Welcome to Episode 7 of The Kings Table Podcast, a captivating new show hosted by Ashish, Mike, Aaron, and Matt. Join us for an unfiltered, authentic experience as we gather weekly to delve into the raw discussions that drive our lives, businesses, economics, and the world.
Meet the hosts:
1. Mike (The Sage) Ayala is an accomplished investor, speaker, and podcast host, who stands at the helm of Investing for Freedom, guiding busy professionals and entrepreneurs toward the path of genuine liberation and optimal living. 2. Ashish (Hostess with the Most-est) Nathu is a founder and CEO, entrepreneur, real estate investor, triathlete, and host of the Rich Equation Podcast. 3. Matt (Hero of Hospitality) Aitchison is a distinguished real estate investor, captivating speaker, and committed philanthropist. 4. Aaron (The Trend Spotter) Amuchastegui is a seasoned real estate virtuoso with a remarkable track record of over 1,000 house transactions, predominantly acquired through astute foreclosure purchases at courthouse auctions.
In this episode, we delve into a critical global issue: the Ukraine war. We analyze its impact on geopolitics and global dynamics, offering insights into this complex conflict. We explore the importance of having backup plans in a world filled with potential threats and uncertainties. We talked about OPEC and the United States’ oil dependency on other countries, unraveling the complexities of energy dynamics. Aaron shared his business idea, and we had a discourse on how pharmaceutical companies. We talked about the disconnect between the insurance industry and supply chain challenges, and the broader impact on our well-being.
Tune in for an episode that navigates diverse topics, offering a comprehensive glimpse into geopolitics, business insights, and healthcare complexities.
Highlights:
03:24 – Ashish talks about the topics to be covered in this episode 06:13 – Ukraine war 24:04 – Discussion on having backup plans on potential threats and probability 36:10 – Transition of power to a new order 42:51 – OPEC and the oil dependency of US on other countries 51:18 – Aaron’s business idea 01:15:10 – How the pharmaceutical companies keep us unhealthy, and the disconnect between the insurance industry and supply chain challenges
Connect with us!
We eagerly await your feedback about the show! Kindly share your thoughts via text message at this number: (844) 447-1555.
Mike Ayala: Instagram: https://www.instagram.com/themikeayala/ YouTube: https://www.youtube.com/channel/UCoa4pNSAYxBM6nSn2jCrPYA Website: https://investingforfreedom.co/
A proposal by the Consumer Financial Protection Bureau to ban medical debt from credit reports is drawing the ire of the financial services industry, which claims not enough has been done to study the root cause of the problematic medical billing: The fractured health care system.
Advocates have been pushing for years for the CFPB to take medical debt off credit reports, claiming millions of consumers are pursued for debts they don’t owe or that are inaccurate. In September, the CFPB released an outline of a sweeping proposal to amend the Fair Credit Reporting Act. The plan was announced by Vice President Kamala Harris from the White House, with CFPB Director Rohit Chopra saying that medical debt has “little predictive value in credit decisions.”
In comments that closed last week about the proposal, financial firms and trade groups said that if enacted, the plan would restrict lending, increase costs and result in more denials of credit to low- and moderate-income consumers. Experts claim the CFPB’s proposal would make credit reports less accurate, increasing risks for lenders.
“Conceptually, the CFPB is getting into a dangerous place, because they’re saying medical debt doesn’t have predictive value — and that’s not their job,” said Kim Phan, a partner at the law firm Troutman Pepper, who focused on privacy and data security. “The industry has the right to decide what has value and what doesn’t.”
The CFPB said it expects to publish a report in December summarizing the feedback it received on its proposal from small businesses that will include written comments from stakeholders. Next year, the bureau plans to issue a notice of proposed rulemaking that will give the public an opportunity to comment on the plan before it is finalized.
Phan said that unless the CFPB scales back the proposal or makes changes, she expects the bureau will be sued by a trade group or credit bureau once a final rule has been issued. Taking medical debt off credit reports impacts a consumer’s credit capacity, which is one of the seven factors of credit used in underwriting decisions, Phan said.
“If a consumer earns $30,000 a year and just took on $100,000 of medical debt, their capacity to take on new credit is much more restricted,” Phan said.
The CFPB estimates that roughly 100 million people struggle with unpaid medical bills. The scope of the problem is so large that roughly 50 consumer groups banded together to urge the CFPB to take action.
Chi Chi Wu, senior attorney at the National Consumer Law Center, said consumers get stuck with unpaid medical bills for many reasons, though the majority are due to an insurance company denying a claim, paying only part of a claim or a health care provider demanding payment.
