July Fed Meeting Update

    During the July 26th press conference, the Federal Reserve Chair, Jerome Powell, announced that interest rates would increase by .25 points. As directed by Congress, he said, “The Federal Reserve’s job is to get inflation under control and restore price stability.”   They are looking for more moderate growth to reach 2% inflation. With headline inflation at 3%, data suggests that they are going the right way; however, Chair Powell stated it isn’t enough data to pause hikes.   Inflation is dropping due to higher interest rates, the labor market, supply chains improving, and energy and food prices coming down. During the press conference it was very clear that until job reports, employment compensation index reports, and inflation are all showing improvement, September’s Federal Reserve meeting will see rates either be maintained or increased.   Chair Powell said, “Don’t expect rate cuts this year, but maybe next year.” He also projected that inflation won’t be 2% until 2025. He feels confident in forecasting a soft landing versus going into a recession. There is a pathway based upon disinflation and the labor market. As a result, consumer confidence is rising.   The challenge in the housing market comes when 91% of Americans have a 3% or better interest rate on their current mortgage. The motivation to sell is greatly reduced causing the supply of homes in the market to remain extremely low.   This highly competitive real estate market has forced many first time buyers out of the market. Investors have been buying so much real estate that Case Shiller has reported that housing is recovering without homeowners. Simply put, homeownership continues to decline and investors continue to buy.   Here is the opportunity. Investors who need to borrow will see their margins shrink as interest rates increase. First time buyers who haven’t been exposed to unicorn interest rates will perceive the slightly elevated rates of today as normal. It will continue to open the lane for first time buyers to get on the property ladder and start building wealth.   For the rest of us, the opportunity is in the fact that interest rates are temporary. Replacing the inventory of homes for sale will take time. With high demand and low inventory, prices will continue to increase. Purchasing the home now, while values are increasing, allows the opportunity to refinance when rates improve.   Consider the math in a purely hypothetical scenario. As we know, there are no guarantees of future increases in value or decreases in interest rates:   You take out a mortgage for $300,000 with 10% down on a $330,000 purchase at a 7% interest rate for 30 years. Your Principal & Interest is $1,996. If appreciation is a steady 3%, and you refinance in 2025 at 5% with a new value of $371,350. You have built over $20,000 in equity and your new P&I is $1,595. Plus, in this example, you no longer have a monthly private mortgage insurance premium or second loan HELOC to pay anymore. While you have paid $9,600 in interest, you are still way ahead of renting for two years without any interest and tax write-offs.   Strategizing with a professional who understands our local market conditions is key.   For a complimentary buyer consultation, please give a call, text or send an email.

Attention Grabbing Headlines Causing Consumers to Worry ...Unnecessarily

 National housing news can be, and often is, very different from the housing news in South Central PA. We have an extremely stable housing market for a variety of reasons. For one, Central PA is not a tourism mecca. Yet, there are so many things to do in this region. The greater Harrisburg area is a transportation hub making our location easily accessible. If you cannot find the entertainment, shopping, or sporting events you are looking for locally, you can be an hour   and a half to Philadelphia and Baltimore or three hours to New York City.      When you are seeing home prices declining in national news, these statistics factor in areas where the cost of living and tourism are three and four times higher than our local region. Our area is still appreciating, just not at double digit levels.      Where we are trending with national news is in the decline of home sales by approximately 20%. However, if you only look at the click bait, you could miss out on the reason why. In 2019, our national inventory was about two million homes for sale. Currently, we are hovering around a million homes in inventory. Locally, we have less homes to sell than ever before and it continues to decline.      Central PA’s median days on market is seven days, ranking the Harrisburg area #9 on Stacker’s list of the 50 fastest selling metros in the nation as sourced by Redfin data. “Harrisburg’s vibrant real estate market boasts an extraordinary phenomenon where home sales unfold at a remarkable pace, making it one of the quickest in the nation,” said the Greater Harrisburg Association of Realtors President.      While media and advertising focus on clicks, real people need real information from a source they can trust. You don’t need to be buying or selling real estate to talk to your real estate resource, the Jennifer Hollister Group. Your home advisors are available anytime to simply bring you real estate information with insight 24/7.

Economic Update: Why don’t economists think this will be like the great recession?

    The short answer is strict lending practices, equity in the market and the continued low inventory of homes.   The declining inventory of homes is still putting upward pressure on prices. While it looks like a recession is still possible, homes for sale are still selling fast and often for more than the asking price. We expect interest rates to continue to fluctuate over the next year and for home prices to soften, but not stop rising.   What’s staggering is that over the last 25 years, the nation’s total housing inventory has averaged approximately two million homes for sale. Today, we are averaging about 980,000. During the great recession, inventory was at a remarkable four million homes!   While there has always been competition from investors, it hasn't been like what we have seen over the last year. One in four single-family homes across our nation was purchased by an investor. As you may be sensing, this is contributing to the rental pressure and the inability of Millennials to obtain housing.   Many well-qualified, motivated buyers feel stuck. Some are opting out of buying in hopes that the prices will start to stabilize, and rates will come down. As professional real estate agents who study the market, we aren’t seeing indicators of a major shift. We are experiencing some softening and this is mostly occurring in higher-end properties or overzealous sellers trying to push their value.   Considering that the average home price has gone from $40,000 in the 1970’s to almost $400,000 here in the 2020’s, it’s clear why real estate continues to be a great investment. But, just like anything that holds value over time, there are peaks and troughs.   It’s important to discuss with your Jennifer Hollister Group home advisor what your personal plans are for your home buying, selling and investing needs. We are your resource and consultant before, during and after the real estate sales cycle. If you are on the fence trying to decide, don’t do it alone. Sometimes it’s not the right time. We will be honest with you. These last few years have been volatile, emotional and stressful for most people. We are here to help educate you so that you can make informed decisions with confidence.