Normally this would be the FOMC post for the month, but we’re going to start doing the market-related news a little differently. So, please enjoy the first of our market highlights articles!
“The market’s about to crash!” “This market is totally different and everything is fine!” “The fed is over-tightening and we’re going into a recession!” “There won’t be a recession, everything is about to get better right now!”
- There are a lot of different takes on what the market is doing right now and what it will be doing. So let’s take a look at some facts!
From the chart above, we see that total inflation is at 6.4%, food is 10.1%, energy is 8.7%, and everything except for food and energy is 5.6%. Total inflation went from 6.5% in December to 6.4% in January. Economists were expecting a bigger decrease so they’re a little on edge right now. If you’re buying or selling a home right now it means factoring in higher costs for the next 1 to 2 years. Inflation is expected to calm down sometime this year to early next year.
The federal funds rate is the interest rate that commercial banks loan money to each other. Effectively, this is the lowest possible rate at which anyone can get a loan. The Federal Reserve has been increasing this rate over the last year and plans to continue slowly raising it this year. The idea behind this is to combat inflation. For the homebuyer, however, it will push mortgage rates up. For a seller, it means your asking price just went up. even if you won’t see another dime of it.
To get past that hurdle, might I suggest, allowing potential buyers to get a home inspection?
The charts above are pulled from Google. I included $300k and $400k because most, but not all, Delaware home sales will fall between these numbers. Rates today are a lot higher than they were a year ago! Demand is still outpacing supply and the Fed is still pushing these rates up.
Even more local!
The numbers in the chart above will help determine some more local buying or selling strategies.
Let’s take a look at Sussex. In Sussex County in January, 61% of homes were sold under the asking price! Only 14% were sold above asking. This tells us that if you’re buying in Sussex, you may have room to negotiate. This is particularly true given how long homes are taking to sell. Sussex homes are staying on the market longer than New Castle or Kent County homes.
New Castle homes have the shortest time on the market at 26 days. Significantly more homes sold under asking than over asking; 42% were sold under, while only 29% were sold over. It’s not as big of a difference as Sussex though. Be decisive if you’re currently interested in buying a home in New Castle. There’s some room for negotiations, but homes are moving relatively quickly.
In Kent county, we have a little more of a relaxed atmosphere; homes are staying on the market longer than in New Castle, but not as long as Sussex, and more homes are being sold at asking rather than above or below. One advantage of Kent, while you’re more likely to pay the asking price, that price may be lower than either New Castle or Sussex.
- Inflation is going to be in the picture for at least another year
- Mortgage rates are going to trend upward over the next year as the Federal Reserve continues to raise rates
- Different local markets, different local strategies
- Don’t forget the home inspection!
And as always, thank you for reading!