The Big Question

You don’t need us to tell you. The big question right now is obviously, “When will the Fed cut rates?”

As you’ll see in our first story, we got some excellent news. The latest data shows that those cuts are likely coming in September, if not sooner. We’ll be keeping an eye on all the incoming reports, and letting you know which way we see the needle moving.

In the meantime, if you haven’t had a chance to fill out this brief survey designed by our partners at Estate Media, we encourage you to take a few minutes this weekend to fill it out. It will go a long way toward helping us further tailor this newsletter to meet all your professional needs. And just to sweeten the pot, one lucky entrant will win a $500 Whole Foods gift card!

And now, on with today’s Blueprint!

– James and David

Excellent news on inflation

In June, Core CPI inflation rose 0.1%, below expectations of 0.2%. It’s up 3.3% year-over-year (the lowest since April 2021), below expectations of 3.4%. That’s what the BLS reported yesterday in its latest update. Here’s a breakdown of its key inflation metrics.

Housing inflation slowed considerably in June, dropping from 0.42% to 0.27% month-over-month. This increase is entirely in line with pre-pandemic inflation averages. Until now, housing defied pre-pandemic norms more than any component of core CPI.

Our take

Honestly, we couldn’t be happier. This is a huge relief. Had the inflation numbers come in hotter than expected, the Fed might have further delayed interest rate cuts. But that’s not gonna happen. The Fed will most likely cut rates by September, possibly earlier. Yields on the 10-year treasury have already fallen, causing the average of the 30-year fixed mortgage rate to slip to 6.85%, its lowest level since early March. We have one more important inflation report before the Fed holds its meeting at the end of July. But if this report is any indication, interest rate cuts are definitely on their way.

Mortgages with rates below 6% are falling

85.6% of mortgaged homes have a rate below 6%, down from the peak of 92.8% in Q2 2022. That’s one of the central conclusions revealed by the Federal Housing Finance Agency’s (FHFA) latest update on residential mortgages. Here’s what else the agency reports:

• Nationwide, mortgage holders carry only 48% loan-to-value (LTV) on their homes, down from 70% a decade ago.

• Adjustable-rate mortgages (ARMs) account for 3.5% of outstanding mortgages, down from 9.6% one decade ago.

• The average credit score among borrowers with an active loan is 743.

• There were 50.8 million outstanding mortgages with unpaid balances totaling $11.7 trillion at the end of Q1 2024.

Our take

That 85.6% of mortgaged homes with sub-6% rates is the reason why many experts feared that homeowners wouldn’t list their properties for sale this year. Well, we are seeing some movement. While the “lock–in” effect hasn’t subsided entirely, new listings have spiked by nearly 10% year-over-year. But our big takeaway from this report is that current mortgage holders are doing great. They have a high credit score on average, their LTVs are great, the number of outstanding ARMs is very low, and nearly all of them are flush with equity. Current homeowners are sitting pretty!  

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Metros where investor activity spiked the most

According to Realtor.com, small investors (those who purchased 10 or fewer homes) bought 62.6% of all investor purchases from January to March 2024, the highest small investor share on record. Small investors bought 6.4% more properties on an annual basis, while medium (11 to 50 homes) investor purchases fell 3.8% and large investor (50-plus homes) purchases fell 13.9%. Metros in the Midwest and the South are where investors made most of their purchases.

Here are the top five cities where investor activity spiked the most:

1. Savannah, GA (+ 8.3%)

2. Youngstown-Warren-Boardman, OH-PA (+ 7.9%)

3. Peoria, IL (+7.2%)

4. Springfield, MA (+6.4%)

5. Montgomery, AL (+6.3%)

Our take

It’s not surprising that investors have concentrated their efforts in the Midwest and South since these regions have the most affordable homes. Even though homes in these regions have seen significant price growth since 2019, they still fall below the national median price level. Interestingly, though, cash is no longer king to investors. During the pandemic, investors often made all-cash offers to help them win bidding wars. At the peak, in Q4 2021, 69.7% of investors purchased in cash, but in Q1 2024, the share of investors purchasing in cash fell to 64%, the lowest level since 2008.

The news that just missed the cut

• How AI will change the job of real estate agents, according to Forbes 

• Investors in distressed assets are gearing up to pounce on this opportunity

• This is what’s driving the rise of “Zillow Gone Wild”

• Warren Buffett’s best quotes about buying a house

• Cameron Diaz’s posh Benedict Canyon mansion just listed for $17.8M

Foundation Plans

Advice from James and David to win the day

Today we conclude our two-part series on the essentials of choosing a brokerage firm (you can find part one here). Before you attach yourself to a brokerage, make sure you base your decision on these factors:

Training and/or career development programs – Most brokerages offer a variety of training programs, but it's important to do your research. Getting a real estate license does not teach agents how to “do real estate.” Sure, they’ll learn about all the laws and state regulations… but can they fill out a purchase agreement? Do they know how to run a market analysis? How to work the MLS? How to market and advertise their properties? This is why training programs are essential, and it’s equally essential that brokerages offer them. 

Marketing tools and technology – In many brokerages, these are 100% company-paid, but some firms require agents to pay a la carte for what they use. Each brokerage brand has its own policies, so make sure to ask. Most MLSs and Realtor associations also offer some level of technology for their members. Tools provided by a brokerage can include customer relationship management (CRM) programs with features such as geo farming, automated emails, text follow-up tools, digital marketing materials on demand, personalized websites, online and in-person training and coaching, transaction management tools, forms library, post-closing follow-up programs, and more. 

The brokerage’s reputation – Make sure you associate yourself with a brokerage that has a good reputation. If they’re a franchise, how much name recognition do they offer? How are they known for treating their agents? If they’re an independent brokerage, how well-known are they within the community? What’s their market share? Use Real Trends to research how well they rank and how successful they are. 

Mentorship programs – Some brokerages often pair rookie agents with seasoned agents as mentors. Make sure you ask whether the brokerage you are considering has such a program, and be sure to ask these questions: How many days or hours of formal training is involved? Is there a cost for this service? If so, how much? Is the mentor easily and readily available to you? What other "hats" does that person wear? What is the mentor expecting from you?

As you can see, choosing a brokerage is obviously an important and complex decision. The relationship between an agent and a brokerage has many different facets, so it’s important to research and understand them all. For more resources on this topic, start here and here.

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:

That’s a wrap on this edition of The Blueprint!

As we head into the weekend, remember that each day is a gift and a new opportunity to lead the life you want and to become the person you want to be. The mistakes and missteps you’ve made in the past don’t define you. Live as intentionally as you can and be ruthlessly focused on the goals you’ve set out to achieve. You can do it!

Thanks for reading, and we’ll see you back here on Tuesday!

– James and David