Dave:
The first data for the spring housing market and how the war in Iran is impacting the market is here. And today we’re diving into it. We’re going to look at the actual results so far and see how prices, inventory, affordability and more are shaping up. And we’ll also talk about what it tells us about the months to come, what you can expect and how you should behave. Plus, we also have a big update on the Federal Reserve drama and whether or not a new Fed share is going to be kinder to the housing market than Jerome Powell. That and much more on today’s episode of On the Market.
Hey everyone. It’s Dave. Welcome to On the Market. I think I say this every week, but man, a lot is going on. Is that just me? Maybe it’s just me. But really it does kind of seem like the already accelerated news cycle is playing at like 2X speed right now. It could be hard to keep up. And today I was going to take a break from more of the news and economics headlines and just focus on housing market data because we have some housing market data from this spring that I want to go into. And we are going to do that, but there have been some big developments even since last week’s deep dive into the Fed drama. So we’re going to provide a quick update on that first, since it seems to be on everyone’s mind right now. They want to know, will Kevin Warsch, the perspective probably new head of the Federal Reserve, help the housing market?
We’ll cover that quickly at the top, but then we are going to get into the weekly and the monthly data we have so far to try and suss out. If the spring market is actually going to take shape, I think you’re actually going to be surprised. I was surprised. Lots of good stuff to go over there, so let’s get started. First up, Fed update. If you didn’t listen last week, I did a deep dive into this ongoing drama that had been emerging as the Federal Reserve around Kevin Warsch’s nomination. You can go back and listen to the history of that. It’s one week ago the episode came out, but I’ll just give you a brief summary. So basically a Republican Senator, Tom Tillis, was threatening to hold up Kevin Warsch’s nomination unless the Department of Justice dropped their probe into Jerome Powell. He believed this is important to maintain the perception and truth of Fed independence.
And as of just a week ago, it was really unclear how this was going to play out if Warsch was actually going to be confirmed if Jerome Powell was going to stay on. Well, now, just a couple of days later, we do actually have some information. We learned on Friday, just a day after that episode came out, that the Department of Justice is intending to drop the probe into Jerome Powell. Now, this paves the way for Kevin Warsch to be confirmed as the next chairman of the Federal Reserve. That hasn’t happened yet, but it is pretty likely it’s almost certainly going to happen. And I will just say, I’m surprised. When I was researching the episode we put out last week, I thought this was going to drag out, but it looks like we will have a new Fed chair in the next couple of weeks.
Now, personally, think what you will about Kevin Warsch. People have different opinions about that, but I count this as a win for Fed independence. I’ve said on the show many times, I’m a believer in Fed independence, even if you don’t like the Federal to Reserve and the decisions that they’ve been making. Fed independence is important to our economy. It is important to borrowing costs for everyone from you, to me, to the US government. So I think Fed independence needs to be maintained. I was concerned about how this could play out. So I’m glad to see the Department of Justice dropping this probe. It did seem a little frivolous, and I think the fact that they’re dropping it supports the perception of Fed independence. Now, everyone wants to know what Kevin Warsch is going to do. I’ve been making numerous news appearances over the last couple of days talking about this.
It seems like it’s on everyone’s mind. The exact wording people keep saying is Warsch going to support the housing market? Is he going to be better for the housing market than Jerome Powell? Well, a lot of people think that. That is the perception because a lot of people expect Kevin Warsch to pursue President Trump’s agenda. And President Trump has been very clear about what he wants. He wants a lower federal funds rate. He said he wants it as low as 1%. I don’t really think that is realistic, but people are wondering, is Warsh actually going to do what President Trump wants and lower rates, even though inflation has been going higher over the last couple of months? Well, I’ll give you my take. And it’s that, honestly, it doesn’t even matter that much because Kevin Warsch is just one of 12 voting members of the FOMC, the group of people that vote on interest rate policy.