“Medical bills are complicated and bizarre and bureaucratic because, unlike a credit card, where the consumer has bought something, a third party is involved in the payment process,” said Wu, who is the lead author of the legal manual Fair Credit Reporting. “Everybody knows the health care system in this country is a mess. Consumers are asking why they got a bill when the insurance company was supposed to cover it.”
Still, collectors say that taking medical debt off credit reports does not tackle the underlying problems with medical billing disputes. Consumers will still owe the debt and the CFPB will be taking away a traditional tool that creditors use to spur debtors to pay: The threat of nonpayment that impacts a consumer’s credit score.
“Just because the debt is not on a credit report doesn’t mean the consumer doesn’t have to pay it,” said Jennifer Whipple, president of Collection Bureau Services, a family-owned debt collection agency in Missoula, Mont. “The proposal is not addressing the issue the CFPB is trying to fix in terms of people having insurance billing or denial issues or unsupportable health care.”
Earlier this year, the three credit bureaus, Equifax, Experian and TransUnion, agreed to remove medical debts of $500 or less from credit reports, which represented roughly 70% of all medical debts. Debt collectors want the CFPB to study the impact of that change, with a focus on health care providers not being paid, before removing the remaining 30% of medical debts still on credit reports.
“It’s too important an issue not to study and not to use data-driven analysis,” said Scott Purcell, CEO of ACA International, the trade group for collectors and creditors.
Whipple, who is the treasurer of ACA, said the CFPB’s message to consumers is that they do not have to pay their medical bills because there will be no impact to their credit. That kind of message, she said, could result in some consumers thinking they don’t need to pay for health care coverage at all.
“If the message is that medical bills won’t be on a credit report, then consumers may think they don’t need to pay a high premium every month or maybe even carry health insurance,” Whipple said. “Folks on Medicare or Medicaid will think they don’t owe the debt and so they may not take the time to fill out the forms to continue to get coverage.”
Banning medical debt from credit reports is just one piece of the CFPB’s proposal, which would subject a wide range of companies to the Fair Credit Reporting Act’s requirements. The plan also has been criticized for restricting the sale of so-called credit header data by the three main credit bureaus, which some experts say could potentially cut off critical information to law enforcement agencies.
The FCRA requires that information on credit reports to be accurate, and was intended to provide a way for consumers to dispute erroneous information on credit reports and give creditors an unbiased and fungible metric of a borrower’s ability to repay. In its proposal, the CFPB said that consumer complaints about medical debt underscore how ineffective, time-consuming and costly the dispute process has become. Legal experts say the CFPB’s proposed changes will reverberate throughout the financial ecosystem with unknown consequences.
“Medical debt is an insurance problem, and to say you can’t collect it or report it doesn’t solve the insurance issues and it also doesn’t help poor people,” said Joann Needleman, a practice leader and member of the law firm Clark Hill.
Wu, at the National Consumer Law Center, said consumers often find out about a medical debt when they try to buy a car or refinance their mortgage and are told that they can’t get approved for a loan.
“Consumers will pay the debt because they don’t have time to go back and dispute it,” she said.
Andrew Nigrinis, an economist at Legal Economics LLC and a former CFPB economist, said the CFPB did not provide a valid economic analysis of the impact of the proposal. He also said the CFPB’s research that found removing medical debt would increase credit scores was hardly a surprise.
“It’s the same logic that if you took away mortgage delinquencies from credit reports, then obviously credit scores would go up,” he said. “It’s not a profound result.”
Medical debt is a major problem for states that failed to implement the expansion of Medicaid under the Affordable Care Act and have a high percentage of uninsured residents. In a study he conducted for the collections industry, Nigrinis found that the loss of predictive information on credit reports would result in more lending to unqualified borrowers, higher litigation costs to collect debts, and lost income for medical providers due to nonpayment of services.
“The debt collection industry is very competitive and they pass costs on to consumers,” he said. “Presumably, debt collection rates would go up and so would costs of financing and denials of financing.”
Needleman added that the CFPB “is deciding which debts that a consumer should pay — and that’s not their role.”
Redfin has decided to end its support of the National Association of Realtors (NAR) for two primary reasons. Firstly, Redfin disagrees with NAR policies that require a fee for the buyer’s agent on every listing. Secondly, Redfin is concerned about a pattern of alleged sexual harassment within the organization.
