Hello everyone and Welcome to another

episode of Selling Greenville your

favorite Real Estate Podcast here in

Greenville, South Carolina, I'm your host

as always Stan McCune realtor right here

in the Greenville area you can find all

of my contact information in the show

notes if you need to reach out to me for

any of your real estate needs that's the

only way I make money through this

podcast is through you my potential

clients former clients current clients

refers of clients all of those things

and even if you're just a listener

there's a way that you can support the

show Beyond just referring business to

me and that is by subscribing by liking

by hitting whatever button you can that

can support the show different different

apps different platforms have the

ability to comment or like or leave a

rating or leave a review whatever app

you're using please go ahead and do that

I would greatly appreciate that from all

of you

today we're going to be taking a look at

how mortgage rates impact buyer demands

so we know that rates going up when the

30-year fixed rate mortgage goes up

demand goes down and when the 30-year

fixed rate mortgage goes down when rates

are low demand obviously picks up

people are sensitive to those rates when

we had rates at all-time lows during

2020 2021 demand went crazy

now that rates have been at higher

levels the highest levels that they've

been in 20 30 years that has cooled off

buyer demand so I wanted to take a

deeper dive into this and see what

exactly is the impact that rates are

having in general

and I wasn't really sure the best way

to do this for the purposes of the show

but basically I did a bunch of analysis

and at the end of the day

I'm going to be showing you a few

Snippets of the analysis that I did and

then we'll go ahead and draw some

conclusions on the basis of that

analysis now if you're watching on

YouTube the show is on YouTube I am

going to go ahead and screen share all

that I'm going to be screen sharing is

the the federal reserves data on

the 30-year fixed rate mortgage so what

you're going to be seeing is the actual

data let me make sure I'm actually

sharing the right thing here

okay

there we go

if you're watching on YouTube you may

have not seen anything change but

something changed on my end that's the

only thing that matters okay

so you're going to be seeing

basically from 2019 through the present

what the 30-year fixed rate mortgage has

done but if you're just listening no

worries you'll be able to track

everything just fine just know there

is a lot of data that we're going to be

covering in here

and and again I'm gonna do the best

that I can portraying this data but

if you have any questions you guys know

my contact information is in the show

notes for any questions that you might

have all right we're going to dial back

the clock to 2019 specifically to June

of 2019 so for those of you that

don't remember 2019 was an interesting

year that was obviously right before the

pandemic

and rates were doing some interesting

things we we had rates go up near the

fives towards the end of 2018 and

then going into 2019 we really did not

know what was going to happen

and what ended up happening is

rates started to go down a bit during

the year 2019.

