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Beware the Inverted Yield Curve

The talk of the economic world this week has been the loop-de-loop of the yield curve. It’s only been this way for a few days, but the clock is clearly ticking. Why does it matter?

The yield curve marks the difference in interest earnings on the 10-year Treasury note versus short-term investments. Typically, the interest is greater on long-term investments because it’s a longer wait. But sometimes, the curve inverts, making the interest earnings on short-term investments greater. When this phenomenon persists for a few months or more, it’s a pretty solid predictor of a recession.

 A sustained, inverted yield curve isn’t foolproof. It could signal a general economic slowdown rather than a hard recession like we saw in 2009. But it does matter, and it’s worth watching. Right now, some real estate experts are predicting not a collapse in the real estate market, but definitely a slowdown. Where home values rose as much as 7.6 percent in 2018, predictions for residential real estate 2019 are much tamer, more along the lines of 4.5 percent.

What Do Buyers and Sellers Need to Know?

While we’ve been experiencing price slowdowns for a bit now, prices are still rising, just not at the brisk pace they have been. It’s actually good news for the market for two reasons. First, once potential sellers see that prices are slowing, more will be moved to list and get the most they can before they slow any further, so that moves more inventory to the market, which will help balance it further. We’ve actually seen the most balancing that we’ve ever seen in the past two years, with 3.41 months of inventory available.

 

Buyers will find this new change of pace refreshing, although they will still need to be motivated to buy to secure a good deal. Be prepared to put more down that you anticipated in the event that interest rates go up later this year, although the Fed has indicated it would not be moving rates up in the short term. You’ll also need to be prepared to get pre-approved by your lender and have your bank produce a proof of funds for down payment and closing to be a strong contender in any deal. Although prices have slowed, buyers should know that prices are predicted to continue increasing over the next five to ten years, so any purchase that buyers are planning to hold should appreciate nicely. 

Key Salem Housing Market Statistics

Here are a few other key stats from the Willamette Valley Multiple Listing Service housing report for February 2019:

 

Average Price for Single-Family Home Salem – $282,658

Average Number of Days on the Market Salem – 86

Average Price for Single-Family Home Keizer – $306,467

Average Number of Days on the Market Willamette Valley– 84

Single-Family Homes Sold Willamette Valley – 611

Total Dollar Volume of Homes Sold in Willamette Valley -- $411,419,151

Months of Housing Inventory Available in Willamette Valley – 3.41

Total Pending Sales Willamette Valley – 1,236

Active Listings Willamette Valley – 2,779

Active Listings Salem – 302

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