FOMC Raises Fed Funds Rate by 25 Basis Points at Latest Meeting

FOMC Meeting

As expected, the FOMC lifted its federal funds target by 25 basis points to a range of 1.25 to 1.50 percent in a majority vote of 7 to 2. The committee expects the labor market to “remain strong” and the economy to continue to rise. Growth in household spending is once again described as being “moderate” and most still expect inflation to move higher before stabilizing at around 2 percent. Members of the FOMC continue to describe policy as accommodative and repeat that near-term risks are balanced. The two members who voted against the hike underscore the skepticism that high level of employment will eventually lead to a wage push inflation. There was no upward movement in the quarterly funds forecasts for next year with an outlook of three more 25 basis point moves expected until the rate is at 2.1 percent.  Six of the members see funds below this rate by the end of next year while four see it above the rate. The outlook for 2019 also calls for three similar rate hikes and now, call for two hikes in 2020, up from only one previously predicted.  GDP forecasts are up with 2018 now predicted to have a median of 2.5 percent up from the 2.1 percent previously predicted. The long run median holds at a modest 1.8 percent. Unemployment was forecasted to fall 3.9 percent next year from the prior call of a 4.1 percent decline.

Fed Chair Press Conference: Janet Yellen

The modest rate of wage growth is evidence that the labor market, despite its low 4.1 percent unemployment rate, is not overheating by any means.  Janet Yellen, Fed Chair, cited that given the softness in wages and the low path of inflation, that it could take a “longer period of a very strong labor market” before inflation finally gains traction. Though the 4.1 percent unemployment rate is ½ below the Fed’s long-term projections, she did not describe the economy as being at full employment, but rather only in the vicinity of full employment. She stated that unemployment will have to come down even more before full employment is reached. She noted repeatedly that one factor behind the lack of wage gains and lack of inflation is the workforce’s low rat of productivity growth. Expectations for tax cuts have helped the stock market post “significant” increases and in effect has translated to higher GDP and lower unemployment forecasts in the FOMC’s quarterly projections. She stated members of the committee are welcome the possibility of tax cuts which they see boosting both consumer and capital spending. A possible risk developing she cited was the flattening underway in the yield curve as short-term rates rise, in line with the Fed rate hikes, while the longer-term rates hold steady]. She said there was much discussion regarding the slope of the yield curve and that comparatively low long rates reflect a low term premium for future inflation risk. She warned the curve now may more easily invert as the Fed withdraws accommodation; an inverted curve is when short term rates exceed long term rate

CA Legal Update: New Assessment Fees for California Real Estate Recordings


As of January 1, 2018, a required $75 assessment fee will be paid at the time of recording in addition to standard recording fees. The new law imposes a fee of $75 to be paid at the time of the recording of every real estate instrument, paper, or notice required or permitted by law to be recorded, per each single transaction per single parcel of real property; not to exceed $225. This new legislation passed in September establishes permanent, ongoing sources of funding dedicated to affordable housing development. The new law requires that the county recorder sends revenues from this fee quarterly, after the deduction of any actual and necessary administrative costs incurred by the county recorder, to the Controller for deposit in the newly formed “Building Homes and Jobs Fund.” This would make legislative findings and declarations relating to the need to establish permanent, on going, source of funding dedicated to affordable housing development.


The fee will NOT be imposed on any real estate instrument, paper or notice recorded in connection with a transfer subject to documentary transfer tax or in connection with a transfer of real property intended to be occupied by the owner. A transfer NOT subject to transfer tax wherein the transferee/ buyer will occupy the property as their residence is also not subject to the $75 assessment.

The Assessment will apply to the Recording of Documents Regarding Real Property, such as, but not limited to:

  • Deed
  • Trustee’s Deed
  • Grant Deed
  • Deed of Trust
  • Quit Claim Deed Fictitious Deed of Trust
  • Assignment of Deed of Trust
  • Request for Notice Of Default
  • Subordination Agreement
  • Easement
  • Release or Discharge
  • Mechanic’s Lien
  • Notice of Default
  • Notice of Completion
  • Maps
  • CC&Rs
  • Etc.