now before I get too ahead of myself

here I want to clarify one thing I don't

know why but for whatever reason the

feds tool that shows 30-year fixed rate

mortgages it's always a little bit lower

than it should be for whatever reason I

don't know but the but if in case you're

like oh man those rates sound really low

in comparison to you know what the

market was they're always a tad bit

lower I feel like than than what they

actually were but if we I want to dial

the clock back to June 2019 specifically

and and have us take a look at that

in June 2019 rates were in the high

threes we had we've got a reading June 6

3.82 June 13th 3.82 June 20th 3.84

say we're hovering June 27 3.73 so we're

having right in that 3.7 3.8 range and

here's what that meant by for Greenville

demand we're going to be looking at

basically a bunch of different months

here here what the rate was what the

30-year fixed rate mortgage was what

pendings were in other words pendings

are homes that are under contract during

that period of time that went under

contract during that period of time and

then how many sold during that month as

well so we're going to start here with

this June 2019 with rates in the high

threes pendings at that time were at for

the month of June we had 1 288 pendings

and according to the Greenville

greater Greenville Association Realtors

Market stats 1288 homes went under

contract were pending during that time

that was a two percent year-on-year

increase a pretty standard number by

by that time period and 1399 homes

sold that month that was also a roughly

two percent year-on-year increase

okay

that's going to be our Baseline okay

we're also going to look at September of

2019 because rates started to fall

they they kept falling during that time

and they reached kind of their their

bottom their pre-pandemic bottom in

September September 5th specifically

when they hit 3.49 so they've been in

their mid threes and this is the lowest

September 2019 was the lowest that

rates had been since 2017 important

detail pendings for that month jumped

up they went 18 year on year for

September 2019. So

it's hard to know exactly

whether that was because rates went down

I think it probably played a factor but

pendings were at 1193 which is an 18

year-on-year increase big increase

for that period of time solds were 1296

that was a 22 year-on-year increase now

solds lag right so obviously a home

that went under contract in September

most likely we didn't actually sell

during the month of September usually

they sell a month or two after they went

under contract but but again we're

just kind of establishing a baseline all

right so let's Jump Ahead that was

September of 2019 rates were in their

mid threes the lowest since 2017

pendings were up and right around

1200 solds were up right around 1300

those were both big numbers for back

then let's Jump Ahead to September 2020.

this is when we see rates 30-year rates

start to go into the twos so now we're

seeing actually a big big decrease from

what they had been and and right now you

know they're at historically the lowest

that they've ever been they had never

been in the high twos ever in the

history of the 30-year fixed rate

mortgage they had never been in the high

twos how did that impact things in

September

of 2020 versus September 2019 pendings

went all the way up from 1193 to 1554

that's a 30 year-on-year increase

and remember that September 2019 was

a big increase versus the September

before so that's a really big increase

solds were at

1584. a 22 increase year on year versus

the 1296 sold print that we had in

September 2019. okay so we saw a 30

basically a 20 to 30 percent increase in

buyer demand when rates went from the

mid threes to the high twos big big

increase let's skip ahead a couple of

months to December of 2020. here's where

rates really bottomed out okay so for

the first time this is the lowest all

time we see rates in 20 December 2020

they're in the mid Twos for a 30-year

rate I had some some clients that that

bought homes during that period of time

they're very happy with the rate that

they have let me tell you pendings for

that month were also again up 30 year on

year 111 pendings for December 2020. now

if that sounds low compared to the

numbers we've been saying that's only

because of seasonality right December is

not seasonally a very a very big

month so the fact that we had oh

oftentimes let me put that in context

oftentimes December historically

December's pendings have been below a

thousand okay so for it to be at at over

1100 was a big number 30 increase year

on year closings were up 20 year on year

1442 massive numbers for December 2020.

