Does the Fed Get a Handle on Inflation? | Greater Denver Area Market Update

Hey everyone, Michael Rush here, your Colorado real estate guide, bringing you another market update for the greater Denver, Colorado area. You know, I hear a lot about how buyers think that they missed the lowest interest rates, that they can't get a good deal right now, or they're waiting for the big bubble to burst, right, and for the crash to go deeper and to go further and further so that they can get a great deal. Which I love. You know, I'm a homeowner myself, I'm an investor, so I love that as well, and I love getting a good deal as much as anyone. But I just wanted to bring you some statistics and some data so that you can make educated decisions as a buyer and as a seller right now. So sellers think that, you know, they have FOMO, they missed out on just ridiculous appreciation that we had, white-hot market where prices were just skyrocketing, a Homes were flying off the shelf in the first weekend that they were on the market. You know, competition just $50,000 above asking price, waived inspection, waived appraisal, and whatnot. So, you know, that's not a healthy market, and we're definitely headed towards more of a balanced market, but it's still a seller's market, and we are still lower on inventory than a balanced market. So it's nothing like 2008. It's nothing like that. It's not a bubble that's going to burst. Now, we are having increased inventory and lowered demand from 2021 year over year, and that is because of seasonality for one, and because of the increasing inflation, and in turn the increasing interest rates, mortgage interest rates. Now, I understand the concern that buyers and sellers are having right now, and I also think you can still make great decisions if you have a good real estate guide And if you have good data to make your decisions based off of. So there's good news on the horizon, I think, as a buyer and as a seller. And one thing that I want to touch on is that we just got new numbers today for September on the CPI core rate, which is basically an increase. And what they do is they take numbers on a 12-month year-over-year basis. And when new data comes out, it's on a lag period. So we just now received our data for September of 2022, and that number replaces the data from 2021. And the number from 2021 was low inflation. So when we, when our new numbers replaced it, it showed a higher inflation score on the CPI. Now what's going to be happening in these following months, so in November, in December, January, and February, is that we had higher inflation. numbers in 2021, so it's going to have less of an impact. And I think that the Fed, judging off of what the, the rates just did, I think the Fed when they meet on November 2nd does another rate increase. I think they increase another 0.75, and I think they get a handle on, on inflation. Now this is just my opinion. This is based off of different economists I listen to, different research that I do. Um, it depends on many things throughout the world, but this is what I think is going to happen. I do think we're headed towards deflationary times through— that's what the Fed is trying to do, right? They're doing something right now that is called demand destruction. Inflation is too many dollars chasing too few of goods, and the Fed is trying to destroy that demand right now so that they can get a handle on inflation. Now, in doing so, they go overboard oftentimes and send us deeper into a recession, which is deflationary. And in recession, they then decrease the Fed fund rate to then increase demand again. And mortgage interest rates tend to have a close, close relationship with the, with the fund rate. So that's what I think is going to happen in November, December, January, February. I don't think it's going to be a drastic increase. I think it's going to be slow. It's going to be each month they're going to take a look at the numbers like they have been doing and make decisions based off of that data. But I do think we come back to lower interest rates and that's going to increase demand again. So right now it's actually a window. This is the plan. This is what I would do as a buyer right now, is that I think you have an incredible opportunity for Q4 of 2022 and Q1 of 2023. I think that the beginning of Q1 in 2023, because I think demand starts to increase again, and then we start to get more competition, and you won't be able to get as much as you can right now. Right now as a buyer, you're able to get a much better deal on the home. You're actually able to have an inspection. You're able to get things fixed that need to be fixed. You're able to have an appraisal. And oftentimes you can also get seller concessions so you can keep more money in your pocket at the closing table to, you know, save, to invest, to upgrade the home. Or you can even get the seller to do a 2-1 buydown as well and help you out. And that way you can have a lower interest rate for the next couple years while you see what the market does. Now, I don't think you're going to have as many opportunities to do that as we enter further deflationary times entering 2023, as interest rates come down and as demand and competition goes back up. So that's what I would do as a buyer. I would take advantage of the market where it's at in these coming months. I would try to get a great deal on the property that you want, and then also try to get some things from that seller to help you out and to keep more cash in your pocket. Now as a seller, if you have to sell right now, it's so, so important to price right. You don't want to chase the market, especially right now. So pricing right, being in a great location, having good staging or staging it yourself, that helps so much. Now if you're looking to list and you have 7 other homes within half a mile that are similar to yours and they aren't selling right now and they've been on the market for quite a while, I would definitely wait because you're going to have an opportunity as well coming into Q1 of 2023. I think just because of seasonality, the spring selling season is statistically the best time to sell, but also it's going to coincide with these deflationary times and lowering of mortgage interest rates, which is going to increase buyer demand again. The buyer pool is going to increase, and I think those 2 things work really nicely for you to still get a great price on your home. Um, so you definitely let me know if you have any questions, if you need anything at all. My number is 720-288-0592. Again, I'm Michael Rush, your Colorado real estate guide. Thank you.