A Cut Above

As we’re sure you’re aware, the Fed surprised a lot of people (including us!) by cutting its target interest rate by 0.50%, rather than .25%. We’ve summarized all the main takeaways from the Fed’s announcement below, and we give you our full reaction.

We also bring you Part 2 of our comprehensive three-part series of tips on how to price a listing. Every day, this skill is becoming more and more important in our industry. Scroll down to today’s Foundation Plans for more.

And now let’s dig into this Friday edition of The Blueprint!

– James and David

The Fed announces half-point rate cut

On Wednesday, the Federal Reserve cut its target interest rate by .50 percentage points (or 50 basis points). At his press conference, Chairman Jerome Powell indicated that the rate cut reflects a new phase for the U.S. economy, where the softening job market is the main concern, rather than elevated inflation. Here are the other key takeaways from his remarks:

• The FOMC (Federal Open Market Committee) lowered its target range for the federal funds rate to 4.75%–5% from the 5.25–5.5% range in place since last July

• Possibly two more .25% rates cuts are projected in 2024

• The Fed anticipates that, by the end of 2025, their target rate will be down to 3.4%, which implies four .25% rate cuts next year.

• The Fed also anticipates a slightly higher unemployment level, with the jobless rate leveling off at 4.4% in the final months of 2025.

Our take

We don’t normally like surprises, but this was a great one! As we said previously, there was a strong case for cutting by 50 basis points, but we believed that the Fed would take the cautious route and only cut by 25 bps. We’re thrilled that they went for the big swipe, because it makes total economic sense. It’s also great news for buyers. Mortgage payments on a typical home purchased today would now cost a buyer $1,200 less per year compared to May. If we get the anticipated 100+ bps of cuts by next March, we could see a big spike in sales and listings in Spring 2025, given that more locked-in homeowners and renters are “itching to move” soon.

New home construction soars

In August, new home construction starts increased by 9.6%, according to KPMG’s latest research. Completed home construction jumped to 1.79 million units, the highest level since January 2007. This is a reversal of a trend. For the past nine months, housing starts have been declining as builders focused more on completing projects rather than starting new ones. Here are some important takeaways from August

• Single-family starts surged 15.8% to just under one million units

• Multifamily starts of buildings with five units or more plunged 6.7% MOM and were down 6.2% YOY.

• Builders have pivoted away from multifamily construction after a record one million units were under construction in 2023.

• Building permits increased by 4.9%, signaling growth in future construction

• Single-family permits rose 2.8% while multifamily with five units or more rose 8.4%.

Our take

This summer was disappointing for builders as mortgage rates remained elevated. But now, as those rates continue to fall, new development projects are getting underway and construction activity is increasing. Residential investment is expected to start boosting growth as early as the first quarter of 2025. Even with all this activity, we expect most builders to offer concessions like rate buydowns to get buyers into the market. With the lock-in effect weakening, these are all good signs that next year might be better for our clients and us brokers.

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Counties with the most expensive housing markets

The typical home costs $362,143 nationwide, based on Zillow’s Home Value Index. Of course, this number varies by region, state, and county. To determine the extent of this price variation, Resiclub ran some regression experiments on Zillow’s index. In the process, they found the counties with the highest typical (or median) home price across the country.

Here are the top 10 counties with the highest typical home value:

1. Nantucket County, MA – $2,731,555

2. Pitkin County, CO – $2,394,335

3. Teton County, WY – $2,209,317

4. Santa Clara County, CA – $1,597,328

5. San Mateo County, CA – $1,549,979

6. Dukes County, MA – $1,518,343

7. San Miguel County, CO – $1,498,272

8. Marin County, CA – $1,451,674

9. Eagle County, CO – $1,329,145

10. Summit County, UT – $1,265,911

Our take

While this is certainly an interesting list, it doesn’t tell the whole story. Even within these counties, there are stark price differences depending on the submarket. It's clear that the priciest housing markets are often in sought-after coastal areas since they tend to have higher incomes, limited activity from large-scale builders, and significant geographic and regulatory constraints on new construction. They're also hotspots for knockdown-rebuild projects, where the land is often valued higher than the home itself. The only way these property values will drop to more affordable levels is if there's a substantial increase in housing supply.

From a brokerage perspective, use this report to refine your efforts as a luxury broker and determine where the most expensive homes are located. But don't stop there. We keep detailed lists of homes valued at $1-5 million, $5-10 million, and $10-15 million, etc. in any target area. Know the owners and properties intimately, and tailor your marketing strategy to suit each segment. We suggest doing this kind of inventory analysis for every market that interests you. It is a truly valuable exercise!

The news that just missed the cut

• What will falling interest rates mean for real estate 

• How Walmart is using 3-D printing to revolutionize real estate

• How this investor is looking to make $79M just weeks after buying a property

• Essential tech tools agents need to know about

• Boomers own 38% of America’s homes… but more than half never plan to sell

Foundation Plans

Advice from James and David to win the day

As we mentioned up top, if we get 100+ basis point cuts by next March, we could see a big spike in both listings and sales next Spring. It will be very important how you price new listings. In today’s edition, we continue in our 3-part comprehensive guide to the subject. In Part 1, we covered understanding the property details of your listing. Today, in Part 2, we cover what you need to know when gathering the relevant sale comps. Let’s dig in!

2. Gather Comparable Sales Data

After identifying your search parameters, focus on finding comparable properties in three categories–sold, pending, and active listings. For each category, gather the following data:

• Average price for sold, pending, or active listings

• List-to-sold price ratio

• Days on the market

• Number of price reductions before selling

• Competing homes currently listed

• Incentives offered (such as those in new construction)

Preview active and pending sales in person when possible, and reach out to listing agents of recently sold properties for additional insights. Touring nearby new construction homes can also help sharpen your pricing strategy, especially if your property is competing with newer builds. When presenting your findings to sellers, highlight the fact that you’ve personally reviewed their competition, a service few others provide.

On Tuesday, we’ll bring you Part 3, with tips on how to devise a smart pricing strategy. You can’t do that, however, if you haven’t understood your listing and collected the pertinent sale comps first. For more guidance on how to price your listing effectively, use these resources.

To learn more about Estate Media, visit their website.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

We hope you’re excited friends. Things are falling into place as we expected and predicted. It’s time for us to capitalize as much as we can. Recharge and rest because next week is another opportunity for us to take action and create the life that we want to lead.

Have a wonderful weekend. We’ll see you back here next Tuesday!

– James and David