obviously a huge impact that those

low historically low rates caused

but again this is during the slow time

of the year so guess what happened rates

started to creep up a little bit as we

start entering the busy time of the year

and by the time we hit March right so

the busy time of the year for Real

Estate tends to be you know usually it

hits around mid mid-ish February

something like that continues on through

you know perhaps late April early May

something like that and then basically

we still have a continued busy season

for the summer but not the peak peak

season so March is really Peak peak

season for Real Estate at least from

the standpoint of me as a realtor and so

in March 2021 we have rates still

very low but not at their lowest point

so that by this point they've creeped up

into the low threes

and that's actually interesting if

you're looking at this that's the

highest number for the entire year is

that low three is because the the year

2021 was just insane so rates are in

are in the low threes

and but there's still half a point

lower than they than they were in

March 2020 so if we go back to March

2020

they were in they were at 3.65 at one

point and then in March 2021 the

highest point that reaches 3.17 so

basically half percent lower than March

2020. of course we can't really compare

anything to March 2020 because that was

when lockdown started for for the

pandemic we don't want to talk about

that

but what happened in so this is the

first time the point of what I'm trying

to set the stage for is this is the

first time that we've had these rates

basically right near three percent

during a peak season what happened

things went Bonkers pendings went to 1

678 I think that that was the highest

number ever up 34 year on year for

in comparison again to to March 2020

which is a bit of an anomaly because

because that's when lockdown started

but prior to that things prior to that

things had been strong prior to

Lockdowns solds

1521 that was up 14 year on year

so what we saw is a huge increase

in demand as a result of these low rates

not surprising not surprising

now a little bit of narrative here after

the spring peak season we see a Slowdown

in numbers into the summer months okay

so even though rates did basically go to

their highest point of the year in March

we saw the normal seasonal slowdown that

happened once we hit the summer months

and the result was that we saw

numbers that came in year on year

slightly less than 2020

even though mortgage rates basically

stayed roughly the same for that period

of time why were the numbers lower than

2020 okay for again we're talking about

the summer months couple of reasons I

think first inventory disappeared all of

the excess inventory got eaten up we

went down to one month or less of

inventory historically the lowest

numbers that we've ever seen in terms of

homes available for sale for the average

home buyer

and so inventory just disappeared people

didn't have there weren't enough homes

to purchase enough homes on the market

for transactions to happen because

everything had been had been gobbled up

by that point and so even though there

was probably more demand than is

reflected in the numbers the demand

couldn't keep up or the supply couldn't

keep up with the demand so there just

weren't enough houses to transact

during that period of time and

then as an addition to that when

we're comparing to some of these 2020

numbers it is important to remember that

there was about six weeks of very little

real estate transactions in 2020 as a

result of the lockdowns that happened

and so that six weeks of demand

basically got spread out throughout the

rest of the 2020 year resulting in in

some of the comparisons of 21 to 2020

not being perfectly Apples to Apples but

you know what none of this data is going

to be perfect Apples to Apples because

we're in unprecedented times everyone

always says that but it is really true

we have never seen rates go up and if

you're looking at the chart it's crazy

how much rates went up the mortgage

rates have never gone up as quickly as

they had from the from 2022 until

where they are now they went up faster

than any other level

all right all of that to be said

there were two months in 2021 where

even after that peak season when 2021

clearly out to 2020 and those were

October and November of that year and

again mortgage rates aren't doing

anything too crazy October we're seeing

rates in the low threes

and that's actually higher than

what it had been during the summer

and same thing for November basically

we're just hovering around the low

threes during that period of time but

during that time pending's homes that

went under contract in October were up

12 year on year

1544. November up 12 year on year 1 355.

sold houses solds in October were

down five percent but again that's

because of the the week summer numbers

as a result of the low inventory that

happened solds in November then went

up 17 year-on-year to 1000 and 461 so

even though rates went up slightly right

they had been in according to this data

they had been in the high twos and

then they went into the low threes even

though that's even though rates went up

just a little bit activity demand still

was Strong's and I think that this is

really really important there's not

always a one-to-one correlation between

rates going up and demand going down or

rates going down and demand going up

there's more things at play here

particularly when the increase or

decrease in rates is minor and by minor

I mean a half a point or less of a of an

increase or a decrease

and I think there's a few reasons why

we saw High numbers in

October November of 2021

I think one thing maybe people

hearing the news they were worried that

rates were going to go up and if you're

looking at the chart they did go up

right after this period of time but I

think a lot of this is also just the

result of kind of an anomaly a a random

thing that happened in the market which

was I think probably all those people

that couldn't buy during the Spring and

Summer frenzy of 2021 they found that

there was a little bit less competition

in the fall and so then they all kind of

came back online during the fall and

fourth quarter of that year

with the result of of the fourth quarter

numbers being kind of unusually high

by Greenville standards

so that's something to keep in mind

but I wanted to set the stage again that

it's not a perfect one-to-one

correlation between rates and demand

okay so here's what we can conclude so

far besides what I've already said race

dropping from the mid to high threes

to the mid to high twos re resulted in a

massive increase in demand something

like a 20 to 30 percent increase in

demand now again the tricky the the

tricky thing with this is that there was

that six weeks of demand that got spread

out throughout 2020 so it's not perfect

these numbers aren't perfect but best

we can see there was something like a 20

to 30 percent increase in in demand if