Redfin has engaged in numerous discussions with NAR executives to find compromises on these policies. Since joining NAR in 2017, Redfin has paid over $13 million in dues to influence NAR to advocate for a technology-driven marketplace that benefits consumers. However, Redfin will now explore alternative ways to advance these goals.
Besides disagreement over commissions, Redfin became increasingly uncomfortable with NAR after learning about reports of sexist behavior and sexual harassment involving NAR’s president. These allegations came to light through interviews with 29 former NAR employees. Redfin is concerned that NAR was aware of these allegations for an extended period but only took action after they became public.
Redfin had already resigned its national board seat in June before the allegations of sexual harassment became public. NAR’s policies continue to restrict sellers from listing homes that do not pay a commission to the buyer’s agent, and they also prevent websites like Redfin.com from displaying for-sale-by-owner listings alongside agent-listed homes. Redfin believes that removing these restrictions would make the industry more consumer-friendly and competitive.
After careful consideration, Redfin has decided to go beyond resigning from the NAR board. Redfin will require its brokers and agents to leave NAR wherever possible. While most brokerages operate as loose affiliations of independent agents, Redfin wishes to refrain from imposing a policy that could alienate its revenue-generating individuals.
However, Redfin’s decision to leave NAR is only partially voluntary. NAR rules mandate that Redfin must leave local and state associations, even if its grievances are solely with the national association. These rules stipulate that a broker must pay dues for each agent under their supervision, regardless of whether the agent wants to be a member. No agent under their leadership can be a member if a broker is not a member. Given this all-or-nothing approach, Redfin has decided to choose the latter.
Unfortunately, in many markets, Redfin does not even have the option to make this choice. Approximately half of the U.S., including Charlotte, Dallas, Houston, Las Vegas, Long Island, Minneapolis, Nashville, Phoenix, and Salt Lake City, requires NAR membership for agents to access listing databases, lockboxes, and industry-standard contracts. It is impossible to be an agent without the ability to view available homes, unlock their doors, or write offers.
Redfin urges NAR to separate local access to Multiple Listing Services (MLS) from support for the national lobbying organization. Agents should not be required to support policies and legal efforts that harm consumers, especially when they intend to help consumers.
Despite the disagreement with NAR, Redfin remains committed to the real estate industry. The company will continue to fully support the MLSs that brokers use to share listing data, and it will maintain positive relationships with the many dedicated individuals working at NAR and its local affiliates on matters such as economics, diversity, and pro-housing policies.
Victoria Udrea, a talented author who specializes in real estate and technology, is a valued contributor to Realty Biz News. With her keen eye for detail and passion for keeping readers informed, she diligently covers the latest developments in the industry, focusing particularly on the exciting realm of smart home technology.
Existing home sales achieved their lowest annual level in ten years in September, and now appear to have doubled down. The National Association of Realtors® (NAR) said sales of pre-owned single-family homes, townhouses, condominiums, and cooperative apartments fell another 4.1 percent in October to an annual rate of 3.79 million homes. This is 14.6 percent below the 4.44 million level of sales in October 2022.
Single-family home sales decreased to a seasonally adjusted annual rate of 3.38 million, a 4.2 percent decline from 3.53 million in September. Condo/co-op sales fared slightly better, slipping only 2.4 percent month-over-month to an annual rate of 410,000 units. Both single-family and condo/co-op sales were 14.6 percent lower than the same month last year.
Analysts had expected a less drastic decrease from the 3.95 million level of sales in September. Both Econoday and Trading Economics had consensus estimates of 3.9 million.
“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” said NAR Chief Economist Lawrence Yun. “Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market.”
There were 1.15 million housing units available for sale at the end of October. This is an increase of 1.8 percent from the previous month but 5.7 percent fewer homes than a year earlier. Unsold inventory sits at a 3.6-month supply at the current sales pace, up from 3.4 months in September and 3.3 months in October 2022.
Prices are holding up despite fading sales, moving higher for the 4th consecutive month. The median existing home price for all housing types in October was $391,800, 3.4 percent higher than the $378,800 median in October 2022. The median single-family home price appreciated 3.0 percent to $396,100 and the median condo price gained 7.6 percent to $356,000.
“While circumstances for buyers remain tight, home sellers have done well as prices continue to rise year-over-year, including a new all-time high for the month of October,” Yun said. “In fact, a typical homeowner has accumulated more than $100,000 in housing wealth over the past three years.”
NAR said properties typically remained on the market for 23 days in October, up from 21 days in both September and the prior October. Sixty-six percent of homes sold last month were on the market for less than 30 days.
