The latest on rates

Well, all the excitement over the interest rate cut a few weeks back has now been tempered by the recent spike in mortgage rates. Below, we give you our quick breakdown of what’s going on, and what we expect for the future. 

We also provide a lot of helpful information in today’s newsletter to help you deal with sellers. 

Zillow recently released a terrific survey which allows us to see exactly why and when sellers choose to move. It is full of good insights, and we highlight some of the best ones.

Plus, in today’s Foundation Plans, we discuss the tricky subject of price reductions and how to handle those conversations with your sellers.

With that, let’s get into today’s edition of The Blueprint!

– James and David

Mortgage rates spike after stronger-than-expected jobs report

The average rate on the 30-year fixed mortgage is now 6.53%, according to Mortgage News Daily via CNBC. That number is 42 basis points (0.42%) higher than it was the day before the Federal Reserve cut its benchmark rate by half a percentage point.

Several data points explain why mortgage rates went up. According to the BLS, in September, 254,000 jobs were created, blowing past expectations of roughly 150,000 jobs. It was also higher than the three-month moving average job creation rate for the past six months. Meanwhile, the unemployment rate dropped from 4.22% to 4.05%, although it was expected to remain at 4.2%. 

This unexpected display of strength by the labor market has caused bond traders to discount the possibility of a 0.50% rate cut in November. Consequently, yields on bonds increased nearly across the board. The yield on the all-important 10-year Treasury bill now stands at 4.01%, up 30 basis points (0.30%).

Our take

The main takeaway here–-we are unlikely to see a .50% rate cut at the Fed’s November 7th meeting. The upcoming CPI inflation report on October 10th and the jobs report on November 1st aren’t expected to show enough weakness to justify another cut. If a strong jobs report comes in, even with lower expectations due to Hurricane Helene, hawks on the Fed will argue for 25 bps cuts at alternating meetings. We think this stance is mistaken since inflation is moving toward the 2% target, and the labor market isn’t strong enough to drive further inflation. That makes the current 5% Fed Funds rate seem overly restrictive. We expect mortgage rates to fall below 6% only by the tail end of 2025.

This is what causes sellers to list

78% of homeowners who list their homes for sale are motivated to sell due to major life events, such as changes in family size or job relocations. That’s according to Zillow’s report on seller motivation. Here are some other key takeaways:

• The typical seller spends 3-4 months seriously considering to list before ultimately putting their home on the market 

• 48% of sellers to cite wanting a new location as a contributor to moving or selling, followed distantly by a home being too small (22%) or wanting a new floor plan or layout (22%)

• 66% of sellers said they considered renting out their home before ultimately selling, with younger sellers more likely to consider that approach.

• Life events most likely to motivate homeowners to sell/move:

  • Change in household or family size (51% of total sellers)

  • New job or job transfer (37%)

  • Working remotely more often (35%)

  • Retired (32%)

  • Got married, divorced, or separated (32%)

  • Working remotely less often (29%)

  • Job loss or other involuntary unemployment (29%)

Our take

We encourage you to read this report. It is full of so many tremendous insights that we couldn’t fit in the summary. For example, did you know that while most sellers take 3-4 months to consider moving, 34% of older sellers (60+ years) take six months or more? Did you know 82% of sellers aged 18-29 thought about renting? Those are two of several good nuggets in this report which can help you in your business.

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10 Metros with the highest amount of new construction homes

While it has been true that buyers typically pay a premium for new builds over existing homes, the current stats don’t bear that out. As Realtor.com reports, the median price of an existing home was $422,600 in July. For a new home, it was $429,800. Additionally, in two of the 10 highest-growth new-construction metros—Bend, OR, and Pensacola, FL— newly built homes have a lower median list price than existing homes.

Here are the 10 metros with the highest annual growth in new construction, according to Realtor.com.

1. Bend, OR

2. Miami, FL

3. Seattle, WA

4. Fayetteville, NC

5. Colorado Springs, CO

6. Port St. Lucie, FL

7. Chattanooga, TN

8. Pensacola, FL

9. Knoxville, TN

10. Spartanburg, SC

Our take

This report truly illustrates how agents have to really dig into data. For example, while newly built homes in Pensacola have a lower median price than existing homes, that’s not true in Miami. The prices vary a lot by area, given the supply and demand dynamics of each market. That said, with all the concessions offered by builders these days, newly built homes offer an ideal opportunity for buyers who have been priced out of the existing home market. There are just more options, and less competition, out there. 2025 will be another year in which newly built homes will play an important role in the housing market. That is, until mortgage rates fall below 6%.

The news that just missed the cut

• How to achieve the highest possible sale price for your listing

• Texas’s population boom is cooling

• Zillow adds climate risk data to home listings as threats rise

• How to grow your real estate business without buying leads

• The “Monestier buyer agreement” might become the model for the industry

Foundation Plans

Advice from James and David to win the day

Mispricing a listing is one of the most common mistakes agents and clients make when putting up a home for sale. To help agents avoid this mistake, we did a three-part series last month on how to price a listing properly. Nonetheless, you may still encounter a situation where you will have to talk with your sellers about price reductions. Jim Carrey’s L.A. mansion, for example, is going through its fifth round of price cuts. 

As part of our skills prep series for next year, we are going to give you our best tips for handling price reductions with your sellers, without losing their business in the process. These are also good to know as we head into the winter season, which is typically slower in sales activity.

• Start with a strategic price. If you price a home well from the start, price reductions may be a non-issue. Remember: if you overprice a home, it’s going to sit on the market, rack up reductions, and end up netting a lower price than if you had priced it competitively from the start and sold in a matter of days.

• Shop it off-market to test the price. Before you list on the MLS, get some eyes on the listing through off-market showings and open houses. Get some brokers through the doors, start building interest, and get feedback on the list price before you go live so you know whether adjustments are needed.

• If your seller won’t budge on price, set clear expectations. Let them know if you list at that price point they need to be prepared to make adjustments along the way. Say, “If this property hasn’t sold by X date, we’re going to meet and talk about a new price.” That way they know to expect the price adjustment conversation and they’re ready to compromise. 

These kinds of conversations with clients can be awkward and difficult. If you’ve had them, tell us about your experience. We love hearing your stories. In the meantime, start here to gain some guidance on how to handle such conversations.

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:

“Your time is limited, so don’t waste it living someone else’s life.” – Steve Jobs

Productivity isn’t about doing more, but doing what matters. Take action this week to achieve the goals you want. Everything not related to your goals, delegate to someone else.

Have a fantastic week friends. We’ll see you Friday!

– James and David