The FED Paused and Investors should UnPause

[AJ Wong]

This past week the FED indicated a pause in their historically paced rate tightening cycle. 

The pause in rate increases should have the effect of eventually lowering mortgage rates. 

I have written extensively about the recent spike in mortgage rates paradoxically created buyer opportunities as increased borrowing costs forced many potential buyer's and investors to the sidelines. 

On the Oregon Coast the mild softening in activity provided clients greater likelihood of transactional success or at least the chance to present an offer.

I've had 3-4 recent transactions either close or under contract that might not have otherwise got done if market conditions and buyer demand were that of 8-12 months ago. Examples include, one coastal cash transaction at near 50% of the original listing price, $20k less than asking on a turn-key home and a duplex on a well below asking offer with a full 3% seller concession. 

Certainly my clients paid a higher interest rate, but they got a better deal, and what is the cost of not owning that particular property or investment over the next decade or two or three?

I can tell you that casually shopping for a property to purchase or rent in Southern California has provided new perspective for the opportunities and value of the Oregon Coast. The investors that purchased those properties when rates were 'too high' in the 80's have certainly got their money worth..

With the height of the summer buying season approaching and the news of reduced rates likely to reach home buyers and real estate investors that have been on the sidelines, expect greater competition for the already limited inventory. 

If mortgage rates drop by even 1% there will be considerably more demand and less leverage with sellers for incentives such as seller concessions, interest rate buy downs or repairs.

Additionally (although I'm personally skeptical) if the inflation numbers are accurate and the general costs of living have also peaked, the associated costs of ownership are also likely to have peaked, allowing for buyer's to budget more reliably for insurance, power, water, internet and upgrades. 

The FED is presenting this most recent move as a pause but I think it's more of a pivot. Powell blinked. He knows they can't raise rates further without destabilizing the financial sector. They'll likely hold rates steady through the end of the year, but cuts are coming. The real question is what happens to the value of the USD and how does this effect housing? My money is on dollar decline and property valuation incline. 

[Steve Vaughan]

@AJ Wong  Agree equity capture at the buy is the way to go.  Rates and their trajectory will be uncertain,  but a good deal is a good deal, even if values stay flat or even reduce a little in the short run.  

As you stated, these are long-term assets that should perform well over time!