Consumer Spending

Gallup US Consumer Spending Measure

Americans’ daily self-reported spending averaged $109 in July, the sixth consecutive month where the average was $100 or more. July’s report of $109 is the highest spending average since May 2008. The $6 increase from June is not statistically significant. It is, however, the highest for the month of July for this index. Spending among both higher and lower earning Americans was slightly up in July and is among the highest of the recent upward trend. Higher earners’ spending has consistently been more than double that of lower earners. Adults in households whose annual income is $90,000 or more reported spending an average of $178 throughout July. At the same time, spending with households less than $90,000 annually, averaged $80. This is a strong start for the second half of 2017, but given Augusts’ history spending is likely to remain flat or lower, Americans’ relatively high spending average in July Is not likely to hold.

Consumer Price Index

Consumer prices remains very soft, failing to match economists’ expectations’ for July. Total prices edged one tenth higher in July as did the core which does not include food and energy, both of these factors are no better than what economists’ predicted as their low estimates.  Yearly rates are also at the low estimates at 1.7 percent for both. Moderation in housing costs remains a major disinflationary force, inching only 0.1 percent higher for a yearly 2.8 percent which is down 2 tenths from June. Wireless services continue to move lower falling 0.3 percent on the month for a yearly decline of 13.3 percent. Vehicle sales have been weak this ye4ar and is being reflected in prices which fell 0.5 percent in the month. Lodging away from home is another major negative in the July report, falling from a record 4.2 percent as motels and hotels cut prices. On the plus side, apparel prices which have been on a long negative streak recently, rose 0.3 percent, however the yearly rate remains in the negatives at minus 0.4 percent. Medical care rose 0.4 percent for the second straight month, yearly rates, however, edged lower to 2.6 percent. Energy prices at minus 0.1 percent were a negative in the report, but were offset by a 0.2 percent rise in food. Lack of inflation remains the central trouble in the Federal Reserve’s policy efforts. Today’s report and results will not be improving expectations for the beginning of balance sheet unwinding at the September FOMC.

2017 2nd Quarter Central Coast Real Estate Report

The San Luis Obispo County’s Real Estate update includes data for all cities that make up the San Luis Obispo County of California. This data is for the second quarter, January through June, of 2017.

  • 1,500 Total Home Sales (2017) vs. 1,372 (2016)
  • $639,059 Median Home Price (2017) vs. $550,000 (2016)
  • 98% Sales per List Price (2017) vs. 98.13% (2016)
  • $474.96 Average Price per Square Foot (2017) vs. $350.00 (2016)
  • 75 Cumulative Days on the Market (2017) vs. 90(2016)

Of all the five reported components of the real estate report for San Luis Obispo County four of the five factors improvement from 2nd quarter of 2016 to 201. The only component tracked to worsen from the first two quarters of 2016 to 2017 was the sales vs. list price which decreased a small percentage of 0.13% from 2016.

The total number of sales at 1,500 total homes sold in the first two quarters of 2017 is the highest number of total overall sales at 1,500 total homes sold, more than doubling the first quarter’s count of 667 total homes sold and exceeding last year’s second quarter data by a little under 150 total homes sold.

The median home price increased from $550,000 in 2016 to $639,059 in 2017. Though there is a year on year increase the median home price of the San Luis Obispo County decreased from the first quarter from a median of $663,100 down to $639,059.

The sales vs. list price increased by 1% from the first quarter of 2017 to the second quarter of 2017from a level of 97% to 98%, however yearly basis from the second quarter of 2016 to 2017, the

sales vs. list price dropped 0.13%, which is fairly insignificant.