you want to be more conservative say

maybe a 15 increase in demand I'm not

going to fault you for that

again because we're comparing to an

imperfect environment but that's roughly

speaking what we're talking about when

rates bounced back up into those the low

threes it didn't have a big impact at

the end of the day numbers were were

generally less than they than they had

been before but some of that can be

attributed again to to the six weeks

loss during the pandemic of 2020. rights

at this level were still well below all

historical Norms but what about when

rates start climbing February 2022 marks

a very important month okay because

that's when rates started to climb above

pre-pandemic levels so we can see if

we're if we're looking at the feds chart

December

the end of the year 2021 was kind of

the last time that we see rates in these

historically low numbers December

30th we have a print of 3.11 for the

30-year fixed rate and then it just

starts to go up by the time we get to

February we're already in the mid threes

and by mid-February we're already above

where we were pre-pandemic okay

February 17th we have a number of

30-year fixed rate mortgage average of

3.92 that's the highest that we've seen

since let's go back here

May 30th of 2019 so that's a long

time that's a long time that you have to

go back and and so what was happening

in February of 2022 rates hit the high

threes

for the first time since 2019 pendings

1359 down four percent solds 1162 up

nine percent okay now I'll I'll get

to this in in just a second we'll

come back to that why solds were up even

though pendings were down March 2022

we have rates that went slightly down

they went into the mid to high to

high threes eventually and then

eventually by the end of March they're

already in the mid fours so what

happened in March pendings 1570 High

number but still down six percent year

on year solds

1544 that was up one just one percent

you're on year

let's go ahead to May 2022 may now where

we see rates in the fives in the low fives

pendings now

1482 that's down 12 okay you see what's

happening February pendings were down

four percent year on year March down six

percent May down twelve percent the

numbers are getting higher what about

solds 1578 that was up four percent but

remember we're comparing against the low

inventory numbers of 2021 that kind of

artificially depressed some of the

numbers in that year so that's an

important detail let's Jump Ahead to

June July we have basically a

little bit of fluctuation in these

months between low and

high fives basically in terms of the

30-year fixed rate the June July

pending numbers were respectively 1 388

and 1

397. those are each down eight

percent year on year and souls were

1704 and 1407 June down four percent

July down 10 year on year

so importantly these pending numbers

are are ultimately they're actually

pretty close to the 2019 number so rates

going up caused the market to kind of

revert back to what the demand was in

2019

now closings are still high and and we

even had a few of those months where

closings actually out of the the five

months we just went to three of those

months solds were up year on year and

this is the result of just low inventory

causing fewer homes to fall out of

contract so we got pendings going down

but sold's going up what what Bridges

the gap between those two is homes that

go under contract and then fall out of

being under contract here's what happens

when inventory is really really low

people are scared they get something

under contract listen I experienced this

when I was doing real estate back

then my clients when they finally got

something under contract they were

terrified to lose that they would do

just about anything to get to closing

and to not have to go back to you know

making offers on 15 homes before they

finally got one under contract so even

though we saw pendings normalize

closings were still elevated because

buyers is we're not backing out as often

as they traditionally do now I don't

have any data on this but I'll say it

sure feels like buyers are backing out a

lot more than normal right now the way

the market currently is and this is

because they feel like they have more

options they're they're more concerned

about what's happening in the market and

so we're seeing back out rates

kind of come back to not just normal

but perhaps even elevated levels perhaps

that that'll be something I'll discuss

on another podcast

okay let's Jump Ahead to

late 2022

third and fourth quarter 2022 now we see

mortgage rates again make their final

leap from basically the high fives

into the low sixes that was September

and then in October from the high sixes

into the low sevens

okay so how did the jump in September

into the high fives low sixes impact

things pendings

1263 these are down 14 year on year

now remember we had looked at September

of 2020 the pendings for that year were

1554 so it's down a lot since since

2020 and down since 2021. October

pendings 1167 down 25 year on year

remember October 2021 is

1544. so a big big decrease solds

1468 down 10 for September 22.

sold as October 1232 down 13 year

on year this trend continues November

2022 when rates were in their high 60s

low sevens pendings went down 28 year

on Year all the way down below a

thousand nine hundred eighty four

pendings 1200 solds for that month

that was down 18 year on year December

2022

and we actually saw rates kind of

moderate a little bit they kind of went

back into the into the mid mid to

high sixes during December 2022 pendings

went all the way down to 810 down 25

year on year solds down 24 to

1228 closings year on year

and so mortgage rates obviously had a

massive massive impact on all of this

right we're seeing exactly what happens

as rates go up and down we talk about

how it impacts demand but I wanted to

bring you guys the data and draw a few

conclusions from this data let me see

how far we've been going all right yep

I'm not going to take a whole lot of

time going through these conclusions but

I do want to go through this real quick

what can we conclude from this first

the market is more sensitive to rate

drops than to rate increases now the

market is very we just saw the market is

very sensitive to rate increases but we

saw more of of sensitivity when rates

went down into the twos than what we saw

when rates went up into say the fives

and so ultimately the largest numbers

that we discussed on here remember the

largest number out of all of these was

that March 2021 pending's number was up

34 year on year no other number on here

Compares and I didn't just cherry pick

numbers that well I actually did share I

think some of these numbers I tried to

pick some of the biggest numbers on here

because those were the outliers and

that could kind of tell us okay what's

happening there were no decreases

in anything that compared to that 34

increase the largest decrease was the 28

pendings decrease in November of 2022.

