Welcome to the Grand Illusion (The Reprisal)
The 1977 hit song from Styx Grand Illusion may illustrate several things we are seeing today in the real estate market as well as our Federal Reserve.
I am still fascinated by the “illusion” still being talked about regarding “multiple bid” offers. It seems this is what most clients hear when making an offer on a home or even just starting the buying process. I can assure you that what you see today is not the same as it was back in 2022 when a house came on the market, and there were 20 cars lined up at 10 am on the first day of a showing, and then bids went in each one higher than the other pushing the price up 10%+ from the original listing on that day. I guess the phrase “multiple bids” could be defined as more than one, but it is not what it was like in 2022 when that was a more accurate statement. The facts are that the average home in the Metro ATL is currently on the market for 39 days, which is six days more than they were listed for a year ago, and 15 days if “competitively” priced, according to Redfin. 28.1% of homes listed in 2024 have experienced an actual price reduction from their original listing price. My point is that they are not on the market for less than three days like we saw several years ago, and I genuinely believe that this “illusion” is spooking many potential buyers away from purchasing a home, making them feel like they won’t have a chance and are wasting their time even looking. We still have an inventory shortage, but the “frenzy”/ “multiple bid” illusion is more of a sales tactic than reality if you simply go by the numbers. I am a numbers guy. Multiple bids when the average home is on the market for over a month? The average days listed tells a story. Bottom line, do not be spooked by the rhetoric…find the house you like and make a bid on it. The odds are that if the bid is competitive, you might get the home you want.
Another “Grand Illusion” is the fact the Federal Reserve has stated that they will most likely not begin to consider cutting rates until they hit their target of a 2% 12-month average inflation rate. When I speak of their 2% average inflation rate, that is a 12-month average! Now, my Fulton County public school math courses taught me that to get to a 2% 12-month average, you would need numbers less than 2% over those 12 months. Considering that in the past 12 months, we have not seen anything resembling that, we could be 12-24 months away from any cuts. That is just simple math, folks. The truth is they will need to focus on the US employment numbers, which I believe you will see in the coming months. They will need to focus on this to ensure we do not slide into a recession. Rising unemployment will bring rates down but may also slide us into recession quickly. Don’t hold your breath for that magical illusion of a 2% inflation rate for a 12-month average anytime soon. While retail sales have shown “healthy” numbers, I have stated before that this is due to folks spending money they do not have and are “mastering the possibilities with Mastercard.” There will come a time when many hit their limits, which will most likely create a whole new problem. I do believe that the FED will change its message soon. While continuing to watch inflation, it will begin to focus more on the employment situation, which I think will move “center stage,” especially in an election year.
Remember… the BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
Thank you for reading this blog. I hope that the facts and insights I share provide value to you.
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Blog post date: Thursday, May 2, 2024