The price per a square foot increased as well from both the first quarter and this time last year in 2016.  From the first quarter of 2017 to the second quarter, price per square foot increased slightly from $462.00 to $474.96. The yearly comparison shows a more significant change increasing from more than $100 from $350.00 in 2016’s first two quarters to $474.96 in 2017 second quarter.

The cumulative days a home for sale sits on the market decreased by 28 days from the first three months of 2017 to the first six months of 2017. However, the cumulative days on market increased from the second quarter of 2016 to 2017 from a level of 71 cumulative days up four days to a cumulative of 75 cumulative days on market.

Avila Beach leads the way with the highest median home price of $1,020,000 increasing in median price from both the first quarter and this time last year.

Central Coast Lending: Market Update

Labor Market Conditions

Nonfarm payroll growth of 222,000 was strong in the June employment report butnot6  average hourly earnings which only 0.2 percent higher, part of the mix that makes for only a moderate 1.5 in the labor market conditions index.


In a mixed report employers are finally catching up with their hirings as job openings, at 5.666 million in May fell back 5.0 percent and hiring, at 5.472 million, shot up 8.3 percent. The hiring total is a new record for the series while job openings are second lowest of the year. Other movement in this report is a 1 tenth rise in the quits rate to 2.2 percent which hints perhaps at worker confidence and willingness to switch jobs which may be a positive for wage traction.

Mortgage Applications

Purchase applications for home mortgages fell a seasonally adjusted 3 percent In the week of July 7th. Applications for refinancing fell 13 percent from the previous week to the lowest level since January 2017. The refinance share of mortgage activity fell 2.8 percentage points to 42.1 percent. The decline in applications was registered despite adjustments for the Fourth of July holiday. On an unadjusted basis, purchase applications were down a much sharper 22 percent from the previous week. The weekly decline shaved the year on year purchase index gain by 3 percentage points to 3 percent.

Beige book

Wages are on the rise but with only a modest to moderate rise. Economic growth is described as light to moderate across the Federal Reserve’s 12 districts. Consumer spending is rising in most districts but at a slower pace. This edition of the beige book, especially with descriptions of inflation and introduction to the word slight for the downside description of growth, is perhaps the weakest beige book of the year. There are, however, some indications of strength wit hthe3 report nothing that qualified workers are in short supply and the labor market is continuing to tighten for both skilled and  unskilled labor and especially in the construction and high tech sectors.  Looking at the report on net, it appears to still remain at modest to moderate in most region and economic readings. These results will not pull forward expectations for the next rate hike.

Jobless Claims

Initial jobless claims held little changed at 247,000 in the week of July 8th, with the prior week revised only slightly higher at a gain of 2,000 to a level of 250.000. The four week average4 is up 2,250 to 245,750 which is lightly above the moth-ago trend in what in not a favorable indication for the July employment report. Continuing claims, where data lag by a week, fell 20,000 to 1.945 million with this four wee3k average at 1.949 million, also slightly up. The unemployment rate for insured workers is unchanged at a very low 1.4 percent.

Janet Yellen Speaks

Janet Yellen conceded that wage pressures are weak but warned it’s premature to conclude that inflation trends are falling back below 2 percent. The Fed’s chair also mentions, like she did in her first day of testimony, she declined to say how low the Fed’s balance sheet will be reduced to, saying only that she expects the Fed’s reserves currently at $4.5 trillion, to be reduced substantially. She also repeated that it’s the FOMC’s goal to hold only Treasuries on the Fed’s balance sheet.

Consumer Price index

In what is one of the very weakest 4-month stretch in 60 years of records, core consumer prices could manag3e only a 0.1 percent increase in June. This represents the third straight 0.1 percent showing for the core, which excludes food and energy, that was preceded by the very rare 0.1 percent decline March. Total prices were unchanged in the month with food neutral and energy down 1.6 percent. Housing, which is a central category, continues to moderate, also coming in at 0.1 percent following a 0.2 percent gain in May.  Apparel is down for a fourth month in a row with transportation, reflecting falling vehicle prices, down for a second month. Medical care, which had been moderating, picked up with a 0.4 percent gain while prescription drugs which   Janet Yellen has been citing for specials weakness, bounced back with a 1.0 percent gain. However, wireless telephone service, another area cited by Yellen for weakness, posted yet another sizable decline of 0.89 percent in June.  Year on year the core is steady at 1.7 percent with total prices, down 3 tenths to 1.6 percent.

