Looking Ahead


2023 was the worst year for housing affordability in U.S. history.

               Home prices were way up.  So were mortgage rates, compared to the last five years.

               Existing home sales – the bread and butter of inspecting – were the lowest in over a decade.  In a market like that, you could put a turd on the market and it would sell.

               The slowdown showed in home inspections.

               Many inspectors were down 20-30% compared to 2022.

               The Kentucky Board of Home Inspectors (KBHI) was no help.  It made no outreach to help buyers get the protections home inspections deliver.  It made no connections with the Real Estate Commission to get agents to hand out brochures on home inspecting.  It had no brochures.  Or PSAs.

               Most home inspectors just soldiered on.  A few dropped out.  We’re down to about 580 home inspectors for the whole state.

               That was the bottom.

               Now comes Springtime for home inspecting!  Here are the forces turning things around.  Plus thoughts about what to do.

               While home prices soared, so did Americans’ wealth.  You don’t hear much about that in the

media.  The stock market also took off, up around 25% from its October low.  Fixed income, including bank deposits and CDs, finally started paying real interest, like 5%.  Real wages (after inflation) were rising and labor participation was up too.  Add it all up and Americans have reason for good cheer.

               That is crucial for a huge missing group of home buyers – the ones “stepping up” to nicer homes, neighborhoods, and schools.  It helps everyone else, including those sellers who got great prices!

               Consumer confidence is on the upswing.  It was up 14%, snapping six down months, at year-end, using the standard University of Michigan surveys.  Consumers are spending that way.  Christmas spending set records.

               Mortgage rates topped off.  Rates are coming back down now.  From the highest in two decades — a peak just shy of 8% for a routine 30-year fixed rate mortgage — rates slipped down to around 6.6% at year end.  They are heading lower.

               December traffic among home buyers picked up compared to November, the National Assoc. of Home Builders reported just before Christmas.  Builders are building homes with the same confidence too.  Housing starts were up at year-end (to 1.14 million homes vs 969,000 in 10/23).  Investors are buying in.  The S&P Homebuilders stock index is up 40% since October.

               Existing home sales ticked up from 13-year lows starting in November.  This is the season sales usually quiet down for the holidays.  Not this time around, even though homes still are under-supplied.

               The housing market’s slowdown since 2022 is due to the Federal Reserve, our central bank, raising interest rates to control inflation.  It’s signaling its done, or very close to done, now.  More important, the Federal Reserve projects steadily falling interest rates for 2024 through 2026.  From the Fed’s year-end 5.25-5.5% rate, target rates for the overnight rate – a key influence on mortgage rates – are 4.6% by the end of next year, 3.6% in 2025, and 2.9% in 2026.  That’s a steady drop, averaging 2.5% over the longer term.

               The “lock-in effect” – where homeowners with low mortgage rates avoid moving – fades with lower rates.  Adding supply of homes for sale attracts buyers and moderates prices.

               Projections can be off, but normally not hugely.  The range of all possible outcomes is distributed like a “bell curve,” with Goldilocks (“not too hot, not too cool; just right”) in the center at the big hump, and recession at the left tail and runaway inflation at the right.  So far, the Federal Reserve has pulled off a neat balancing act, with inflation coming down quickly and unemployment stay historically low.  The odds that it will pull off a “soft landing” got better all year. 

               All that adds up to more home inspections.

What to Do?

               As the housing market gets back to normal, slimmer workloads give home inspectors time to get ready and build their business.

               It’s a perfect opportunity for three basics steps to invigorate businesses:

               Use down time to market.  There are always more agents out there.  There also are untouched pockets of customers – like sellers and the aging, just for starters.

               Study what others do.  We can always improve networks and products.

               Work through your products.  Does your report look good?  Better than the competition?  Could you help new groups of buyers – like the elderly ready to downsize and die-in-place? 

               It’s looking like a very Happy New Year! 

               All the best to you!

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