As we finish up the first quarter of 2024, you might find yourself wondering what this year will bring for your real estate career and for our team as a whole.
When you read the section below on our last 30 days in review, you might find some surprising information about our first quarter performance to-date.
Our performance so far this quarter indicates a contrast to what the market is seeing. However, that’s very exciting news for our team, specifically.
Let’s start by talking about where the market is expected to go in 2024. Here’s a snippet from Michael Orr of the Cromford Report:
“As a market, demand has improved a little since late 2023, however, it remains very subdued and is having difficulty catching up to last year, which was pretty poor in the first place. With typical 30-year fixed mortgage rates over 7% again, we are not seeing much enthusiasm among buyers, who were clearly hoping rates would fall below 6.5% at least.
Last year the market caught a second wind in April but ran out of puff 2 months later. It is by no means clear what it will do in 2024, but so far it is merely ticking over, providing very little to get excited about.”
Demand is coming….Here’s why
If you’re curious on why rates may drop in the future and this stuff doesn’t bore you to death…then read on. If you would rather jab a fork in your thigh than read economic forecasting then skip ahead.
Every indication suggests that we are poised for a decrease in rates this year. I’ve been following Barry Habib religiously and here’s what I’ve learned. Interestingly, there are actual predictions on whether the Federal Reserve will reduce rates moving forward. There are signals suggesting a potential drop in rates by March, with even stronger indicators pointing towards reductions in May and subsequent months.
Noteworthy: While the Federal Reserve's adjustments to the federal funds rate—a benchmark for overnight bank lending—do indeed influence the broader economic environment, including interest rates across various financial instruments, it's crucial to recognize that these adjustments do not directly dictate mortgage rates.
Mortgage rates, particularly those tied to long-term loans like 30-year fixed mortgages, are more closely aligned with the yield on 10-year Treasury notes. This is because the market dynamics and expectations that affect Treasury yields also impact mortgage-backed securities, thereby influencing mortgage rates.
Thus, when the Federal Reserve modifies the federal funds rate, it sets off a chain reaction through the economy that can affect mortgage rates, albeit indirectly. With this understanding, let's delve into the current landscape and explore why we're anticipating changes in the rate environment and how this could stimulate demand.
The chart displayed above illustrates the likelihood of a Federal Reserve rate reduction by month, with a decrease in May almost guaranteed. Specifically, there's a 56% probability of a 0.5% reduction in rates.
We anticipate this summer to mark a pivotal moment in demand, making it the peak period for closings. It's important to note that this business operates on 90-day cycles, meaning your current follow-up efforts are laying the groundwork for the anticipated rate decrease.
As a team we are already feeling a surge in activity, and operationally we are preparing for even more momentum. Therefore, schedule your summer vacations with this in mind.
So there are predictions and then there is the logic behind the predictions.
Above is the Federal Reserve dot plot. The Federal Reserve's dot plot is a visual representation of where each member of the Fed expects the federal funds rate to be at the end of the year, for the next few years and in the longer run.
Each dot on the plot represents a Fed member's view on the appropriate target range or midpoint for the federal funds rate at the end of each calendar year and over the longer run. The dots are plotted anonymously.
What this indicates is that of the 19 members of the Fed, 16 are calling for a 1%-1.5% reduction in the Fed rate. This could put rates under 6% by year end, which we feel is the tipping point to unlock move up buyers.
What’s even more interesting is to look at the members' expectations for 2025 and 2026. It’s even lower! I’ll save you from the boring explanation of other signals like the yield on the 10 year treasury note.
Disclaimer: it's important to note that the dot plot represents individual members' views and not an official policy forecast. The actual path of the federal funds rate will depend on incoming economic data and evolving economic conditions.
The Last 30 Days in Review
Sixty days into 2024, and it's clear we're kicking things off on a high note! The energy in the air is electric! In discussions with many of you, it's evident that you're actively engaging with numerous buyers and sellers.
Our team has seen a remarkable 30% increase in pending transactions compared to last year. I am hearing from all of you that you’re working with a mix of buyers and sellers, with everyone either in the midst of appointments or getting ready for them.
This chart shows our pending volume compared to last year. Every day has surpassed the total from the previous year!
This really is a testament to all of you that are staying focused on the activities that create transactions! As a team, it may feel like demand has returned but that’s actually not the case. We are simply outpacing the market!! The information shared above proves that!
Our first-quarter success is happening because YOU, the team members, are making it happen!
Looking Forward: The Next 30 Days
Given the forecast for an uptick in demand we have prioritized the vision and execution of our transaction management.
Earlier this month, we introduced Sisu, a game-changing all-in-one platform. It provides you with a playbook to reach your goals, see real time lead indicators and we are currently in the process of moving our transaction management into Sisu.
Using Sisu means having a system that gives you visibility and insights into where you are at with every contract at a glance. This has allowed us to take a step back and reimage our transaction department. We're currently in the process of adding additional support staff to create a specialized compliance team to help handle your brokerage paperwork.
This will allow your current TC to dive deeper into each of your files and take a more proactive approach to be a true partner with you and your client throughout the transaction. This means an overall increase in communication, help with coordinating home inspections & buyer signings and ensuring key milestones are met. This will allow you to get out of the weeds and build lifelong clients.
With every step we take, from the integration of cutting-edge platforms to the expansion of our transaction department, we're not just preparing for the future; we're actively shaping it. As leaders in our industry, our actions today lay the groundwork for tomorrow's success, ensuring that we remain agile, proactive, and ready to seize every opportunity that comes our way.
Let's embrace the coming days with the same vigor and unity that have brought us this far, ready to meet the surge in demand with unparalleled service and dedication. Together, we're not just witnessing change; we're driving it. The horizon is bright, and it’s ours to claim. Let’s go!
Must-read book
7 Strategies for Wealth and Happiness by Jim Rohn
Must Follow
Dan Habib is Barry’s son and has great content. He’s my go to for mortgage forecasting.
Must-watch reel
Did anyone expect this to be easy?
Must-read article
Definitely a buzzworthy article and an interesting stance from the DOJ. Our solution based approach remains the same: Empower our agents with the best practices to be ready for what may lay ahead.
There's a tendency within the industry to get caught up in the latest news—lawsuits, disputes between major companies, and other sensational stories. While these may seem like bombshells to those of us within the industry, it's essential to remember that we exist in a bit of a bubble.
Our clients, the consumers, are largely unaffected by these developments. To them, the industry's internal conflicts and the latest headline-grabbing lawsuits have changed nothing about how they buy or sell real estate…for now.
Check it out
Our friend Greg Schwartz launched a competing portal with some cool AI search features. We ran some lead gen tests with him here in Az. This will be coming back soon and we're at the top of the list for partnership. They have some good data on existing mortgages for active listings. Really bold approach on the seller data they’ll be including. Check it out: Tomo.com
I’m feeling good! 2024 starting out with a bang!
Quote of the Month
“For every disciplined effort there is a multiple reward.”--Jim Rohn, 12 Pillars & 7 Strategies for Wealth and Happiness
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