Summer Market Forecast 2023

Hi, it's Martin here. So if you're looking to buy a house this year, anytime now for the second half of 2023 I'm sure you've been watching the market and you're aware of the fact that interest rate, ,have been at an elevated level now for some number of months and they've gone up again here in recent

weeks and... ...a lot of people are very confused as to what to do. You know, housing prices have also stayed up.

They haven't come down. I think a lot of people were banking, on the fact that they thought that with a rise in interest rates that you would see at least the housing prices come down.

But that hasn't been the case. Okay, so I know it's a very confusing time for a lot of people. What I want to do today is help you at least identify,.

Where we've been, maybe use some of the historical data to help forecast where we might be going the next few months and give you some insight as to how the mortgage interest rate market is doing and what we foresee.

With housing prices. So I'm going to pull up some charts here on the screen that will help, help you understand this and just follow me along because I think you'll find this to be of interest to you.

Again, if you're looking to buy a house anytime this year, let's take a look.

Okay, so what I have on the screen now is the mortgage bond market. Again, mortgage interest rates are driven by the buying and selling of mortgage bonds in the open market and while you may not have seen this chart before, this is something that I study on a regular basis and this kind of gives us an

idea of the fundamentals that control rates. Now you'll see that today we're up 44 basis points and I'll explain the reason why we're up 44 basis points.

And for that here in just a moment, but what I want you to see is if you look at what we call these candlesticks, again, if you've never seen this chart before, each one of these candlesticks with a wick either up or down, they're either green or red gives us an indication of the trading volume.

I'm on a given day and you can see here, I've got the cursor here. Actually, I'm going to go back here to May 10th on May 10th.

We saw a big improvement in the bond market shown by this green bar that came up. Then we had a follow through here on the following day.

On May 11th, but then by May 12th, we began to see a red candle and the remaining candles, as you can see, have trended down and lower.

As they come down, that causes mortgage interest rates to go up. Because what we're seeing here is the value of the bond based on how it's being traded in open market operations.

So the lower we go on this chart, the higher the banks will charge you an interest rate to you. And if I expand this chart, we're looking at just the last four months.

I'm going to expand this to show you a one year view. Actually, let me go back to six months. You can see that over the last six months, you know, back here at the end of March, we were at this really low level.

It bounced, it came up. Kind of drifted down a little bit lower, tried moving back up, and then it kind of dropped off again, which is where we're at now.

And you can see that, you know, we have done this cycle already once before earlier this year. And every time we come down to these lower levels, we see the.

Those really high interest rates. The goal here would be is for the bond market to reestablish itself and start moving back up.

And that will provide you with lower interest rates. But the problem we've had is that all of the fundamentals, you know.

Are what controls the interest rates. These fundamentals have been pushed aside because of the political environment. And the reason we saw the big decline right here over the last couple weeks is because of the politics coming out of Washington in regards to the debt ceiling.

With the debt ceiling being in jeopardy and not knowing what was happening, the bond market was being squeezed out, banks were holding their money, and interest rates were moving up.

Today, over the weekend, you can see that today, the bond market is being squeezed out, and the debt ceiling is being squeezed out.

The bond market responded very nicely with a positive 44 because of the news that there's at least an agreement in theory.

It hasn't been passed yet, but once the the politicians have come across the aisle here between the Democrats and the Republicans to at least have a game plan for the debt ceiling.

And if they can put that into effect, the next part will be is what's in that plan, but that will influence the markets.

And I think if we get some positive news out of that, that could set the stage here for the bond market to begin to clog.

And I think that's what a lot of people are hoping for. So you can see that we've seen a decline from March 12th until the end of March.

Until the end of the, I'm sorry, did I say March 12th? I meant to say May 12th. From May 12th down to the end of May in about the last 20 days, that's been a pretty big decline.

If we can have a similar, you know, right up the ladder, that will be a helpful thing for clients. We're looking to buy a house later this summer.

I think you'll see better interest rates ahead, provided that these fundamentals get restored and the politaking gets set aside and the banking industry can then restore a little bit of some stability into the market.

Then the

Okay, so and the other part to this is got to do with housing prices. So what you have on the screen here is a breakdown of two different indices that study appreciation and housing prices across the nation and give us these reports.

Now this is for the first quarter of the year, January, February and March. We don't have the April data just yet, but Case Schiller, which is his first line item, takes a look at all the transactions.

That's everything that is possible, whether a cash buyer or a finance buyer puts everything all together and it shows that in January, we did see a slight dropoff in housing prices.

Appreciation was down before, so you can see they're starting to see a progression of accelerating prices. Year over year, we're at 0.6 and you can see that it has a negative 2.3 from the peak.

And I want to take a minute to talk about that because the peak was in June of 2022. We saw housing prices have a huge run up from 2020 to 2022.

They peaked in June of 2022 and since then we're down about 2, maybe 2.5% according to Case Schiller. That's a f- We saw our cry from the big housing bubble or the big price declines that a lot of people were talking about that you may have heard in the media.

People seemed to think that market was going to drop off. It hasn't happened. We're off 2% from the peak in June and as we look at it, it's going to drop off.

Look at the current year, we're already up 0.6 and that's just for Case Schiller. If you look at FHFA, they have their own analysis.

FHFA is the Federal Housing and Finance Administration. They are looking at conforming loan amounts. They do not count cash transactions or jumbo transactions and you can see that in the month of January, the homes that were priced in that segment of the population here was at 0.2%.

February was 0.4. March is 0.6. So we're already up 0.6. We're up 3.6% appreciation year over year and we're up 0.7 from the peak and what that's telling me is that homes that were being financed with conventional and conforming loan amounts, even from their peak of June, we're already up 0.6.

We're already up 0.7 since then. So the forecast has continued to be for housing prices to go up in spite of high interest rates and my concern here, again, if you're looking to buy a house later this year is that if interest rates begin to come.

And they will start to come down at some point as rates come down. You're likely to see housing prices continue to stay at elevated levels.

I just don't see housing prices coming down because much of what's driving the higher sales price at home. So that's kind of what I see happening right now.

You know, I don't have any specific timeframes or exact numbers. I'm not gonna. I'll hold you on that because I just don't know.

But I do believe that if the fundamentals get restored in the bond market, you're likely to start seeing an improvement on mortgage rates, at least from these elevated levels that we're at right now.

But I also see housing prices continue. Again, these are all very individualized questions and answers, so if you have something that you're trying to work out for you, your personal budget, call me, and I'll be happy to look at your file, look at your _____.

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