February 2024 Fort Worth Statistics At-A-Glance
**Source: Greater Fort Worth Association of Realtors
Credit: Old Republic Title
The General Market
The real estate market in 2023 was marked by high volatility, low inventory and soaring prices, making it one of the most challenging years for buyers and sellers alike. However, as we enter 2024, there are signs of improvement and stabilization in the housing sector. Let’s review the fourth quarter of 2023, then glance forward to 2024 forecasts.
The Residential Market
The housing market showed its dynamic nature in the fourth quarter, despite some disquieting headlines. A lack of homes for sale reaccelerated prices, which grew 6.3 percent year-over-year in October. After rising all year, the 30-year fixed rate mortgage spiked to almost 8.0 percent in October as well. Consequently, existing home sales fell below 4 million units for the quarter, a level not seen since 2008. Demand was evident in new home sales. Despite more difficult borrowing conditions, builders responded to the market by offering price concessions and smaller homes. The Federal Reserve (The Fed) maintained its rate at 5.5 percent1 throughout the quarter, prompting observations that the inflation “fever” may have broken. This news helped pull down interest rates, which fell to 6.6 percent by year-end, prompting unusual fourth quarter activity. Single-family starts and permits jumped, while new purchase mortgage applications increased 21.8 percent in November.
With mortgage interest rate sensitivity so evident, more attention was paid to its main drivers: the 10-year treasury note yield and the spread lenders add to it. As the graph below shows, yield changes in 2023 were dramatic. This movement was driven by the anticipation of The Fed’s interest rate path, the continuation of U.S. deficits and demand for U.S. securities as a safe haven. The mortgage spread was about 120 bps wider than in past years, compounding the impact on borrowers. According to the President of the Mortgage Bankers Association (MBA), the political environment with the debt-limit crisis and gridlock layered on top of economic uncertainty pushed up the spread.
Continuing Quantitative Tightening (QT) also contributed to increased mortgage rates. The Fed has intentionally reduced its holdings of Mortgage-Backed Securities (MBS), removing itself as a significant buyer in the MBS market, which consequently raises funding costs for lenders. Despite calls from some housing market organizations to reconsider QT, Chairman Powell explicitly stated in December that The Fed has no intentions of doing so in the near future.
The Commercial Market
The peaking of commercial interest rates in the early fall suppressed Commercial Real Estate (CRE) deal activity in the usually busy fourth quarter, according to MSCI. Transaction volume dropped from October to November, and was down 60 percent year-to-year by the end of the month. While prices softened further, the pace moderated. Performance across the sectors was mixed. Elevated apartment construction impacted the attractiveness of the sector and activity. For industrial properties, deal volume was also down significantly, but prices stayed positive due to rent rate growth of 15.3 percent, as tracked by JLL.
MSCI’s preliminary data for Q4 indicated that office, retail and hotel transactions were on par with the previous quarter. The Office sector continued its adjustment; price declines accelerated and some distress worked its way through the pipeline. According to Bisnow, deed in-lieu-of-foreclosure transactions outpaced averages set in 2022 and before the pandemic. Hotel prices were stable, helped by the return of foreign tourists and the “Taylor Swift effect” of fans flocking to concerts nationwide. MSCI’s November Capital Trends report noted that the period of worry over retail properties seems to have passed. The vacancy rate2 remained near 10-year lows and in-store shopping was very robust this holiday season. Retailers who survived the pandemic have adapted, occupying smaller stores and moving to freestanding retail space.
A Glance Forward
In December, The Fed signaled that the tightening cycle was likely at its peak. The first of potentially three rate cuts could come in early spring. By then, the economy could be showing sufficient signs that it will not reheat. According to the Federal Reserve Bank of San Francisco, annualized Gross Domestic Product (GDP) growth could slow due to depleted pandemic-related excess savings. GPD could also lag due to persistently high consumer credit rates and further credit tightening caused by the expiration of a special program supporting smaller banks. Economists expect the job market to soften a bit and that inflation will be less of a concern. Fannie Mae forecasts that Consumer Price Index will settle around 2.6 percent in Q1 2024, creeping closer to The Fed’s 2 percent target.
