Month: May 2013

It has been an eventful week in the line of real estate news. Existing home sales, new home sales, and mortgage rate movement has all made headlines with implications for the housing market. Moving from one to the next…

Sales of existing homes rose to the best pace in three and a half years in April, according to the National Association of Realtors. The pace of 4.9 million represents a 9.7% rise from the previous year, and the median price of $192,800 was the highest in 5 years. On the national level, the tightness of supply is finally easing, as supply of inventory rose to 5.2 months (6 is considered healthy).

New home sales also increased, underscoring elevated demand on the market for property. The pace of 454,000 in April was up 29% from the previous year and the highest level since the summer of 2008.

Part of the reason for such high demand is the favorable affordability conditions. Home prices have been rising lately, but they are still at 2003 levels.

Mortgage rates have been near record lows, but over the past three weeks have jumped. As of today (May 29) the average 30-year fixed rate wars 3.90% according to the Mortgage Bankers Association, which is the highest level in a year.

Central Coast Lending’s rates are lower than the national average. We have published the 30-year fixed at 3.625% (3.701% APR). See the graph at the end of this post for movement over the past two weeks. You can see how much rates have spiked.

Higher rates have hurt mortgage application activity, especially refinances. Applications for purchases are also down slightly, although, as discussed, positive affordability conditions and the a stronger economy continue to influence elevated demand for real estate.

Mortgage rates have jumped as we continue to see encouraging news about the economy. Investors continue to move money out of the bond market and into the record-setting stock market. Still, even with the rises, the Federal Reserve’s stimulus program will keep downward pressure on rates for the time being. When they wind down their program, we will see further jumps in rate prices.

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Chefs, gourmets and foodies have a heavenly new resource in North County.  The local farmers favorite, Spice of Life has opened a charming little store at the corner of Pine and 13th in Paso.  The creative owner, Lori, has a wonderful selection of spices plus a good selection of tasty teas and herbs.  She sells her own blends either individually or in a sampler sets for those who may want to try a few before deciding on your favorites.  Lori will also set you up with small ‘sample’ jars that are plentiful enough to ensure nothing sits in your cupboard too long.  Offered are certified organics but all products are selected for quality and purity. She is a skilled and creative cook herself as evidenced by the recipes she shares.  If you are in the mood to spark up your meals, stop by and get inspired!  Call 227-6000 or www.pasospices.com

Economic data has been generally positive over the last several weeks and mortgage rates have moved alongside the stock market, although after a busy Thursday (May 17) of statistics, we are reminded that the “recovery” isn’t always so uniform.

Unemployment claims jumped by 32,000 for the May 11 week. The upward movement came after consecutive weeks of drops to recovery low levels.

Groundbreakings on new housing construction dropped in 16.5% in April from March, although they were still up 13.1% from the previous year. While short-term growth may slow, permits for housing projects rose 14.3% monthly and 35.5% yearly. We may be in for a very strong summer construction season.

Inflation on both the consumer and producer levels stalled in April. This is a sign that the Federal Reserve’s policy of monetary easing is not having an immediate, outsized impact on US currency.

Mortgage rates are now in their second week of consistent upward movement, but despite the upward pressure they are still near record lows. For the future, we will point you to something that Central Coast Lending owner Jason Grote said for our May 13 rate update:

“I realize that this week, rates aren’t as low as they have been, but keep in mind that the 3-4% range of the 30-year fixed will be a thing of the past in 24 month,” said Grote. “We will miss them, and the people that took advantage will be the winners.”

To track mortgage rate movement throughout the week, check in with our CCL Rate Tracker, which publishes rates for 10 loan programs every Monday, Wednesday, and Friday.

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As the economy goes, so mortgage rates move. When uncertainty effects the market, investors are more likely to put their money in a “safe” location, and the U.S. Treasury bond market has been that “haven.” High demand for U.S. government bonds correlates to downward pressure on mortgage rates (see here to learn the specifics).

Of late, mortgage rates have jumped a bit higher. The Dow Jones Industrial Average and the S&P 500 – prominent stock market indexes – have continued to reach record high levels on a day-to-day basis. Employment news has been much more positive, with unemployment claims reaching a recovery-low figure, and the unemployment rate dipping to 7.5%. The housing market, construction, and spending economic indicators like retail sales, have all had strong showings over the past several months.

During the months of March and April, mortgage rates steadily dropped to within inches of all-time record lows. During the streak, the 30-year fixed just missed hitting its best ever mark (set in late 2012), according to Freddie Mac’s weekly survey.

Even as the stock market has improved, mortgage rates have dropped. In this case, the Federal Reserve’s bond buying quantitative easing program has guaranteed a source of demand for U.S. Treasuries.

During the month of May, mortgage rates have moved up off their floor. The good economic news was too much to overcome.

“Low initial jobless claims and improving employment data have caused the latest push,” said Central Coast Lending owner Jason Grote.

We saw a similar pattern to begin 2013. The fiscal cliff alarm brought nervous investors into the bond market, and mortgage rates dropped. When the fiscal cliff passed without much damage, mortgage rates rose. We are seeing the same cycle today.

“Rates feel volatile,” Grote explains. “Good numbers cause optimism, but if the economy is not ready for the increase, they fall back down.”

“I expect this to continue for the foreseeable future.”

To keep the market in perspective, mortgage rates are historically low, and the Federal Reserve’s bond-buying and bond-swapping programs will keep them that way. Fed Chairman Ben Bernanke has tentatively tied the program to a improving unemployment, but we still have a ways to go (the 6.5% mark has been put out there).

Employment news is good, but as Wall Street Journal reporter Ben Casselman remarked on Twitter, “At 180k jobs per month, we won’t return to population-adjusted pre recession employment until 2022.

In other words, we have a long way to go, and as we move forward mortgage rates will remain low – for now.

“I realize that this week, rates aren’t as low as they have been, but keep in mind that the 3-4% range of the 30-year fixed will be a thing of the past in 24 month,” said Grote. “We will miss them, and the people that took advantage will be the winners.”

Give us a call at 805.543.LOAN to learn more about how to take advantage of record low mortgage rates. To see the May 13 CCL 10-program mortgage rate tracker, click HERE and scroll past the text.

While I haven’t seen an official announcement, the application for liquor license that’s on the door of the old Taco Bell/Pizza Hut building on Madonna Road lists Buffalo Wild Wings as the new tenant.