Demand Just Gave Us A Warning

 The listings under contract chart has suddenly shot a warning cannon across the market.

This is a much more negative view than the one we published just a couple of weeks ago, which we described as worrying at the time. A drop below 7,500 at a time when the autumn buying season should be fully underway is not a good sign. Only 2007 and 2008 gave us lower readings than this.

It suggests that another leg down in demand has followed the recent rise in mortgage interest rates. Not exactly surprising, but the drop is even larger than we anticipated.

____________________

The drop in demand is being driven primarily by the rise in interest rates. 

HOWEVER, the Central Banks have blinked. 

It appears the strategy of raising interest rates to fight inflation is more painful to the markets than the long term consequences of continuing quantitative easing ie. 'printing' money / buying debt, which should lower rates some. 

• The stock market loves it - on a tear this morning. 
• Mortgage lenders will love it.
• We should love it...at least short term, as we would expect some interest rate relief that will increase buyer purchasing power.

How this plays out in the longer term e.g. inflation; the value of the dollar; etc. is above my pay grade - which really means I'm not only not qualified to comment with any authority, but truth is, choose not to parrot what many sober prognosticators are saying is simply kicking the proverbial debt can down the road.

This brings up a 'problem' for me as a trusted advisor. 

Everything is connected. More so than I can ever recall. No doubt, in no small part due to the acceleration in global messaging via the internet.

To the rescue: 

We do have Collateral Analytics' 5-year Forecast, which we would expect will recalibrate accordingly. 

Btw, no change yet as of this writing. 

I take great comfort in your proprietary access to this tool - both for its utility in giving us that 'bank grade' metric to translate the financial markets big picture to our local market, but also the differentiation it gives me; the power to add value to the conversation with the greatest objectivity we can provide for a forward look!

The point is, real estate trends don't happen in a vacuum. So we have the inherent challenge that even as the real estate market is a hyper local business we can't ignore the broader context that drives interest rates; the stock market; and at the end of the day, people's confidence in moving forward.

Stay tuned for an interesting ride as we enter Q4!