What To Expect For The El Paso Housing Market
We have a new Federal Reserve Chairman. Jerome Powell leads the troops these days. As Fed Chairman, Powell will be repeatedly run through the Congressional wringer. His first run through occurred last week.
From what we gleaned from Powell’s testimony, the new Fed boss holds similar views to the old Fed boss, Janet Yellen. Powell, like Yellen, holds a positive outlook on the economy and inflation. Like Yellen, Powell plans to raise the federal funds rate this year. Powell’s optimism, which exceeds Yellen’s, has led some market participants to believe that four rate increases could occur before the end of the year.
You would think the prospect of four rate increases would have interest rates trending higher. They did initially, but they then drifted lower. The yield on the 10-year U.S. Treasury note is down roughly 10 basis points compared with the yield last week.
Mortgage rates followed suit. Yes, they remain near a four-year high, but there was some back-sliding, at least at the national level. Quotes on a prime 30-year fixed-rate conventional mortgage remain range-bound between 4.5% and 4.625%. Closing costs, though, have become more accommodating to prospective buyers.
WHAT THAT MEANS FOR RENTERS IN EL PASO
Our rental stock is greatly impacted by our proximity to Fort Bliss, generally driving prices higher than other markets. In January the number of rental units on the markets dropped by 10.4%. The median lease price increased 1.7% to $1,1063. The total number of units leased increased 23.1%, which means competition for better units can be fierce.
In some areas, the rental payment can be higher than a mortgage payment. For some, having the cash for the down payment and closing costs is a concern. We are fortunate, in El Paso, to have several different programs, each with different criteria, that can provide assistance. This means more choices in housing for El Pasoans. If mortgage interest rates start increasing, some potential buyers may get priced out of the market and become renters, driving up competition.
WHAT THAT MEANS FOR BUYERS IN EL PASO
Rates still remain affordable for the El Paso market and we are fortunate to have a lot of different programs to address the unique characteristics of buyers in El Paso. But that means carefully shopping to make sure to understand all of your financing options.
The spring selling season has started. The average price of homes on the market in January dropped slightly, by 0.7% to $156,423. The number of homes for sale edged up by 4.6% as sellers began to enter the market. The number of pending sales increased by 15.3%, as buyers began snapping up the better deals. Curiously, sellers were able to get an average of 97.3% of their asking price, up slightly from the previous months! Expect to see increased competition for homes until more sellers enter the market. Any increase in interest rates could mean fewer deals for buyers who wait to enter the market.
WHAT THIS MEANS FOR SELLERS IN EL PASO
With pending sales increasing faster than the number of homes on the market expect to see increased buyer interest in available inventory, at least until potential sellers who have been sitting on the fence during the holidays begin entering the market. The average days on market increased by 11.6% to 77 days, but are expected to improve unless we see a significant surge in the number of homes coming on the market. Timing will be important for sellers who need to sell quickly. Proper pricing, presentation, and focused marketing programs are the name of the game.
Any increase in mortgage rates will mean an early surge of buyer interest in available inventory as they try to stay ahead of market forces, but then a decline as they are forced to shop in lower price points. Sellers moving on will also be faced with higher acquisition costs. Generally, this may mean taking less profit on the sale of their home in order to enjoy the longer term benefits of lower rates on subsequent purchases.
Michael Bray is a 35+ year real estate professional in the El Paso market, and also serves as the Vice President of the El Paso Housing Finance Corporation for the past 15 years. He can be reached at (915) 549-1770 or Michael@ExitWestRealty.com.