First-time buyers accounted for 28 percent of October sales and individual investors, or second-home buyers had a 15 percent share. Twenty-nine percent of sales were cash purchases. Only 2.0 percent of sales were considered distressed, that is short sales or foreclosures.
Regional data reflected the downturn in sales and rising home prices. Existing home sales in the Northeast dipped 4.0 percent from September to an annual rate of 480,000 units and were 15.8 percent lower year-over-year. The median price grew 7.5 percent to $439,200.
Sales in the Midwest held steady at an annual rate of 930,000 units but were 13.9 percent lower than in October 2022. The median price in the Midwest was $285,100, an annual increase of 4.2 percent.
Existing home sales in the South retrenched by 7.1 percent from September to an annual rate of 1.69 million, 14.6 percent lower on an annual basis. The median price was up 3.5 percent to $357,700.
In the West, existing home sales decreased 1.4 percent and 14.8 percent from the two earlier periods to an annual rate of 690,000 units. The median price rose 2.3 percent to 602,200.
Yun said a three-week easing of mortgage rates has stirred up buying interest. “Though limited now, expect housing inventory to improve after this winter and heading into the spring. More inventory will result in more home sales,” he said.
Curiously, however, new residential home sales surged in September while existing home sales all but completely froze because owners are reluctant to move and buy another home at a far higher mortgage rate. New-home sales rose 12.3% to an annual rate of 759,000 in September, up from 676,000 in the prior month, the Commerce Department said Wednesday.
Since there are so few existing homes on the market, buyers find themselves having almost no choice but to buy new. Builders, also under pressure from high interest rates, are sweetening the pot, however, by offering discounted mortgages and other incentives. In fact, Devyn Bachman, senior vice president of research with John Burns Research and Consulting, credits these enticements as the “number one” driver for the rising new home sales figure last month.
“‘Incentive’ is just a big fancy word for discount, and what we’re seeing on that front is that it’s what’s creating a competitive advantage for the new-home market,” she tells Fortune. The mortgage rate buydown, the industry term for discounted mortgage rates, is the most “desired and most effective” incentive offered in the new-home market today, she adds.
Independent sellers usually cannot match these types of incentives, typically offered by large builders like Lennar and Toll Brothers, Erin Sykes, chief economist at residential real estate brokerage firm Nest Seekers International, tells Fortune.
Mortgage rate buydowns explained
As high as mortgage rates may seem now, there’s little indication that they’ll drop significantly anytime soon—meaning in the next two to three years. Capital Economics, for example, released a report this week saying not to expect 6%-and-below mortgage rates until the end of 2025.
Mortgage rates hovering around 8% are a stretch for many borrowers, which is why a mortgage rate buydown can be an enticing option for eager prospective homebuyers. There are a few different types of mortgage rate buydowns, Bachman explains, with full-term buydowns and temporary buydowns being the most popular options among builders.
A full-term buydown is the more desirable option for buyers because the builder buys down the mortgage rate for the entire life of the loan. In other words, builders pre-pay the difference in interest between the market mortgage rate and the mortgage rate they’re offering, Bachman says.
Currently, some builders are offering buydowns as low as 5%, mostly in “peripheral, emerging” markets, Sykes says. This includes places like Loxahatchee, Fla., and Boynton Beach, Fla., which are both within 30 minutes of Palm Beach.
During the past week, mortgage rates hovered around 8%, “so when you’re talking about buying into the [5% range] that’s a huge advantage for the new construction market,” Bachman says. For a temporary rate buydown, the builder still buys down the rate, but it’s not for the entire life of the loan. Rather, the builder would pay a lump sum to reduce the mortgage rate for the first one to three years of the loan. After that, buyers would be subject to higher mortgage rates. Many builders that offer these programs have partnerships with certain mortgage companies or have their own mortgage arm.
Other builder incentives
Builders are also offering other incentives, including covering up to tens of thousands of dollars in closing costs, which can be particularly helpful for first-time homebuyers who struggle to save up enough.
“That gets at the heart of the affordability issue that we’re seeing in the marketplace today,” Bachman says. “Like, I just can’t close because I don’t have the cash to do so.”
Builders have also started building more “spec” construction as opposed to “to-be-built” homes. This is important because rate locks can be “incredibly expensive,” Bachman says. Rate locks mean that the mortgage rate between the time of offer on the newly built home won’t change between the offer and the closing. However, a rate lock can cost 0.25% to 0.5% of a mortgage, amounting to potentially thousands of dollars in extra costs for buyers in the form of a cash deposit.
