Hey guys, you probably saw that the amount of jobs that were added in August to the economy was actually way lower than expected.
A lot of people attribute that to the rise of the Delta virus and people may be slowing down on hiring. But one thing we can be sure of is that there are a lot of jobs available in America.
There's 10 and a half million jobs available right now. One thing that we're starting to see is unemployment benefits being turned off. Or at least not the incentives added by the federal government. So that might bring more people to work.
But right now we've got to deal with what's here now.
So job wage growth in America so far is up about 4.8%. The challenge is that inflation is also a 5.2%. So it's eating up all those gains. When we look at this in terms of what's going to happen in terms of the real estate market, Lawrence Yun — the chief economist for the International Association of REALTORS — tells us his expectation is that the government is going to start to taper off maybe faster than we expected with its monetary policy in terms of buying back mortgage backed securities.
So what happens with our industry is that a lot of people look at the fed rate as being the same as the interest rate of mortgages. But it's not really a direct correlation there.
That's really dealing with short-term interest rates, which impact, you know, car loans and short-term credit card debt and all those kinds of things.
When we're talking about long-term mortgages, that's much more impacted by the bond market. More people are going in buying mortgage backed securities. The US government is buying 40, 50% of all us backed securities — upwards of 40, 50, a hundred billion dollars a month.
As they taper back, that will have a much bigger impact on interest rates than anything else. So they're already talking about doing a tapering starting before the end of 2021.
When that occurs and we start to see interest rates rise, that will impact us more than anything else.
And here's how it's going to impact us:
Buyers will not be able to afford as much home because as interest rates rise, it puts pressure on the ability to pay more.
Also, sellers will feel the pressure because buyers won't be able to pay as much. They're going to be pulling back on what they can afford to spend. So put sellers under a little bit of pressure there as well.
So what's the messaging behind all of this?
When we know what's happening, we can see it's not a crystal ball. We know that even the Mortgage Bankers Association expects that by the end of next year, 12 months from now, they expect interest rates to be about 4.2%.
Considering that we're under 3% now, that would be a pretty massive increase. Basically a 25% increase in what people are paying in terms of interest rates.
So if we know that's on the horizon, whether it's in the next six months, 12 months, 18 months, doesn't it make sense for your buyers to get in the market today and take advantage of interest rates that are at 60 year lows? And then also it doesn't make sense for sellers to take advantage of this increased buying power that current buyers have in our marketplace?
Of course it does!
But we have to position ourselves as the absolute, undisputed, preeminent expert in our market and talk numbers. Talk Turkey with our buyers and sellers. Put out videos, emails, and informational statistics that people can latch onto.
When we give people that data, at the very least, they're going to look at you differently. They're gonna look at you as the expert in the marketplace. And they're going to trust you.
What you're trying to build is trust and authority and what you have to say. And then people will put their trust in you to help them buy and sell a home.
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