Is it a good time to buy in the Coachella Valley? I’m very busy showing properties. Buyers are definitely looking, taking notes and thinking about buying. If a home is exactly what they are looking for in a specific neighborhood, or area, the HOA is ok, and the sun orientation is just right, they are jumping and there are still more than one offer if a property is priced below the comps. BUT…if a seller is being adamant about a price, and that price is not reflective of the fact that there are less buyers, and the buyers are picky, that property will sit. If you are looking to buy or sell here in the Coachella Valley, give Kim Kelly, local agent and resident for over 20 years a call at 760-285-3578. I like this rundown by Kevin Budde, a mortgage consultant with Monarch Coast Financial.
A Good Time to Buy a Home
Our economy is entering a Goldilocks period. A time when the economy is strong, and inflation is low. This will be beneficial for our Spring and Summer housing market. I would like to explain.
The three components of our economy most critical to the Federal Reserve Board and their policies are the 1) GDP, Gross Domestic Product, 2) Inflation and 3) Employment.
Gross Domestic Product
The overall strength of the economy measured by goods and services produced started slowly in 2023 after finishing 2022 at 1.9 percent. The first and second quarters of 2023 were both 2 percent but grew quickly in the third quarter to 4.9 percent and the fourth quarter ended with 3.3 percent for a total of 2.5 percent in 2023. The economy was boosted by strong consumer spending, which makes up two-thirds of the GDP. Since the economy is strong and inflation has come down, consumers have been spending on goods and services that no longer carry premium pricing.
During the Pandemic, the supply chains closed limiting inventory of products quickly pushing prices higher for those items that were available. In 2021 the inflation rate was 7 percent; 2022 it was 6.5 percent both well above the Fed’s target range of 2 percent. The Fed’s actions raised interest rates to 23-year highs. The inflation rate in 2023 ended at 3.4 percent and the fourth quarter reported 1.7 percent, below the Fed’s target. The deceleration rate of inflation is one of the most rapid in U.S. history.
Employment has remained strong with job growth in 2023 averaging 232,000 new jobs a month. In 2022 the unemployment rate was 3.5 percent and 2023 was 3.7 percent. When consumers feel their job is secure, they are willing to buy houses.
Where are Interest Rates Headed?
When the Federal Reserve Policy Board meets January 30-31, they will leave rates unchanged even though many economists have been predicting the beginning of the cuts in rates. Inflation alone would justify cutting interest rates but the Fed fears by lowering the rates too soon it could stimulate the economy and cause inflation to increase. With all the increases in rates the Fed has made over the last two years, we will begin to see more slowing in the GDP, and an increase in unemployment as companies have begun layoffs. In the second and third quarters of 2024 mortgage rates will most likely be one percent lower than where they stand now, bringing the 30-year fixed to 5 percent.