The to-be-built model, in which buyers choose their plot of land and all of the finishes on the home before construction starts, is traditional in homebuilding. The issue is that when it’s finally time to close the deal months down the line, mortgage rates may have risen. Rate locks can prevent this.
However, with spec construction, builders start construction without having a buyer, and once finished (or near finished), they put the home on the market. That gives buyers a better idea of what their mortgage rate will be at the time of purchase.
“Honestly, to remain competitive in today’s new construction landscape, most builders are offering mortgage-rate buyouts paired with other incentives,” Bachman says. “Now, I will caveat this whole thing by saying, if we get to a place where the market starts to kind of halt, this is a riskier business model.”
She continued: “Why? Because the builders are starting homes that there’s not necessarily a contract or a consumer attached to.”
While mortgage rate buydowns and other incentives may be responsible for rising new-home sales today, Dan Green, CEO of first-time homebuyer mortgage company Homebuyer.com, tells Fortune that there are other factors at play—including low existing home inventory. With so few existing homes on the market, buyers have few options but to pursue new construction.
“Incentives and buydowns may be playing a role, but the more likely reason why new construction home sales are surging is that it’s all that buyers can buy,” he says. “It’s too tough to find a home resale.”
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Welcome to Episode 9 of The Kings Table Podcast, a captivating new show hosted by Ashish, Mike, Aaron, and Matt. Join us for an unfiltered, authentic experience as we gather weekly to delve into the raw discussions that drive our lives, businesses, economics, and the world.
Meet the hosts:
1. Mike (The Sage) Ayala is an accomplished investor, speaker, and podcast host, who stands at the helm of Investing for Freedom, guiding busy professionals and entrepreneurs toward the path of genuine liberation and optimal living. 2. Ashish (Hostess with the Most-est) Nathu is a founder and CEO, entrepreneur, real estate investor, triathlete, and host of the Rich Equation Podcast. 3. Matt (Hero of Hospitality) Aitchison is a distinguished real estate investor, captivating speaker, and committed philanthropist. 4. Aaron (The Trend Spotter) Amuchastegui is a seasoned real estate virtuoso with a remarkable track record of over 1,000 house transactions, predominantly acquired through astute foreclosure purchases at courthouse auctions.
In this episode, we navigate the complex terrain of economics, wealth building, and real estate investment. We launch into a comprehensive discussion on inflation, dissecting its impact on the purchasing power of the US dollar, particularly since the creation of the Federal Reserve. We explore how inflation and leveraged debt play pivotal roles in wealth building and empower you to take control of your financial future. We share our observations regarding real estate investing trends and explore the concept of finding opportunities amidst crises.
Tune in to gain a deeper understanding of inflation, wealth creation, and the intricate world of real estate investment.
Highlights:
00:39 – Kicked off the episode with the topic of inflation 06:35 – The purchasing power of the US dollar since the creation of the Federal Reserve 19:15 – Impact of inflation and leverage debt in wealth building, understanding the system so you can be in control 27:28 – How people wanting to build wealth see or think about inflation 34:34 – Make more fake money and invest it in real assets 50:24 – Observations of what each of the hosts is seeing from people on the topic of real estate investing 1:05:34 – Don’t waste a crisis, learn to see opportunities in times of crisis 1:08:31 – Union negotiations 1:27:27 – Investing in real estate 1:32:33 – Creative ways to structure deals
Connect with us!
We eagerly await your feedback about the show! Kindly share your thoughts via text message at this number: (844) 447-1555.
Mike Ayala: Instagram: https://www.instagram.com/themikeayala/ YouTube: https://www.youtube.com/channel/UCoa4pNSAYxBM6nSn2jCrPYA Website: https://investingforfreedom.co/
Mortgage rates hitting a century-high of 8% this month has left economists, homeowners, and prospective borrowers alike wondering when (or whether) the market will let up. Capital Economics doesn’t expect mortgage rates to fall significantly anytime soon—how does 6% or higher through the end of 2025 sound?
The London-based research firm, known for its housing market forecasting, released a revised mortgage rate forecast on Thursday, showing it’s unlikely that mortgage rates will fall below 6% before the end of 2025. Thomas Ryan, the new U.S. property economist for Capital Economics, tells Fortune: While the firm has “kept the same path for mortgage rates that we had in our previous forecast, we’ve shifted up our anticipated path for mortgage rates.”
That’s going to continue to have an adverse effect on housing affordability in the U.S., which is already at abysmal levels with high home prices and mortgage rates and declining inventory levels.
