The weather can be a bit tricky here in the Denver Metro area during the month of March. Mother nature likes to show off with low 70 degree spring-like days and follow it up with freezing temperatures and snowfall the next day! Don’t forget that March is historically the ‘snowiest’ month of the year, so be prepared – we may still have a whopper of a storm or two heading our way – if we’re lucky ??. And with the St. Patrick’s Day celebrations behind us, I am left feeling lucky to have each of you as clients, referral partners, friends and family.
“May your blessings outnumber the shamrocks that grow, and may trouble avoid you wherever you go.”
Market in a Minute
Interest rates have had a bit of a bumpy ride over the past month, particularly with the most recent headlines. The biggest news impacting mortgage rates, of course, was the shocking collapse of Silicon Valley Bank (not to mention New York’s Signature Bank), followed by the weekend acquisition of Credit Suisse. The run on Silicon Valley Bank (SVB) caused the FDIC to jump in and shutter the bank late last week. No surprise that these events would cause a bit of a panic in the financial markets, and many spooked investors flocked to the safer havens of the bond market, ultimately moving mortgage rates lower for a couple of days. As the markets digested the news and the government’s response, things have calmed a but and rates have stabilized. So what happened? In general, banks accept deposits from borrowers and invest the excess cash to earn a return. Those investments can take a variety of forms, but in the case of SVB, they were heavily invested in longer dated, fixed-rate bonds. The problem came when SVB’s clients (many of whom are venture-capital backed start-up companies burning cash) needed to withdraw more cash than the bank had available on hand in the 4th quarter of 2022. This caused the bank to have to sell their bonds at a loss to provide the necessary cash instead of continuing to hold them. And when the bank announced recently that they would need to raise additional capital to cover the loss they realized when they sold their bonds, their customers got nervous and moved to withdraw their funds… ultimately spiraling into a textbook bank run. Now the question is ‘What’s Next?’ For now, it seems that things have stabilized with the FDIC announcing that they would guarantee the full amount of deposits rather than the normal $250k max per eligible account. But the root cause of the problem, higher interest rates, isn’t going away and many market analysts are watching to see if there is another shoe to drop.
The Fed meets again this week and all eyes are watching to see their response to the banking crisis and latest CPI and PPI data for February. The Consumer Price Index (CPI – a key measure of inflation) came in below expectations with a modest increase of 0.4% for the month, bringing the 12 month inflation rate down to 6% – the lowest we have seen since September of 2021. The Producer Price Index (PPI) also came in below expectations with a decrease of 0.1% for the month, bringing it down to 4.6% on a 12-month basis for the index. Both of these reports indicate that inflation is continuing to cool, but will it be enough for the Fed to pivot or continue with their benchmark rate increases? We shall see… but for now, the 30-year fixed rate from Freddie Mac is 6.60%, slight increase from one month ago.
On the real estate side, inventory (or the lack thereof) is still among the most important factors in Denver’s current housing market – yes, we’ve all heard it before – Low Inventory! Active listings at the end of February were at 3,778 homes – down from January’s 4,120. As the spring market is beginning to heat up, buyers are getting anxious for more listings to come on the market – but unlike the Spring of 2022, buyers don’t necessarily feel the pressure to act quickly when deciding to make an offer on a home. Activity is definitely up with other key metrics such as new listings (3,451), pending contracts (3,740) and closings (2,661) all indicating that homes are being snatched up almost as quickly as they are coming onto the market. More competition is a factor on selected properties (depending on price point, condition of the home and location), and the median price in Denver increased just over 4% to $562,500 – with sellers just about getting what they are asking with a 98.88% “Close-to-List” ratio. With an ever-changing market – even weekend to weekend – having a well thought out strategy and being prepared to react to the market temperature is key to getting under contract. If you are thinking about purchasing or know someone who is, let’s chat and come up with a plan to help you (or them) get into in that new home soon!
Monthly Morsel: Create Balance & Harmony with Feng Shui
In this month’s eReport, I am sharing with you an overview of the ancient Taoist practice of feng shui, which promotes harmony and balance in the home. I also offer tips on how color plays an important role in this concept and can add to the peace and tranquility throughout your home
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