So he cannot unilaterally lower interest rates. Remember that. He cannot do that. And even if he could, it wouldn’t correspond necessarily to lower mortgage rates. So what then should you expect? We’re getting a new Fed share. This has to mean something, right? What does it mean? Well, I think Warsch is going to try and move the Fed in that direction. He does have a lot of sway. He is responsible for a lot of the culture and a lot of the priorities at the Federal Reserve, even though he can’t unilaterally lower rates. And I think he’s going to try and get the federal funds rate lower. Now, is it going to 1%? No. The idea of dropping rates that low in an economic emergency makes sense. Dropping it to that right now, I don’t really think makes a lot of sense. That could reignite inflation, and it also takes a tool out of the Fed’s playbook in case there is a genuine economic emergency.
But I do think he’s going to push hard for two, three, maybe four or more rate cuts over the next couple of years and get it closer to a neutral rate. But I do think that is going to be hard. I do not think there are a lot of other people at the Federal Reserve who believe that the federal funds rate should go lower right now. The labor market is holding up. Inflation is going up. Those are the types of condition where you at least hold rates. In a different environment, you might say it’s actually the kind of time that you raise rates. They’re not going to do that right now, but that could be argued. If you actually go through the minutes of the last FOMC meeting, the vote was 11 to one to keep rates steady. There’s only one current voting member who believes that rates should go lower right now.
So if Powell is replaced with Warsh and things don’t change much, that’s still a 10 to two vote. You still have a significant amount of people that you need to change their mind, and that’s happening at a time that there is inflationary pressure. And as long as there is inflationary pressure, while the labor market holds up, which is exactly what’s going on, it is going to be hard for Wash to lower rates. Now, philosophically speaking, he may be more supportive of helping the housing market than Powell. I think that’s actually probably true. Jrum Powell has repeatedly almost gone out of his way to not support the housing market. Not that he’s intentionally trying to hurt it, but he’s never said that Fed and monetary policy should be used to support the housing market. Now, President Trump has said that. Scott Bessett has said that. And I do believe just by extension, because Warsch has been appointed, nominated, I should say, by President Trump, and President Trump probably was screening candidates for a philosophical alignment, I have to believe that Warsch also feels that helping housing at least should be factored into monetary policy decision making.
And so I do think in that respect, Warsch might help the housing market just a little bit. But again, there’s only so many tools that he can use. He can’t lower the federal funds rate by himself. Even if he does, it won’t lower mortgage rates. The one thing the Fed can do that would lower mortgage rates is quantitative easing, but actually Warsch has been extremely skeptical of quantitative easing in the past. He actually resigned from the Fed back in 2011 because he disagreed with quantitative easing. Now, he said he wants to shrink the balance sheets of the Fed. That’s quantitative tightening. That’s the opposite. And so unless he’s had a complete about face or he’s faces extreme political pressure from President Trump, I don’t think that’s going to happen. And so again, I’ve tried to caution people, and I know I’m talking about this two weeks in a row, but so many people are saying that this is going to be big relief for the housing market.
I do not think so. Could the housing market get better? Sure. But I don’t think it’s because Kevin Warsch is becoming the Fed chair. If inflation was down, maybe that would be different, but it’s not. We’ll see what happens in the next couple months. If it gets under control, if it starts to go down, maybe he can bring rates down, but right now, I wouldn’t expect anything in the New York Time. So that’s a big update. If you follow the housing market, if you’re an investor, what the Federal Reserve does? Super important, right? And although Warsch, again, cannot change things on his own, it’s probably going to take some time. It is, I think, a bit of a philosophical shift at the Federal Reserve, and that could have implications for housing market in the longer term, six months, a year, two, three years down the line.
It could, but we’re just going to have to wait and see what he does, if he could build consensus at the Federal Reserve. And if we get a clearer line of sight on lower inflation, it’s going to come down to all of that. And obviously we’re just going to have to wait and be patient and see how that plays out. So that’s our update on the Federal Reserve. Next, I want to turn our attention to the spring housing market. Let’s talk about it because we’re getting the first data now for what’s actually happening in the market despite the war in Iran, despite rates bouncing up a little bit. Is there going to be a spring housing market? We’re going to get into that right after this quick break. Stick with us.