“Our new higher forecasts for U.S. Treasury yields mean that mortgage rates won’t fall as quickly as we previously predicted,” Ryan wrote in the new forecast. “While we still expect mortgage rates to decline, they are unlikely to fall below 6% before end-2025, muting any recovery in house purchase demand and sales volumes.”
By the end of 2023, Capital Economics predicts the mortgage rate will be 7.5% (versus 6.75% in its previous forecast), and drop to 6.25% by the end of 2024 (versus 5.25% in its previous forecast), Ryan says. It won’t be until the end of 2025 that we’ll see 6% mortgage rates, predicts Capital Economics, which had previously penciled in a 5% rate by the end of that year.
Higher mortgage rates tied to higher Treasury yields
The firm’s new forecast is tied to higher forecasts for U.S. Treasury yields, which affect mortgage rates. The 30-year fixed mortgage rate is “loosely benchmarked” to the 10-year Treasury bond, Odeta Kushi, deputy chief economist at Fortune 500 financial services company First American, wrote in a report this year, meaning that mortgage lenders tie their interest rates to bond rates. Historically, the spread between the 30-year fixed mortgage rate and the 10-year Treasury bond yield has been 1.7 percentage points (typically expressed as 170 basis points or bps).
“In simple terms, mortgage rates are priced directly from the yield on mortgage-backed securities (MBS), which is a bundle of home loans sold as an asset,” Ryan tells Fortune. “When Treasury yields rise, lenders require higher yields on their mortgage-backed securities to attract investors that want to earn a higher return than the risk-free rate, which in turn pushes mortgage rates up.”
Today, the spread is at more than 300 bps with the U.S. Treasury yields briefly touching 5% this week for the first time since 2007. This, in turn, has pushed mortgage rates to their highest point since November 2000, “and is higher than we had anticipated them to go,” Ryan wrote.
When we can really expect to see rates fall
However, Capital Economics does predict that mortgage rates will fall faster than Treasury yields, albeit slowly. In 2024, the firm predicts, the 10-year yield will drop 75 bps to 3.75%, compared with a 125 bps fall in mortgage rates, Ryan says.
The firm also predicts that the U.S. Treasury yields will “fall sharply” from here and that the Fed will abandon its “higher-for-longer rhetoric” and cut interest rates next year. Even with strong GDP growth this quarter, Capital Economics expects that growth to slow—and even decline soon.
“That weakness, together with further signs of improvement in core inflation, which has already been falling since the back end of 2022, is why we expect the Fed to cut rates more aggressively next year than current market pricing assumes,” Ryan says. “As outlined in the report, that will put downward pressure on Treasury yields and mortgage rates.”
Other real estate experts and financial institutions tend to agree that we’ll continue to see relatively high mortgage rates—at least compared with the sub-3% rates of the pandemic—throughout the next couple of years. Goldman Sachs also released its forecast this week, predicting “sustained higher mortgage rates,” not dipping below 7% until the end of next year.
Other housing market experts are doubtful we’ll ever enjoy the mortgage rates of the pandemic era again.
Mortgage rates “will never return to the 2%-to-3% range they were previously,” Rhett Wiseman, a private real estate investor who owns and has invested in more than 200 residential properties in the Northeastern and Midwestern markets, previously told Fortune. In other words, the frozen housing market, with people holding on to their sub-3% rates, could be with us for a long time to come.
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In the heart of the Pacific Northwest, the Seattle housing market is a fascinating real estate scene. Underscored by competitive pricing and swift sales, the Seattle housing market is a hotbed for homebuyers and investors alike.
With so much heat surrounding this constantly evolving market, there has never been a better time to take the first few steps toward fully understanding the nuances of owning or renting a home in the heart of the Pacific Northwest.
Stay tuned as we break down some of the most interesting aspects of the Seattle housing market and provide some examples of how the financial reality of owning a home in the Emerald City compares to renting an apartment.
The Seattle housing market
As we delve into the intricacies of the Seattle housing market, a key takeaway emerges, the median sale price of a Seattle home has experienced a decrease of 2.6% year-over-year to rest at $800,000. This adjustment, while subtle, is still noteworthy because it may signal a temporary (or longer) breather in the otherwise bustling Seattle housing market.
Despite this marginal cooling, the pace of Seattle’s housing market remains upbeat. Homes here are scooped up off the market after a mere 14 days on the market, a notable uptick from the previous year’s 17-day benchmark. This brisk pace of sales is emblematic of a persistent demand for housing in Seattle at all price points.
