They say the only thing predictable about the housing market is its unpredictability. October was no exception—it’s been like watching a suspense movie where you’re not sure if the villain is rising mortgage rates or the hero is a pending home sale trying to make a comeback. So buckle up and get ready for a plot twist or two as we dive into this month’s market insights.
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1. The resilient U.S. economy and its ripples on housing
The U.S. economy continues to flex its muscles, posting solid growth in the third quarter with a 2.8% annualized increase in GDP. Consumer spending, particularly on goods and services, was the main driver, showcasing the economy’s resilience (National Association of Home Builders).
But before we break out the champagne, keep in mind that this growth comes with an edge: stronger economic activity has stoked inflation worries, affecting long-term mortgage rates (HousingWire).
Key takeaway for appraisers: A strong economy is generally a positive sign, potentially spurring housing demand. However, rising rates can temper this effect by dampening affordability, so keep a close eye on economic indicators like inflation and employment data.
2. Mortgage rates and their roller-coaster ride
October brought more twists to the mortgage rate saga. While rates had dipped to as low as 6.08% in September, a stronger-than-expected jobs report and resilient economic growth pushed them back up to an average of 6.72% for 30-year conforming loans (Freddie Mac). This recent uptick has raised eyebrows as the Federal Reserve prepares for its November policy meeting.
The upcoming Fed meeting is closely watched, with markets betting on another 0.25% rate cut. Analysts expect this move as part of the Fed’s effort to ease pressure on the economy without stalling growth. This expectation was reinforced by October’s tepid nonfarm payrolls report, which pointed to enough economic uncertainty to justify a rate cut.
Fed Chair Jerome Powell’s recent remarks emphasized his intent to prevent further labor market weakening, supporting the likelihood of a November rate reduction (Morningstar).
However, this cut could be one of the last for a while. With cuts totaling around 1.25% anticipated through 2025, the Fed might pause after December if the economy continues its strong pace. The next moves hinge on upcoming economic data, especially inflation and growth metrics.
Key takeaway for appraisers: Rate cuts can initially boost market sentiment, but fluctuations can disrupt affordability and homebuyer confidence. Stay nimble as rate changes affect buyer behavior and influence the volume and type of appraisal requests you receive.
3. Existing home sales hit new lows amid rising inventory
Despite more homes trickling into the market, existing home sales dipped 1% in September, reaching the lowest level since October 2010. Home prices, meanwhile, edged up 3% year-over-year, sitting at a median of $404,500. Inventory levels have improved, with a 4.3-month supply compared to 3.4 months a year ago (National Association of Realtors). However, prospective buyers remain hesitant, waiting for mortgage rates to drop further.
The “rate lock-in” effect, where homeowners cling to their low-rate mortgages instead of trading up, continues to constrict the market.
Key takeaway for appraisers: A sluggish existing home market means fewer transactions, impacting your workload in this segment. However, rising inventory may eventually ease price pressures, affecting value assessments.
4. New home sales and builder confidence show signs of life
In contrast, new home sales increased by 4.1% in September, fueled by the Fed’s initial rate cut in September and builders’ efforts to offer more affordable options. Builder confidence also improved for a second consecutive month. Yet, builders remain cautious, employing strategies like price cuts and mortgage rate buydowns to lure wary buyers (National Association of Home Builders).
Key takeaway for appraisers: Increased new construction can mean more appraisal opportunities, especially as builders continue to focus on affordable units. Stay updated on local new home developments and their potential impact on market comparables.
5. The first-time buyer conundrum
First-time buyers accounted for just 26% of existing home sales in September, matching the lowest levels seen in recent years (realtor.com). The challenge? High home prices and mortgage rates make it difficult for buyers without home equity to compete. While builders are seeing more activity with new homes, the affordability gap remains significant.
Key takeaway for appraisers: Pay attention to trends in first-time buyer activity, as these can influence broader market conditions and appraisal considerations, particularly in areas with more starter homes.
6. Pending sales offer a glimmer of hope
Amid the challenging market, pending home sales—an indicator of future closed sales—rose by 7.4% in September (National Association of Realtors). This uptick suggests buyers are capitalizing on temporary rate drops and inventory growth, but it remains to be seen if this will translate into sustained momentum.
Key takeaway for appraisers: This rise in pending sales could signal an increase in appraisal activity in the months ahead. Keep a watchful eye on how these trends play out, especially as the market responds to further rate changes.
Conclusion: Navigating a market in flux
For real estate appraisers, October’s market presents a landscape of contrasts. New construction is on the rise, builder confidence is rebounding, and mortgage rates remain unpredictable. Meanwhile, existing home sales are in a lull, tempered by the rate lock-in effect and affordability hurdles. As the market responds to economic signals and Federal Reserve actions, your appraisal practice must adapt to these ever-evolving conditions.
So, what does this all mean for you? Keep your pencils sharp and your data sharper. And remember, when the market takes you on a roller-coaster ride, make sure your seat belt—your appraisal expertise—is securely fastened.
