Have you seen The Karate Kid? Of course, you have. I love that movie. For the handful of people who haven’t seen it, the movie tells the story of Daniel LaRusso, a high school teenager, who moves from NJ to CA with his mother to start a new life. Daniel, who wasn’t thrilled about the move to begin with, gets bullied in school and finds it difficult to make friends. That is until he befriends his neighbor, Mr. Miyagi, an elderly Japanese handyman who is obsessed with Bonzi trees and catching flies with chopsticks. Mr. Miyagi is also an expert at Karate, and after learning about Daniel Son’s troubles at school (that what he called him), he offered to teach him Karate.
Daniel was so excited. That is until he started training – which consisted of washing cars (the famous wax on, wax off), painting fences and yes, catching flies with chopsticks. After weeks and weeks of this kind of “training”, Daniel gets fed up and is eager to learn how to kick, punch and fight. After getting into an argument with Mr. Miyagi and threatening to stop training all together, Mr. Miyagi threw a punch at him, and Daniel blocked it by using the wax on and wax off motion. Mr. Miyagi tried to hit him in the head, and he used the “paint the fence” motion to block it away. His hands and reaction time were quick because of the fly catching. Yes, Mr. Miyagi was teaching him how to fight, but he was also teaching him patience. (Spoiler Alert Coming). That patience led Daniel to becoming a Karate champion.
I’ve been thinking a lot about patience recently which is tough to practice in New York City, a city filled with people who get heart palpitations if we see we have to wait more than 4 minutes for the subway. And this is especially true for those of us working in the real estate world where everything needs to get done yesterday. Everything. And in the interest rate environment that we’re in, everyone from real estate agents, mortgage professionals and prospective home buyers, have all been losing patience with rates remaining at elevated levels like they have. In fact, over 40% of mortgage brokers did not renew their license in 2023 and the numbers are comparable for real estate agents as well. So many of our peers just gave up and couldn’t wait any longer. And it makes sense with mortgage applications nationwide continuing to be at low levels.
But markets go through cycles and there’s light at the end of the tunnel. And perhaps the first glimmer of hope took place in the week of July 10th with the latest inflation readings. On July 12th, the CPI (consumer price index), which measures inflation on the consumer level, dropped by a full 1% year over year from 4% to 3%. That’s a big drop from the 9.1% reading we saw in June of 2022. Not to be outdone, the PPI (the producer price index), which shows overall producer inflation dropped year over year from 0.9% to 0.1%. That is the lowest level since August of 2020.
We’re not out of the woods yet, and the FED will be watching the upcoming jobs report and the changes in wages to determine the long-term outlook on future FED rate hikes. But the latest inflation readings, which are the main drivers of mortgage rates, are leading economists and market experts alike to predict that we’ve reached the peak of interest rates, and the downward trend has officially begun. And with rates getting Karate chopped (see what I did there 😊), more inventory will open up and more buyers will qualify for financing.
Vice President of Lending
CrossCountry Mortgage, LLC
C: 973.769.8180
scott.nadler@ccm.com
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