Seattle home sales
While the median home sale price has dipped slightly, the amount of sales tells a more complex story. In September 2023, the Seattle housing market saw a sales volume of 635 homes — a sharp 21.3% decrease from the previous year. This shift in volume may reflect a multitude of narratives, from inventory flux to economic uncertainty influencing buyer behavior.
Competition in Seattle’s housing market
In the competitive Seattle housing market, homes not only sell fast but often above the asking price, too. The current market sees homes achieving 99.9% of their listed value, with about 27.9% of them closing above the listing price. This increase in homes selling over the asking price — a jump of 6.6 percentage points from last year — highlights the vigorous competition among qualified buyers.
Seattle housing market migration
Migration trends play a role in Seattle’s housing market. The recent data shows that a striking 82% of homebuyers in Seattle are choosing to stay within the metropolitan area. Yet, for those looking to move into Seattle from the outside, the city is drawing crowds from metros like Louisville, San Francisco and Los Angeles.
Conversely, Seattleites who are eying an exit tend to cast their gaze toward places like Spokane, Phoenix and Wenatchee, perhaps seeking different economic conditions or even a slower pace of life.
How climate affects the Seattle housing market
With environmental concerns increasingly playing a role in housing decisions, the Seattle housing market faces a moderate assortment of environmental risks, namely in flood and water damage.
The minor risk of wildfires and negligible concern for severe winds strike a chord with those weighing up the safety of their investments against the changing climate measures. All in all, Seattle is not as risky, in terms of environmental concerns, as many other cities on the West Coast.
Life in Seattle
Beyond the numbers, the quality of life in Seattle contributes to its market’s prowess. With high walkability, transit accessibility and bike-friendly streets dramatically lessening some of the more annoying and persistent noises that often plague life in larger cities, there’s a certain peace in Seattle that is truly difficult to find in other cities of comparable size.
Settle down in your ideal Seattle home
Seattle remains an enduring epicenter for real estate activity in the Pacific Northwest. The market’s recent dip in pricing and pace sets the stage for a complex interplay of supply, demand and economics. For those tuned into the nuances of real estate, the Seattle housing market presents a dynamic opportunity, one that calls for savvy negotiation and an appreciation for the city’s unique lifestyle composition.
Renting in Seattle
Just as the Seattle housing market has its own unique ebbs and flows, the city’s rental market does as well. The nuances of renting in Seattle offer a range of experiences, from solo living in studios to too many roommates in two-bedroom apartments, any number of renting scenarios is possible in the Emerald City.
Current rent prices in Seattle
Seattle’s rental market, as of late 2023, reveals prices that cater to a diverse audience of renters. For those seeking the compact convenience of a studio apartment, the average rent has dipped to $1,422, a significant decrease of 16% from the previous year. This downward trend presents a more accessible entry point for individuals looking to enjoy city life on a budget.
For one-bedroom apartments, the average rent rests at $2,145, reflecting a 10% decrease compared to prior figures. For those requiring more room to compose their lives — perhaps a couple or a small family — this price point offers the extra space with just a moderated increase in cost.
For two-bedroom units, the average rent comes in at $2,991, a 12% reduction from previous years. This adjustment in the rental market may resonate well with those looking to harmonize affordability with the need for more expansive living quarters.
Seattle rent ranges
The makeup of apartment prices in Seattle’s rental market reveals that 30% of the apartments hit the middle range of $1,501-$2,100, indicating a substantial segment of the market is oriented towards moderate pricing. Meanwhile, a smaller, yet noteworthy, 19% of apartments fall between $1,001-$1,500, showcasing the availability of lower-priced units that attract budget-conscious renters.
Interestingly, apartments priced at $701-$1,000 comprise a mere 4% of the market, illustrating the rarity of finding such affordability within the city limits. The absence of units in the $501-$700 range is a silent note in the city’s rental market score, underscoring the premium placed on living in Seattle.
Finding your space in Seattle’s rental market
Seattle’s real estate and rental markets are full of complexities and variations. Despite recent dips in average rent prices, providing a softening counterpoint to the competitive housing sales market, Seattle’s rental market maintains a steady rhythm of demand with just enough supply to get by.
With its strong economy, scenic charm and cultural relevance, Seattle continues to attract people from across the country and throughout the globe. Whether people are drawn to the city’s rental market as a prelude to homeownership or as a long-term lifestyle choice, Seattle is home to a range of living options that suit different lifestyles and budgets.
Does Seattle sound like the place for you? The perfect Seattle apartment is only a few clicks away.
