The BEST case scenario JUST happened

Cooling inflation, hot market. Boom. Good morning, and happy Tuesday! Soft CPI & inflation reports rocketed up stock markets last week, as hope is growing that the Federal Reserve is done with rate increases. As previously mentioned last week, another real estate “bull-run” may be coming sooner than anyone expected.

Let’s win together in this market. Text me at (808) 228-5528, or schedule a 10 minute call by clicking the below:

Stock markets yesterday resumed a powerful rally that started last week, as a result of falling bond yields. The S&P 500 was lifted out of correction territory, in one of the shortest comebacks since the 1970’s. Oahu’s median price per square foot shot up, to new all time highs.

For the newest listed properties on the island, I’m starting to see multiple offers, and over list price scenarios again. A majority of homes on-market have not benefited from this action yet, still weighted down by uncertainty and seasonality. For value seeking buyers in today’s market, I’m advising to focus on homes with over 30 days on market - to snipe a good deal.            

The wealth effect, and how it relates to Oahu’s real estate market

The wealth effect is a behavioral economic theory suggesting that people tend to spend more, as their homes and investment portfolios increase in value. They “feel” richer, even if personal take-home income doesn’t change. This was on full display during 2021, when real estate activity, helped by one-in-a-lifetime low interest rates, soared alongside unprecedented stock market gains.

In higher priced markets such as Hawaii, a majority of down payment funds come not from savings, but liquidation of another asset such as stocks, a retirement account, or another piece of real estate. Regardless of the reality of the economy - if the stock market continues to rally upward, this will eventually cause a sector shift; in which savvy investors will rebalance their investment portfolio out of equities, and back into real estate. Adding lower interest rates into the equation, will only further fan the flames of an already warming real estate market.      

September 20th Rate Update with Pua

Before September, today's rates would have been depressingly high, but they represent significant progress from October's multi-decade highs of over 8% for conventional 30yr fixed rates. For the same scenario, Monday’s rates are down 5/8ths of a percent from those peaks. For the bond market that underlies and dictates day-to-day rate movement, it is shaping up to be an uneventful couple of weeks.  Surprises are always possible, but without them, there isn't much on the calendar of scheduled events that would cause a big reaction in rates.

Future moves of inflation are key data points to watch. With inflation being stubborn, that will make the case for rates being higher for longer. Richmond Federal Reserve Bank President Tom Barkin said Monday that inflation has come down nicely, but some businesses are planning to keep raising prices and that means the Feds should hold rates at relatively high levels for a long time. Financial markets now expect that the Fed will quickly cut rates by 100 basis points next year beginning in May.