As the war in Iran continues and may even be escalating, the national housing market continues to slump. Our short-lived period that saw mortgage interest rates drop below 6% ushered in what appeared to be the beginning of much stronger demand for housing. Economic concerns stemming from the war have since created a climate of consumer uncertainty, along with mortgage interest rates that are now above 6%.
Rising fuel costs, changes in the bond market, and consumer reluctance have quickly reversed the short-term boom in housing that we all saw. Originally, there was hope for a quick in-and-out conflict, but that now appears unlikely. It is now becoming clear that hopes for a hot spring housing market may be fading.
If the war winds down within the next few weeks, there is still a chance that we could see an improved housing market by late spring. Even though the national housing market has declined, the numbers so far do not indicate anything close to a market crash. In the Eugene and Springfield area, we are seeing continued demand for homes, including multiple-offer situations in some price ranges.
Let’s all hope for an improving economy and a strong late spring and summer housing market.
The following are a couple of paragraphs from a recent article in Inman News.
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Beyond putting more pressure on consumers’ pockets and sentiment, First American VP and Deputy Chief Economist Odeta Kushi said rising gas costs could also impact the housing market through higher material costs for homebuilders and higher inflation. If the conflict drags on through the spring and summer, Kushi said, the Federal Reserve may feel more pressure to control “inflation dynamics.”
“Monitoring key inflation reports like the [Personal Consumption Expenditures Price Index] and the [Consumer Price Index] is important. Those two key aspects of the economy will give a better understanding of what the Federal Reserve is likely to do with monetary policy,” she said. “The Fed will need to do a balancing act to keep inflation stable, alongside maintaining full employment on the labor market side.”
Tucker told Inman that the ongoing oil crisis complicates the balancing act Kushi mentioned. The Windermere economist said it’s difficult to know what the Fed will do, whether it’s holding off on planned rate cuts or actually “jacking up” interest rates. “It’s not everyone’s favorite,” he said of the option to raise rates. “But it’s the cure for a demand shock.”
Although the mere idea of the Fed raising rates is enough to fling agents and consumers out of orbit, the economists said it’s important to remember that 10-Year Treasury yields are a better predictor of what may happen with mortgage rates. And right now, despite some volatility since Feb. 28, those yields are holding relatively steady at 4.25 percent.
That’s (disappointingly) pushed mortgage rates back above 6 percent — to 6.11 percent, to be exact. But that rate is still below the 2023 peak of 7.8 percent, and may be enough to keep homebuyers and homesellers who need to make a deal this spring in the market.
“I think that if we see it persist, we could start to see it impact the spring homebuying market,” Kushi said. “But right now, the 10-year Treasury isn’t moving around all that much. There’s still hope for spring. Our outlook, as we’ve been writing [reports], is more positive.”
Even if the conflict drags on, leading to some worst-case scenarios, Tucker, Ratiu and Kushi said it’s unlikely the market will fall apart. At the height of the Great Recession, Ratiu said there were still 4 million home sales, mostly from consumers who had to move due to life changes, such as a new job, getting married or needing more space for an expanding family.
“I don’t think that the market is going to in any way necessarily dry up. I think transactions will continue,” Ratiu said. “I think this market could be an opportune time because when you put everything together, there have been three years of sluggish sales activity. Sellers may be more motivated than ever to make a deal. And so far, at least, the indications are that there are many more people willing to come to market with properties this season.”
“So I still think the spring could be a great time for many people looking to buy,” he added.
Have An Awesome Week!
Haas Team Real Estate
541.349.2620