Welcome back to On The Market. I’m Dave Meyer. Let’s get into the spring housing market data that we have so far. Now, I’m recording this right at the end of April, so we don’t have April monthly data. March data shows that appreciation was basically flat. If you look according to Redfin, it was 0.1%, so prices are almost exactly flat on a nominal non-inflation adjusted basis. When you look at real prices, so inflation adjusted prices, prices have been falling. This is the same situation that we’ve been in for years, and I don’t expect that to change. Inflation right now at 3.3%, housing is flat. That means that home price growth is negative. That’s one of the many reasons I’ve been saying that we were in a correction. That’s where we sat in March. But let’s talk about weekly data because things are moving so quickly. If you listen to the show, you probably know I don’t normally get into weekly data because it can be very volatile.
But during times of a lot of uncertainty, I do look at it because it can be a really interesting indicator to help us formulate our strategies. Is the spring housing market going to be here? Is it going to be a good time to buy? Is it going to be a good time to sell? Are things going to get worse, right? And so it does make sense to look at weekly data. And fortunately, there’s some actually good news here. Color me surprised. I was not expecting to see this. I have to admit that when I was looking at this weekly data, I thought we were going to see more slowness, more reasons for pessimism about a spring market materializing, but it actually has been a little bit better. I dug into Altos data. This comes from HousingWire. You can go check it out. I like this data.
The founder of Altos data, Mike Simonson, has been on the show many, many times. His colleague, Logan Modashami, who’s been on the show many, many times, popular guest, uses the same data here. So it’s high quality stuff though, even though weekly housing market data is fickle. So keep that in mind. But what we saw, what I was surprised is, is we saw a big increase in pending sales last week. Pending sales, if you don’t know what that means, that’s just the number of properties that went under contract. They’re waiting to close. And it’s just a good indicator of how much activity there is, right? How many people are signing contract this week? And it went up 10% week over week. Might not sound like a lot. That is unusual. It’s like one or 2%. That’s like a big move. 10% week over week is a lot and is now up 20% year over year.
That’s super encouraging, right? Now I want to caution again, this could be a blip because it is just one week. I think there’s also a reasonable question if this is just a rebound from a couple really slow weeks, right? Like with the war, there was also Easter, things slow down on holidays, right? Maybe we’re seeing some of that artificially low data from the last couple of weeks work itself out and it will normalize, but it’s still encouraging in its own right, particularly because the data is sort of validated with a totally different data set. Just so you know, sometimes when you have this volatile one week data, you should look and say, okay, is there another data set, another indicator that we can look at to see if this is real? And so what I looked at is mortgage purchase applications. That is more of a forward looking data point.
It tells us sort of how pending sales are going to be 30, 60, 90 days down the line, right? It’s just people applying for mortgages, not actually closing or even putting them under contract. And what we saw in that mortgage purchase application index is a 10% week over week gate, almost exactly the same as impending sales, and it’s a 12% year over year increase. So take that to all the people saying there is no buyers out there. There are buyers in the housing market. It has been remarkably resilient. Now, I’m not saying this is going to sustain. I think we have a lot of big questions, which I’m going to get into in a minute, just like the questions and some of the indicators. But people, at least this last week, we’re getting back into the housing market. Is it the move from 6.5% mortgage rates down to 6.3?
I don’t know. That doesn’t seem like it’s enough to me, but maybe people are locking in now because they expect rates to go back up. I think that is possible too. But either way, whatever it is, maybe the weather got nice, at least where I live. Everyone’s out and about right now. Maybe they just felt motivated to go buy a house. We saw more activity, and I’ll take it for now. Not saying to go celebrate, take it with a grain of salt. We’re not going to see some huge boom. But as of a week or two ago, I was starting to get concerned, I talk about this two or three weeks ago, that we were going to see an even slower housing market this year than last year. Not crazy, just a little bit slower. I was expecting and hoping for modest gains, and I was worried that we’re actually going to see modest declines.
We don’t know yet, but I think this is hopeful instead of what I was expecting to see this week. Now, on top of just the demand side, we also saw increased activity on the seller side of the market. Single family new listings, people who decided to go up and sold their house up 7% week over week. It’s up 7% year over year. That’s a lot. Again, could be a blip. Is it? If I had to guess, probably yes. I’d be pretty surprised if we really started to see sustained activity, but I’ve been wrong before, I’ve been surprised before, and that at least would be a pleasant surprise, right? At least we would see more activity. I would love to be wrong in that way. I’d love to see more inventory. I know some people don’t because it can put downward pressure on prices, but I think that’s the best way back to an actually healthy, functional housing market for the first time in like seven years.