As 10-year Treasury yields tumbled, the average 30-year fixed mortgage fell 26 basis points in the week ending Nov. 9, the largest one-week decrease since last November.
The 30-year, fixed mortgage averaged 7.5% as of Nov. 9, according to Freddie Mac‘s Primary Mortgage Market Survey. That’s down significantly from last week’s 7.76% and up from 7.08% the same week a year ago.
However, the gap between mortgage rates now and a year ago has narrowed, Bright MLS Chief Economist Lisa Sturtevant said.
“At today’s rates, the typical monthly payment is about $3,000, just $250 higher than a year ago,” Sturtevant said.
HousingWire’s Mortgage Rates Center showed Optimal Blue’s average 30-year fixed rate for conventional loans at 7.444% on Thursday, compared to 7.576% the previous week.
“Incoming data show that household debt continues to rise, primarily due to mortgage, credit card and student loan balances,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Many consumers are feeling strained by the high cost of living, so unless mortgage rates decrease significantly, the housing market will remain stagnant.”
Homebuyers react to lower rates with uptick in mortgage demand
Lower mortgage rates helped push total mortgage applications up 2.5% for the week ending Nov. 3, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey released Wednesday.
“Applications for both purchase and refinance loans were up over the week but remained at low levels,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “The purchase index is still more than 20 percent behind last year’s pace, as many homebuyers remain on the sidelines until more for-sale inventory becomes available.”
While some homebuyers are already jumping on the opportunity to snag a lower rate, others will wait for 2024 in the hopes of finding even lower rates and more homes on the market.
However, while rates are poised to come down next year, they won’t return to their pandemic levels, Sturtevant cautions.
“We are in a new era for mortgage rates where prospective homebuyers can expect rates to settle above 6%,” Sturtevant said.
New inflation data comes out Tuesday, giving investors more clues on the Fed’s path moving forward. According to Chen Zhao, senior manager of the economics team at Redfin, futures markets are currently pricing in a 4.5% probability of a hike in the next Fed’s meeting.
The jobs report today which should move mortgage rates lower, demonstrates why it’s time for the Federal Reserve to land the plane. The labor market doesn’t show wages spiraling out of control as it did in the 1970s because the inflation data doesn’t look like anything in the 1970s.
We had a solid job openings print this week and jobless claims are still near historic lows. Today’s labor data isn’t the cleanest report with labor strikes in different sectors and we did get significant negative revisions. But, job growth is returning to its average pace. Remember, if we didn’t have COVID-19 and job growth stayed on trend with population growth from February of 2020, we easily should have between 157 million – 159 million total people employed, and today we are at 156,930,000.
From BLS: Total nonfarm payroll employment increased by 150,000 in October, and the unemployment rate changed little at 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, government, and social assistance. Employment declined in manufacturing due to strike activity.
Here’s a breakdown of the jobs gained and lost in today’s report:
In this job report, the unemployment rate for education levels looks like this:
Less than a high school diploma: 5.8%
High school graduate and no college: 4.0%
Some college or associate degree: 3.1%
Bachelor’s degree or higher: 2.1%
Wage growth has been slowing down since January of 2022, which is a big slap in the face to everyone saying that wage growth can’t slow down unless people lose their jobs. Today’s 4.1% year-over-year growth data is lower than the 6% plus wage growth data we saw in January of 2022.
The other labor data lines were fine this week: nothing is breaking, but put them all together, and the labor market is returning to normal. Job openings data is roughly at 9.6 million, but the quits percentage is back to pre-COVID-19 levels. That’s essential because the Fed doesn’t want people to quit their job for higher wages. Jobless claims rose more than anticipated, but this is historically low.
The 10-year yield has had a crazy week, heading lower before the jobs report as we can see below.
As I write this article, the 10-year yield is at 4.53%, and mortgage rates are heading lower! Softer labor data will send rates lower. Looking at the history of economic cycles, usually when the Fed is done hiking rates, bond yields head lower with mortgage rates. The Fed made a big mistake by being too hawkish in its October meeting, which sent bond yields (and mortgage rates) much higher and made policy more restrictive
Overall, the labor market is getting back to normal. This is why, for a long time, I have targeted that 157 million to 159 million level as the baseline level for job growth, reflecting the slower growth rate of our population. We had a global pandemic, which did not throw us back to the 1970s, and in time, we are returning to normal.
We don’t need to create a job-loss recession for some code of honor that doesn’t exist among Federal Reserve members, we just need to endure.