Commercial Real Estate (CRE) investors have been on the sidelines waiting for lower rates to boost valuations and refinancing prospects. One investment bank recently speculated that leasing and capital markets could benefit from optimism over falling interest rates and demand for top-tier office space.
The MBA forecasts a residential market turnaround beginning in Q1. Total home sales for the year are projected to grow 6.5 percent and single-family starts by almost 11 percent. Much-needed existing inventory could rise significantly, as many sellers can no longer delay listing. A clearer Fed path and lower inflation are expected to push down treasury yields, normalize mortgage spreads and thus, put mortgage rates close to 6 percent by year-end. Given these factors, the market is expected to be unusually strong for a presidential election year.
In 2024, consumers, builders, borrowers and investors are looking forward to a reprieve from punishing interest rates and the real potential for The Fed’s projected soft landing.
Credit: New American Funding - Jason Obradovich
Another month rolls by and another month we see inflation continuing to come down. Last week, Core PCE data for January was released showing that on an annualized basis, inflation is sitting right around 2.8%. While the news is welcome, the fact that CPI and PPI were unexpectedly high in January and showing little signs of slowing down, has created a lot of conflict in the market about how long this inflation battle will take.
You may not have noticed but rates moved much higher in February. The three-year Treasury was up almost 50bps for the month as the market adjusted for the fact that the inflation battle is not nearly over and it’s very likely that the Federal Reserve won’t lower interest rates until June or after. The market is still pricing in 3-4 cuts this year but those likely won’t happen until the very end of the year.
Moving over to the jobs market, we continue to see the unemployment rate hovering around 3.7%. When you combine that with the strong jobs opening’s data, it’s very clear that, so far, these much higher interest rates are not impacting employment.
Over the next week, please keep an eye on the following items. First and foremost is the jobs data for February which comes out on Friday, not to mention CPI data for February, which comes out next week.
That’s it everyone from the capital markets desk this week. Thank you all for watching and have a great day.
For answers to your questions about buying a new home, reach out to your Loan Officer today. They’ll be happy to go over what products and assistance might be available to you and help you choose the right loan for your unique needs.
The Best Gas Grills for Your Backyard Barbecues
Everyone has their own opinion when it comes to the charcoal versus gas grill debate. Neither side is wrong, of course, with both types of grills coming with their own pros and cons. Charcoal grills, for instance, can reach higher temperatures and give food that rich smoky flavor, while gas grills allow for faster start times, precise temperature control, and greater overall convenience.
Gas grills can also turn on and off in an instant, allowing you to get cooking without the long setup. Unlike charcoal, you can maintain specific temperatures without a whole lot work, either – simply turn the dial to the desired heat setting and the grill will take care of the rest. That means, you can set low temperatures, high temperatures, and everything in between without having to continually watch the fire and fan over the flames. Even better, many gas grills come with side burners that allow you to cook multiple food items at different temperatures, allowing for much more versatile cooking options. Not to mention, the minimal cleanup necessary, compared to all the ash you’ll have to dispose when cooking using charcoal.
Many homeowners prefer gas grills over charcoal for all of those reasons. According to a 2022 survey from the Hearth, Patio & Barbecue Association (HPBA), 64 percent of all gas grills in American households use gas. This is why there’s such a dizzying selection of gas grills in the market, with each manufacturer trying to integrate fancy features to make their models standout. As nice as some of those bells and whistles are, we prefer focusing on the core elements, such as size, build quality, precision control, and heat output, although we’ll obviously take extra niceties into account, especially among grills that already get the basics right.
These are the best gas grills for your backyard barbecues.
7 Recipes You Can Make In 5 Minutes
Watch the Video for the entire delicious recipe!
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