Navigating the Housing Market Crash: How the Fed's Interest Rate Cuts Could Shape the Future

• RealPage, Inc. reports that Q2 2024 saw an impressive annual absorption of nearly 390,000 units, marking a staggering 52% increase compared to the pre-pandemic Q2 annual average from 2010 to 2019.

• Despite the ongoing record number of new apartment deliveries, demand continues to outpace supply, underscoring a significant shift in the housing market dynamics.

• The heightened demand also reflects broader economic trends, including employment growth and wage increases, which boost renters' ability to afford higher rents.

June data has been released providing a chart that shows a 5 year year chart with a median sales price. Month over month home prices have increased by $2,800, year over year home prices have increased by 4%.

Is the housing market crash coming?

• Florida and in Texas Inventory is surging but pricing is not coming down significantly to show a housing market crash.

  • Compare housing prices today compared to what it was pre-pandemic. Listing pricing is coming down dramatically. We should intend to take a look at the sale price rather than listing.

Homes remain very unaffordable

that’s the truth...

5-year chart of how many homes are for sale right now

• Currently at $1.77M, a 13% improvement from last year. Not the same for 2021 or 2022 in terms of improvement. In June 2022 we were at $1.75M.

• 2.38M homes for sale, inventory is still down today compared to pre-pandemic. The inventory leads to propped-up home prices.

• Inventory went up less than half a percent month over month. Mortgage interest rates are still floating as of today.

Average 30-Year Fixed Mortgage Rate

• Having been stuck on this chart for more than a year, the Federal Reserve has not changed the Fed fund interest rate. One interest rate cut this year in 2024.

• September meeting will lead to a .25% (25 basis points) cut, which can lead to interest rates slowly beginning to drift down lower than 25% with anticipation of lowering the rates.

• They will continue to cut 2025-2026. Quick side note, if you're looking to refinance your opportunity is coming likely in late 2025. Interest rate cuts will be gradual over two years or more.

• Q4 mortgage rates should still be in the 6% range. Q1 2025 mortgage interest rates will be in the high 5% - 6% range.

• The average was at 7.2% in May.

Home sold above list price

5-year chart: 35.1% of homes are selling over the listing price. Not as crazy as 2021-2022, this has not changed as much.

Top 7 metro areas where people are leaving

Boston, Chicago, DC, Seattle, San Fran, NY, LA. This is listed from 7-1.

Migration in Florida continues to cool and Texas has stabilized.

Inventory levels are expected to cool slightly. There will not be any dramatic change

What happened at the July 31st Fed meeting?

There is a 100% chance of an interest rate cut this coming meeting in September.

Not 99.9, but 100%.

The Federal Reserve had its FOMC meeting that lasted 47 minutes. I condensed it in a way that can be readable in 2 min...

Powell tries to get technical and dance around questions that have been asked during the meeting. The reporter asks, "The market expects you to cut interest rates this coming September; if that is the case, why wait when you can cut it right now?" Paul answers by saying it is not guaranteed to happen this September, however, it can happen this September. He specifies the totality of the data and bases the decision on a test of confidence.

The next question would be, what is Powell not confident about? 

Is wage inflation not coming down, shelter inflation, and food prices? Where is this lack of confidence coming from? He said that in late 2023 the inflation data was good and he began gaining confidence, but inflation started to increase in January, February, and March. With a decrease in inflation in the last quarter he is starting to feel a little more comfortable.

How many interest rate cuts will there be this year?

You need to remember that there will be a total of 3 meetings this year (September, November, and December). Colby Smith from Financial Times specifies that the Fed anticipated three interest rate cuts in March, but as of June, they said that there will only be one. He couldn't give a straight-up answer and based it on how the economy evolves. He said that they will update their projections next meeting in September.

Michael McKee from Bloomberg TV posed an interesting question about whether it would be better to leave interest rates as they are, considering the impact higher rates have on the economy by slowing demand and raising prices. He pointed out that maintaining the current rates might better serve the American people by achieving maximum employment and price stability.

In response, Jerome Powell acknowledged that inflation has been the biggest problem over the past few years, which led to their focus on higher interest rates to address it. However, he noted that the weakening labor market is becoming a more pressing issue. To tackle this, Powell mentioned that it might be appropriate to dial back on interest rates.

Bloomberg Philanthropies has purchased 980 Madison Avenue from Aby Rosen's RFR for $560 million.

Aby Rosen’s RFR Holding has sold 980 Madison Avenue, an art gallery, office, and retail building on the Upper East Side, along with the land beneath it, for $560 million. Property records show the buyer is an entity affiliated with Michael Bloomberg. Lawyer David McCabe of Willkie Farr & Gallagher signed on behalf of the new owner but did not respond to requests for comment.

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