Real estate market takes a breather – 12/17/2023 – Marcos de Vasconcellos

Brick by brick, the news and data that circulated in the last week seem to build a foundation for a heated real estate market in the coming months. Here and in the United States.

There, mortgage rates (used in loans for those buying homes) reached their historic peak in October, when the average 30-year mortgage rate reached 7.79% per year. Now, after seven consecutive weeks of decline, they are finally below 7%, according to data from Freddie Mac, a giant in the area.

The drop in rates follows the majority view of market analysts that the US Central Bank, the Fed, will begin to cut interest rates — currently, in the range of 5.25% and 5.50% per year — from March.

Cheaper mortgages increase the appetite for owning a home and are the gateway to the heating of the real estate market. In November, the number of new listings (houses put up for sale) and pending sales (closed deals, awaiting completion) reached the highest level in the last 12 months, according to a survey by another huge real estate agency, Redfin, with data from across the country .

And the increase in demand has already increased house prices by 3.7% in November, compared to last year. The biggest annual jump since October 2022. In addition to the expectation of a cut in interest rates, people are understanding that it is not possible to guess when the mortgage rate will return to below 5%, says the text published alongside the survey.

In Tupiniquin lands, optimism with the cycle of interest cuts had an immediate effect on the increase in home sales. In August, when the Copom cut interest rates for the first time in three years, the number of houses sold in São Paulo jumped from 5,800 (in June) to 8,000 — the highest level, so far, in the last two years, according to data from Secovi -SP.

But a market is not made up of interest alone. The Legal Framework for Guarantees, sanctioned by President Lula at the end of October —with vetoes that were overturned by Congress last week— brings more incentives —on two fronts— to our real estate market.

The first and most obvious front is to unlock credit in the market. As an asset (vehicle or property) can now be used as collateral for more than one loan, the idea is that the money will circulate again and, in many cases, be used to purchase other properties.

There is a second point of this law that could bring more flavor to a market that is still little explored in Brazil, but with great potential for financial leverage: repossessed properties, also called auction properties.

The rule makes it easier for creditors to repossess assets when the debt is not paid. Therefore, in the coming months we should see an increase in the number of properties repossessed by banks to then go to auction, at prices normally well below market value. Caixa Econômica Federal is the biggest exponent of this market.

Speaking of properties at low prices, we cannot ignore that construction companies are asking professionals in the field to intensify their search for land for popular subdivisions and construction within the framework of the Minha Casa Minha Vida program.

Less interest, more credit in the market and more properties at popular prices seem promising pillars for the coming months in the real estate sector.

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