so the and again this is the difference

this is after rates had gone into this

the sevens in November 2022 after

having been just a year earlier in

threes so rates more than doubled and

pendings went down 28 versus when

rates had only gone down in March

2021 versus March 2020 by half a point

demand shot up 34 so the market is more

sensitive to rate drops than to rate

increases keep that in mind because

there's more consensus that that

ultimately that were near the top of

where rates are then that where they

are currently most people think that

we're pretty close to where they're

going to stop before at some point who

knows when but at some point rates will

come back down so when rates come back

down you can expect a bit more Market

sensitivity in terms of demand than

when rates have been going up secondly I

think the data indicates that there are

different levels of rate sensitivities

so we've already discussed this a little

bit but when rates went up in March 2020

2021 that was still a record-breaking

year but rates again they had only gone

up about a half a point but that was

wasn't enough to overcome peak season

peak real estate season friendly frenzy

sorry I cannot talk right now the the

peak frenzy of the real estate season

and so again some of this matters do

rates go up or down at what time of the

year that matters if rates go up during

the Slow Time of the Year during the

fourth quarter for instance that's going

to bring demand way down and if rates go

down during a peak season of the year

that's going to cause demand to go

Bonkers that's another thing to keep in

mind we need to track when these rates

go up or down

in fact

all the up and downs that we

see in this data through it all it

really seems like the sensitivity

generally speaking is more at a full

point increase or decrease versus a half

Point increase or decrease what I mean

by that is so we're right now

as I'm recording this September 18th

2023 we are at last I checked right

around like 7.3 roughly is the

30-year fixed rate mortgage somewhere in

in that range it's you know it's up and

down all the time

but basically if that comes down to

half a point I don't see that having a

huge impact on things but if it comes

down a full point

when we start to see it down into the

low sixes versus merely the high sixes I

think that's going to have a massive

impact and we see this all through this

data again I'm I only discussed a little

bit of the data with you because we just

don't have time for it and discussing so

much data you you kind of get overrun

with with it if you're just listening to

it or even just watching it

so I didn't want to go crazy on you

guys

but it's all through the data the

Half Point increases or decreases don't

really impact things but those full

point increases or decreases definitely

do and that's when we start to see

demand swing one way or the other so

I already kind of jumped ahead here but

with rates hovering in the low to mid

sevens right now and having been here

for a while I think we'll continue to

just see demand at the levels where

it has been assuming no new major

economic event and of course I always

have to hedge that assuming the

economy roughly stays the same and rates

roughly stay the same I think demand

will roughly stay the same nothing

groundbreaking

but you hear people all the time if

you go on Twitter and you talk to the

doomers on Twitter they will tell you

it's going to crash even if rates stay

where they are the Market's going to

crash I don't see that in the data

but we'll we'll have to obviously keep

tracking now if rates go above eight

percent

then I think we can expect to see a drop

in demand probably on par five to ten

percent that's basically what we what we

saw in this data when rates would make

an IT make a jump one way or the other

or a decrease by one percent we

would see demand swing five to ten

percent and if rates went above eight

percent I think we would see a loss of

about five to ten percent of demand and

that would probably be enough for us to

start seeing prices going down on a

year-on-year basis I've already said we

might have a few year-on-year prints

that are that are down before the end

of this year we had one already we might

see a couple more

but I think if rates went above eight

percent I think that that would we would

probably see an extended period of time

until those rates went down where we'd

see prices on a year-on-year basis lower

now if we solve the opposite what if

rates dropped and went then into the low

sixes then I think we even see demand

increase by five to ten percent we even

start to see prices increase

meaningfully

real estate prices right now are

basically staying flat year on Year

we're seeing you know one percent less

than one percent you know a site below

one a slight below or a slight

decrease

in that one month that I mentioned

but if if rates dropped into those

sixes we would start to see those year

on year median sales price numbers that

we look at so closely start to see those

to creep up from where they're

hovering around like one-ish percent

probably start to creep up to two three

four five percent year on year because

