As we close out a very crazy year in the real estate industry, we wanted to give you a quick overview of what has transpired and some of the reasons behind it. From there, we will transition to some insights into what we see in our crystal ball for the next 6 to 12 months. If we go back to the very end of 2021, it became clear that the inflation that we were experiencing was not “transitory” as the Federal Reserve members and Sec. Yellen kept insisting. In fact, as the spring went on, it started to get out of control. Treasury bonds and mortgage-backed securities, which dictate the direction of mortgage rates, will always react negatively to inflationary pressures. By the time the Federal Reserve began to admit that they were behind the curve in raising short-term rates to combat inflation, it was too late. In fact, by February, long-term rates started moving up dramatically and they continued their upward trajectory until the CPI numbers came out for the month of October, showing for the first time a decline in the year over year readings. They measure CPI in part by comparing how much of an increase there was in the month one year prior to what it was this year. In 2021, starting in October, the increases were significant for the next six months. Therefore, the year over year comparisons will take the pressure off the upward trajectory. This coupled with the fact that the Federal Reserve’s aggressive hikes this year are starting slow down the economy, should translate into a decent decline in inflation leading into next year. This will also translate into lower long-term interest rates as investors see inflation and the economy cool. This fall we have seen rates as high as the mid-7’s prior to a meaningful decline after last Thursday’s CPI reading. Some of the smarter people that we follow that track long-term interest rates believe we will see rates decline in the first six months of next year into the 5’s again. The housing market has obviously slowed down in light of these higher interest rates. That said, there is still a huge inventory problem that is not going to go away anytime soon. Builders have started to pull back once again which will only exasperate the problem. To put this in perspective, at the peak of the market back in 2007 there were 75% more houses on the market than there are today. Foreclosures and short sales are practically nonexistent, unlike the Great Recession. From a demand perspective, we had a millennial birth rate spike 33 years ago (which is the average age of the first-time homebuyer) that will continue for the next 3 to 4 years. In conclusion, we see a window of opportunity over the next 6 to 9 months. For the first time since Covid hit, you can actually make an offer without competition and get seller concessions again. While appreciation has slowed, we are still seeing year-over-year increases in value in the double digits. If you are looking to make a move or buy your first home, now would be an opportunistic time to get your foot in the door because when rates drop back into the fives you will see another wave of buyers rushing in from the sidelines and we will be back into another situation similar to 2020/2021 with multiple offers, etc.… Even if you have to pay a higher interest rate today, if rates drop later there is always the opportunity to refinance into a lower rate. Buying a home that jazzes you will be much easier today than 6 to 12 months from now. We have a wonderful presentation we have prepared for potential homebuyers that dives deep into the statistics driving the supply/ demand dilemma we currently face to help you come to your own conclusion about when to pull the trigger. Happy House Hunting!