Mortgage Market News and Insight

For the Weekend of March 23^rd, 2024

 

Hawaii’s Most Read Mortgage Publication for 16 Years

 

Volume 16 – Issue 29

A Pretty Picture May Not Be Accurate

A friend texted me last week with a screen shot from her phone of an ad on Instagram for a local landscape company.  Her question shocked me.  She asked “Hey, isn’t that a picture of your house?”  The shock was not that someone had a front yard that looked a lot my house.  The shock was that this very well-known and established company had the gall to take a picture of my landscaping and promote it as a representation of their work.

 

This then got me thinking about mortgages and real estate with so many companies spending big bucks on fancy websites and lots of money on ads running on social media.  I don’t think that most consumers are aware that on the internet there’s no one policing what a company promotes as their work product.  I’ve seen too many mortgage websites that have stock photos of happy consumers shaking hands with their Loan Officer at the signing table – except that photo is of no legitimate client of that company, nor is the employee someone who actually works for that company!

 

The same could be said for real estate websites.  These sites now have the ability to access the entire MLS database.  Many sites make it look like their company is the one with the actual listing.

 

How can you as a consumer know the company you found is really as good as their website and ads state?  I always advocate a 3-step approach.

 

Step #1 – Educate Yourself

I have personally lost confidence in the professional class in our country.  I’m no Einstein or Warren Buffet, but some of the advice I have been given by those that should know was awfully wrong. I now take it upon myself to learn as much as I can before enlisting the help of a professional.  I constantly tell both my kids how lucky they are to have the world of knowledge at their fingertips through their smartphones.  When I was growing up, we had to go to the library and sift through the card catalog for books on subjects.  Many of my friends got lost for hours not understanding the Dewey Decimal System.

 

Use the technology we have available to us to learn about the subject first.  It’s the only way you’ll be able to ask the professional a smart question and test their knowledge.

 

 

Step #2 – Personally Engage a Professional

In short, interview them.  Ask them all kinds of questions.  No question is dumb.  In fact, how the professional handles irrelevant questions will show you a side of their personality you may not otherwise see.  Ask them questions you already know the answer to.  Yes, test them on the knowledge you’ve learned.

 

Your interview, be it in person, over the phone, or now via video conference like Zoom, is a good opportunity to see if their personality and demeanor is a good fit for your personality.  Some professionals are super aggressive.  They may not work with your personality type.  But matching your personality isn’t always paramount.  Engaging a real estate agent is different than hiring an attorney.  One type of personality is not always the best for that job.  I’m not sure how aggressive I’d want a listing agent to be.  At showings, they would need a more welcoming attitude.  But for a legal matter, I’d want an aggressive lawyer, so long as they had an exceptional understanding of the law.  Remember, just because that person earned a degree or designation, doesn’t automatically signify they’re great at their job.  Not everyone finished in the top 10% of their class!

 

 

Step #3 – Past Client Testimonials

I never judge a restaurant by the reviews on Yelp, unless they all say the place is horrible.  But knowing how the professional I want to hire performed with past clients is something I am very interested in learning about.

 

In general, people are more motivated to write a negative review than a positive one – that’s just human nature.  It seems that every time I buy something on the internet, I immediately get a solicitation to post a review.  I’m sure you get the same requests.  Unless my experience was unexpectedly great, I usually pass.  If my experience was terrible, I’ll let them know.  Not to be mean, but with hopes they will get better.

 

I encourage every client of mine to post a review on my profile page on Zillow.  While not a big fan of Zillow, they do make sure those that post comments are real people and they police their site effectively.  I currently have 182 reviews.  You should look for the same from those you wish to engage.  The more reviews that person has, the better.  Unlike in the past when a business gave you a couple of names of past clients to contact, sites like Zillow’s don’t allow the profile owner to edit or hide any of the negative ones.

 

 

Remember, pretty pictures don’t tell you the whole story.  In fact, it may be someone else’s story!  Use the 3-step approach to determine if that professional is right for you.  Educate yourself, interview them and ask a lot of questions, and research what others thought of the service they received.

 

 

 

 

 

 

 

 

And now the week’s economic news…….

 

Status Quo for Fed

All eyes were on the Fed meeting this week.  No surprises were revealed, and officials essentially maintained the status quo in terms of the outlook for monetary policy.  Fearing a more unfavorable outcome, investors were pleased, and mortgage rates ended the week a little lower.

 

As expected, the Fed made no change in the federal funds rate.  The primary focus of investors for this meeting was the future path that officials anticipate for rates, and their median forecast remains for three 25 basis point rate cuts this year.  Of note, though, the spread between officials grew narrower, meaning that there was less deviation in the higher and the lower individual forecasts from the median.  In short, they are now more closely aligned with the consensus outlook.  Officials also significantly raised their projections for GDP growth, reflecting the solid performance of the economy in recent months.

 

Investors anticipate that the first rate cut will take place in June or July, similar to their expectations prior to the meeting.  The timing will primarily depend on the inflation data in the coming months.  The big question is whether the uptick in inflation in January and February was mostly due to temporary seasonal quirks or whether it indicates that the downward trend has stalled.  In his press conference following the meeting, Fed Chair Powell suggested that inflation likely remains on a gradual downward path to the target rate of 2.0% annually.

 

Sales of existing homes in February jumped 10% from January, far above the consensus forecast, but were still a little lower than last year at this time.  Inventory levels remain stuck near historic lows, standing at just a 2.9-month supply nationally, far below the 4.3-month supply typical in a balanced market. The median existing-home price of $384,500 was 6% higher than last year at this time.

 

Given the severe shortage of homes in many regions, additional inventory continues to be desperately needed, and the data released this week was encouraging.  In February, single-family housing starts surged 12% from January to the highest level since April 2022 and were 35% higher than a year ago.  Single-family building permits, a leading indicator of future construction, climbed to the best level since May 2022.  Finally, a separate survey of home builder sentiment on housing market conditions from the NAHB unexpectedly rose to an eight-month high.

 

 

 

Next Week

Investors will continue to watch for Fed officials to elaborate on their plans for future monetary policy.  For economic reports, New Home Sales will be released on Monday.  Personal Income and the PCE price index, the inflation indicator favored by the Fed, will come out on Thursday.  Mortgage markets will close early on Thursday and will be closed on Friday in observance of Good Friday.

 

Until next week…….