that demand would impact things pretty

pretty big

now it's hard to really quantify how

many you know with all the different

factors that there are at play because

like I said it does matter what part of

the Year these rates go up or down in

but generally speaking if you see a rate

increase or decrease by a full

percentage Point that's when you start

to see demand increase or decrease by

five roughly five to ten percent

I've said it on this show and I will say

it again there is a lot of data that

indicates that at 5.25 for the 30-year

fixed rate mortgage and below that

number is where the market would start

to go Bonkers again I think until we hit

the low fives I think the market will be

relatively tame I say relatively because

if we see him going to the low sixes

or high fives at some point soon we are

going to see that big I mean a five to

ten percent increase in demand would be

big but would it would be really crazy

if rates went even lower than that

I don't see that happening anytime soon

okay we've talked about this before the

FED seems pretty particularly with

unemployment not getting very high you

know there's a lot of angst over

inflation at the FED I think the FED

is going to kind of hold the line for a

bit in terms of interest rates which

then impact mortgage rates so I'm not

predicting that we're hitting 5.25

anytime soon I'm just letting you guys

I'm just reminding you guys that's kind

of a line in the sand that I think is

real and I think it's reasonable Zoom if if

when rates do fall back to that level

maybe we're talking about it might be

over a year from now you know we might

be talking about in in 2025 before

that happens again

because that's a full two points

below where we are right now so it would

take a lot of rate decreases

theoretically for the for the FED to do

that I know that there's you know people

like to talk about the the the spread

between the 10-year Treasury and the

30-year fixed rate is abnormally high

right now I understand all of that

but at the moment I don't see that

normalizing for those of you that are

data junkies and understand what I'm

talking about I don't see that

normalizing just yet

so I think it would take a bit for us

to go down into the low fives and I

think the FED doesn't want mortgage

rates to go down into the low fives

anytime soon they don't like that how

expensive housing has gotten the past

two years because guess what it's their

fault it's their fault for this right in

a lot of ways they caused it by letting

rates go so low so they feel sorry sorry

to yell into my microphone they feel

responsible they won't admit that but I

think they do

and so they they're going to do

their best to keep these mortgage rates

elevated as long as the housing market

doesn't crash and right now it doesn't

appear like it's going to crash anytime

soon

so I think it's reasonable to assume

if when rates go back to that level

again maybe in in a couple of years that

demand would be 15 to 20 percent greater

than it is right now and at that point I

think it's very reasonable to assume

we'd start to see year-on-year price

increases in the double digits again 10

you know appreciation for housing going

back to 10 perhaps even higher

so we'll have to we'll have to see

we'll have to see when this happens

the best case scenario really in my

opinion is if when the FED starts

tapering these rates that they do it

slowly and ideally that they do it

during the non-peak season right because

again we're talking about when when

rates are lower during peak season

things go crazy but for now we have a

slower period with rates that appear

like they will be elevated for at the

very least the next half year or so

here in this level you know low sevens

it high sixes maybe I think they're

probably going to be in the low sevens

for for a minute

so we'll have to keep tracking that

but long story short is there is

some insane rate sensitivity right now

Market wide this is not just in

Greenville I talk to people in other

markets same thing but this is a

Greenville podcast so I wanted to bring

you the data on Greenville so that you

guys got it

understood exactly what is happening

what the impact is with what's happening

you know when the FED met last week

or last month in Jackson Hole the FED

releasing more you know whether what

they're going to do in terms of their

rates this week these things that are

happening behind closed doors impact

things here in Greenville and so you

heard it here you got the information

for me I hope that was helpful for you

guys and I hope that if you're a buyer

or a seller in the real estate market

hopefully that helps you to better

prepare better plan ahead for what might

be happening here in the future thank

you guys for listening my contact

information is in the show notes if you

need a realtor for any of your real

estate needs here in Greenville we also

have a referrals relocations Department

with my company I can find you a realtor

anywhere in the country

and we're International so even

outside the country so let me know if

you need that

please rate review subscribe do all

those great things to support the show

and we will talk again next time