And so I hope that I’m wrong and that we do see more inventory and more pending sales. Now, of course, what I’ve shared so far is just national, but I will just give you a couple of regional updates as well. There are still markets with huge growth in year over year price increases. This is according to Redfin this week, year over year. Detroit, San Francisco, Cleveland, Providence, Pittsburgh, all double digit price growth, biggest declines. You won’t be surprised to hear as Austin, 3.6%, Seattle, Riverside, California, Minneapolis, and Las Vegas. So that’s what’s going on in prices. I actually am going to talk a lot more about regional trends, buyer’s markets, sellers markets where people have more leverage in just a minute. But before we do, I just kind of want to say a little bit more about what happens next with the housing market, because again, I’m sharing this positive news because we all need positive news, right?
It’s been a rough four years in the housing market. And I am not saying we’re out of the woods, but I was happy to see a little bit of life into the housing market this week, but what happens next? In the near term, I think it really comes down to what happens in the Middle East. And I know that’s frustrating because no one knows. It’s really anyone’s guess. But if you read any of the studies or forecasts on inflation and the impact on the war, the general consensus, strong general consensus, is that inflation is likely to remain in the three to 4% range minimum in the near term and that things can take a while to cool. And that is even if the strate of hormones open today, which it obviously has not. And if the war drags on, inflation spreads back through the economy, which it will, it will.
If the strategormoon remains close, I believe the market’s going to slow down. I’m glad to see this blip, but I think if this drags on for several more weeks, or God, I hope not months, but if that continues to happen, the market is going to slow. Affordability is just lower. Fewer people can go buy homes. Plus, it really negatively impacts consumer confidence. Consumer confidence is literally the lowest it has been in the 70 years it has been tracked. So that on top of reversing affordability gains, meaning affordability has gotten worse over the last couple of months, I think it’s got to slow down. I feel it’s very hard to imagine that if affordability stays low, people have low consumer sentiment that we can sustain any momentum in the housing market. Now, maybe we could still salvage modest home sales growth, but the idea that it’s going to pick up like we saw this week and stay that high, I don’t really think that’s going to happen amid inflation fears, AI fears, low consumer sentiment, unless the war ends and inflation goes down, right?
Hopefully there will be a quick resolution. We see mortgage rates start to come back. We get affordability back on track. I think this week’s data shows that there is still demand for housing. People want to buy homes. And if the war ends and mortgage rates start to come down a little bit, I think we can get a little bit of a momentum back. But it really, to me, comes down to how long this war stretches out because I know this is a little wonky, but it’s not like the day the strait of hormones opens that we’re going to see inflation go down, that gas prices are going to go down. They’ll probably go down, but not to where they were pre-war. And the longer things stay closed, the longer it will take for things to get back to normal. We kind of saw this during COVID, right?
Things were so messed up for so long that it’s taken forever for inflation to come back down. Now we’re not in that situation yet, don’t get me wrong, but I’m just saying the longer the war drags on, we’re like a month away from certain countries running out of oil, dipping into strategic reserves. That will push up inflation. That could cause a global recession, right? All these things could start happening if the war stretches out. So let’s all hope for a quick resolution to this. But the housing market’s not tanking, so don’t get worried about that, right? We’re not seeing prices crashing. We’ve actually seen solid pending sales. So even though it’s maybe not getting better and it might continue to be slow, like I’ve been talking about, the bottom is not falling out. So that is good news. That’s why I was encouraged to see this stuff this week.
And there is more data that’s actually come out about the current housing market, the spring housing market that I think is super encouraging for investors. And we’re going to get into that, but we got to take one more quick break. We’ll be right back.
Welcome back to On The Market. I’m Dave Meyer. Today we’re going through spring housing market data. And while the macro situation is complicated, the conditions on the ground for investors aren’t that bad. I know that sounds crazy and I know that I have been somewhat pessimistic about the chances of a housing market rebound, but a lot of my pessimism, if you listen over the last couple of weeks, is about the housing market not getting back to healthy levels. That’s what I personally really want to see, but that does not mean that investing conditions on the ground for long-term investors are bad. And I actually think things are shaping up in a way that are better and better for people who are looking to acquire more properties. Now, I already talked about more active inventory. That’s good for investors, but the big news and the data that we are starting to see from the spring housing market is that negotiating power and leverage is improving.
