Currently, the two hot topics in the real estate world are Zillow and the Federal Reserve. Today I’ll break down what is happening in both those spaces.

Zillow has been buying homes for quite some time. However, they recently decided that they’re done buying properties, and they're going to lay off 25% of their workforce. They were overpaying and selling homes at a loss. About a week before their announcement, people in the real estate community were wondering how they could overpay and then sell at a loss while staying in business. I guess now we know the answer. Zillow was buying about 4% of our market on a monthly basis. There are other iBuyers also buying about 4% to 7% per month. If they also stopped buying, we could start to see a slowing in our market as there's less demand for housing under $500,000.

The second concerning thing about our market is the Fed. They’ve recently stated that they're going to start tapering their bond purchases by about $15 billion per month. With the Fed not buying as many bonds, interest rates are expected to rise. As interest rates rise, it gets more expensive to borrow money. If rates go up by 1%, your purchasing power drops by 10%. If rates start to take off, you could see a slowing in the market as people second guess whether they want to make a move. Buyers may also start looking at lower-priced properties to keep their payments down. Rates are the Achilles’ heel of real estate. If they rise too quickly, we could have a big problem.

Right now, rates are still historically low and it's still cheaper to own than it is to rent. If you know anyone thinking about buying or selling a home, please share this information with them. You can always give us a call 602-738-9943 or send us an email at jason@thepenroseteam.com I’d love to talk with you.