From Stocks to Shelter: Market Update

I hope you all had a fantastic Memorial Day weekend, filled with sunshine, barbecues, and moments to honor those who served our country. As we gear up for another busy week in the real estate world, it’s crucial to stay informed about the latest market trends and developments affecting us here in Las Vegas.

Rates ended HIGHER compared to last week, and volatility was MODERATE. Rates are in the low 7’s for most loan types without paying discount points. Paying discount points can get you in the high 6’s.

Stock Market at All-Time Highs: Impact on Mortgage Rates?

If you’ve been keeping an eye on the stock market, you’ve probably noticed that stocks are hitting or approaching all-time highs. This remarkable performance has important implications for mortgage rates and the real estate market. Over the weekend, a friend mentioned how amazed they were by the growth in their 401k over the past year. While I was happy for them, it got me thinking: what does this mean for mortgage rates?

The booming stock market is great for our investment portfolios, but it can make those of us in the mortgage industry a bit uneasy. Remember, the Federal Reserve rapidly increased rates over the past couple of years to cool down the economy. Back in 2022, inflation soared to 9%, far above the Fed’s target of 2%. To combat this, the Fed raised interest rates to increase consumer costs, hoping that higher costs would reduce spending, force businesses to lower prices, and ultimately reduce inflation.

This strategy has mostly worked, bringing inflation down from 9% to around 3.4%. However, we’ve been stuck in this mid-3% range for almost a year now. Jerome Powell has repeatedly emphasized that inflation needs to drop to their target level of 2% before they’ll consider lowering rates.

But with the stock market continuing to soar, it’s hard to see how inflation will fall. Higher investment portfolios boost consumer confidence and spending, which leads to higher inflation – the exact opposite of what we need.

Home Prices Soar Over the Past 4 Years 📈

Last week, I saw a striking chart showing the average 4-year change in home prices across different states. From March 2020 to March 2024, Nevada saw an incredible 46% increase in average home prices! As someone who closely follows the industry, this didn’t surprise me. Nevada, especially Las Vegas, has plentiful jobs, relatively affordable housing, and numerous large planned projects. Honestly, I’m surprised the increase wasn’t higher.

Consider the number of corporations that have committed to expanding or establishing roots in Las Vegas that are still in development. Projects like Oak View Group’s $3 billion entertainment district, LVXP’s 27-acre mixed-use development, Brightline West’s high-speed rail project, and Hollywood’s $1.8 billion film studio expansion are all expected to create over 57,000 new jobs. When these projects are completed, imagine the impact on home prices as 57,000+ people move here for work. The 46% increase we’ve seen might seem small in comparison.

My team and I highlight this when talking to potential homebuyers. We understand buyers are anxious and hesitant, especially with the ongoing media coverage on high interest rates and a potential housing bubble. It’s important to remind buyers that real estate is all about location, location, location. Las Vegas is a unique place where these substantial investments will permanently reshape the city. Our advice to hesitant buyers is to act now before these projects are completed and more people move to our wonderful state.

Short But Busy Week Ahead 🤏

It’s a short but action-packed week with these key events:

• Gross Domestic Product (GDP) data for Q1 2024: This will be released on Thursday. This report is the broadest measure of economic activity and a key indicator of the economy’s health. If the GDP number is strong, expect rates to worsen, indicating a robust economy. If we see a weak GDP number, expect rates to improve, signaling a weakening economy and a potential need for future rate cuts.

• April PCE Inflation data: This will be released on Friday. We should always be on high alert when an inflation report is released. If inflation rises, the market will react negatively, and rates will spike. Conversely, if inflation decreases, expect the markets to rejoice and rates to improve.

• Fed Speakers: A total of 10 Fed speakers will be speaking throughout the week. It will be interesting to hear their commentary, especially as doubts grow about the possibility of rate cuts in 2024.

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