This is something we talked about on the show, but this is backed up with real data. There’s some new data that came out from Redfin the other day that showed that there are over 40% more home sellers than buyers. Another way to put that is for every 10 buyers out there, there are 14 sellers. That’s the highest since Redfin has been keeping this data, which goes back to 2012. 2012, not a super dynamic market. I don’t know if you were investing back then, I was, and it was pretty slow. Definitely a buyer’s market. It did spike up to 30% in 2014, 2015, but 43% where we’re at today, that’s the highest it’s been in 13 years on a national level. And this is true in a lot of regions. So let’s talk about that too, because the way you actually use this data, national data for this, not super helpful.
For regional data though, it can help you formulate your strategy for going out and acquiring, how to bid on properties, how to negotiate on properties. And right now, out of the 49 largest metro areas in the United States, 38 of them are in a buyer’s market. That’s up from 29. 29 a year ago in a buyer’s market, now 38. And actually in five of those markets, there are almost twice as many sellers as buyers. So for every 10 buyers, again, 20 sellers out there. Now on the flip side, there are only five markets that are seller’s markets. These are markets largely in the Northeast, Newark, New Jersey, Nassau County, New York, Montgomery County, Pennsylvania, New Brunswick, New Jersey. The one in the Midwest is Milwaukee. The rest are neutral. There’s six neutral, five sellers markets, 38 buyers markets. This as an investor should be perking your ears up a little bit, right?
This means it’s a better time to go out and acquire right now. The strongest buyer’s market in the country right now is Miami with sellers outnumbering buyers by 148%. In Nashville, it’s 120%. In Austin, it’s 112%. In San Antonio, it’s 109%. Las Vegas, it’s 100%, meaning there are more than twice as many sellers as buyers in these markets. Not really a surprise which markets make this list. On top of those, it’s Dallas, Tampa, Orlando, Phoenix, Atlanta, Charlotte, all the hot markets from a couple years ago in the biggest buyer’s market. I already told you the five that are in a seller’s market, the six balanced markets, Baltimore, Cleveland, Providence, Rhode Island, Boston, Chicago, Minneapolis. Everything else is in a buyer’s market. And if you take this all together, think of this all together, you see stronger inventory, right? More new listings, more active inventory. You have less competition because even though there is some demand, demand from a couple years ago, it’s way down from demand a couple of years ago, right?
And now you have better negotiating leverage when you go out and buy some of that increased inventory. It can make for good investing conditions. And again, I know we say it on the show all the time, but it’s not like we’re making this up. The data actually supports this. There are more sellers than buyers. That means they have to compete for you. In Miami, there are 25 sellers for every 10 buyers. Make them compete for you. How do you make them compete? 25 people need to attract the 10 buyers. How do those 25 people get one of those 10 buyers to buy their property? They negotiate. They negotiate on price. They negotiate on terms. They’ll negotiate on whatever’s important to you if they’re desperate to sell. Now, not everyone’s going to be desperate, but people are going to be motivated to at least talk to you, at least have these conversations.
That’s the power of a buyer’s market. So go out and use it. I know the headlines about flat appreciation, about low pending home sales, about reversals and affordability gains is not the best news. But if you go out and actually look at the deals that are out there and you actually negotiate, don’t just take the list price for face value. I genuinely think you’ll see that deals are actually getting better. Now, are we going to get back to that healthy housing market soon? No, I don’t think so. We’re still in the great stall. But the playbook that we have been talking about for what works right now still works even during all this stuff. The data supports that. It suggests that you have better opportunities to go out and get good deals than you have in a long time, maybe 10 years, maybe more. And I know it’s intimidating to do it with all this uncertainty, but if you follow the principles we talk about on the show all the time, conservative underwriting, buying under market comps, if you can do that, you can find good deals.
So take what the market’s giving you. The market’s giving you negotiating leverage, go use it. That’s our show for today. I’m Dave Meyer for BiggerPockets. Thank you for watching this episode of On The Market. I’ll see you next time.