has stabilized. For now, we expect to see an uptick in buyer activity as we finish the third quarter of 2022.
When we look back over 39 years of mortgage rates, today's rates are still relatively low. We have to remember that during the pandemic the FED rate was lowered to stimulate the economy.
We are excited to see inventory returning to normal levels in Lake Tahoe. The market has stabilized into a less competive market. With interest rates continuing to fall over the last week, buyers will find excellent opportunities to purchase well-priced homes.
Contact me today for more information about Lake Tahoe’s luxury real estate market in California and Nevada.