Also serving the communities of De Luz, Rainbow, Camp Pendleton, Pala and Pauma

Review of all things Real Estate: What real estate market are we in right now?

For starters, the market activity indicator remains at 46. To refresh, 30 is the threshold from buyer’s market to neutral market and 48 is the threshold from neutral market to seller’s market so we’re in a neutral to slight seller’s market. And what are we seeing at ground level?

All of the listings in our office are getting showings; lots of showings and properties are going into escrow, and mostly they are closing, if the buyers are properly vetted. We are also seeing a slight increase in local inventory as well.

To make that point at our local marketing meeting where the area’s most active real estate professionals meet every Wednesday morning, this week we had five homes on caravan versus the nominal one (or zero) that we were accustomed to seeing during the fourth quarter of 2023.

Can an increase in active listings be indicative of increased consumer confidence? By that I mean, if the properties are sold then there will be an incumbent requirement to find alternate housing elsewhere, so are consumers feeling the confidence to take the plunge? Perhaps because mortgage interest rates are starting to drift down.

They have dropped a full 1½ points since October 2023 from 8-ish% to now near 6.5%. It makes me wonder if the sellers who have wanted to downsize, upsize or who want to move closer to family are encouraged by the downward drift of mortgage interest rates?

For a nominal $800,000 loan, the 1½ point interest rate difference amounts to $500/month, which is a lot of money. Several national economists that I read have indicated that they feel we will get to 6.3% during 2024. Others are more optimistic, communicating that they feel we will be in the 5% range during 2024. All good fodder for consideration, makes me wonder what do the tea leaves say?

Equally interesting are the notes from the last nine Federal Reserve meetings; the first six meetings were dominated with discussion about recession. However, for the last three meetings, the notes contained no references to recession. The latest inflation numbers were 3.4%, still above the stated target of 2%. Does the Fed feel like we are on the correct trajectory to reach 2% so no new federal funds rate hikes are going to be necessary?

Increasingly there is talk amongst the economists that the Fed will start reducing the federal funds rate as early as April. Treasury Secretary Janet Yellen even proclaimed that we have achieved the sought after “soft landing.” Wow, a round of fist bumps all the way around…I guess.

Have we accomplished all this with just monetary policy? Or, since the Chairman of the Federal Reserve is a political appointee, are these just election year antics since 2024 is indeed an election year.

From what I read and what I can see from the ground level, I am cautiously optimistic about 2024. Why not, it’s my nature to be a positive person anyway. I don’t personally feel like we will experience a crash landing of the economy that some do.

But I do feel that if we are on the correct glidepath to cushion the landing, then maybe the prudent thing to do is to not take off the controls just yet. If we loosen credit too quickly I fear it would sow the field for another inflationary cycle. I advocate to keep credit tight and instead, tighten up on spending.

Let’s not print money and increase the money supply, rather we should be disciplined in our national spending. We shouldn’t just throw money at every issue; we can’t afford that as taxpayers. We can’t run our households with reckless undisciplined spending, why should our government recklessly run itself on borrowed money?


Reader Comments(0)