Consumer Sentiment

Economic expectations are falling while current conditions remain high, a combination that the consumer sentiment report warns points to economic slowing ahead. The consumer sentiment index fell a sharp 2 points in the preliminary results for July to a much lower than predicted level of 93.1. The expectations component is down nearly 4 points to 80.2 for the lowest reading since before the election, in October of last year. Republican expectations have been falling sharply from their steep highs, down to 108.9 for a more than 7 point decline from June. Democrat expectation is actually improving slightly, but remains very low at 63.2. Current conditions rose slightly in the month to 113.2 which is a positive indication for this months’ consumer activity. But it’s future activity that may be in trouble. Inflation expectations edged higher in the month but remain very low at 2.7 percent for the one year outlook and 2.6 percent for the five year.

CCL Market Update

Mortgage Applications

Purchase applications for home mortgages fell 1 percent on a seasonally adjusted basis during the week of June 16th. The unadjusted purchase index is 9 percent above the level it was during the same week one year ago. The refinancing share of mortgage applications rose 1.2 percent to 46.6 percent of all home mortgage applications being for refinances; it increased 2 percent from the previous week to the highest level since November, when the presidential election took place and rates substantially increased. The weekly seasonally adjusted decline in purchase applications, which follows last week’s decline from the week of June 2nd when the purchase index reached the highest level it’s been since November 2009. The current 9 percent year on year gain indicates that prospective home buyers have been exceptionally active in June.

Existing Home Sales

In previous months housing has been sliding, but May’s existing housing report shows a very solid 1.1 percent rebound to a higher than expected annualized rate of 5.620 million. Today’s report includes gains for single family homes, up 1.0 percent to a 4.980 million rate and also condos are up 1.6 percent6 to a rate of 640,000. The median price rose 3.2 percent to $252,800.On a yearly basis the median is up 5.8 percent showing seller strength relative to a 2.7 percent gain for on-year sales. Another positive in the report is supply which is strengthened by the increase in prices, increased to 1.960 million vs. 1.920 in April and 1.8010 million in March. Relative to sales, supply is at 4.2 months compared to 4.1 and 3.8 in the two prior months. The housing sector opened the year strong then fizzled ou6t during the spring selling season. This report shows limited weakness in the housing sector and should confirm expectations of a bounce back in housing

Jobless Claims

Jobless claims are little changed in the latest report and remain consistent with demand for labor. Initial claims came in at 241,000 for the week of June 17th; this is right in line with economists’ predictions of 240,000. The week of June 17th also happens to be the sample week for the upcoming June employment report, compared to the sample week of the May employment report, there is a slight increase of only 8,000. The four week average is up very slightly to a level of 244,750 that is only marginally above the four week average mid-May which was at a level of 241,000. Continuing claims data lags by a week and are again little changed at 1.944 million for an increase of only 8,000. The continuing claims four week average is up 5,000 to 1.932 million. The unemployment rate for insur4ed workers, excluding job leavers and re entrants is unchanged and remains at a very low level of 1.4 percent. The readings throughout this report are at historic lows as employers hold on to their employees.

FHFA House Price Index

Though sales may be uneven, home prices are on the rise. The FHFA’s house price index jumped 0.7 percent in April with March revised 1 tenth higher and is now also at a lev el of 0.7 percent. The yearly rate is up 4 tenths to 6.8 percent which is the best showing in 3 years! Though the housing sector may have fumbled in the spring selling season, home prices are one of the high points of the nation’s economic data and are a major positive for household wealth.

New Home Sales

After a disappointing spring season for the housing sector, housing is back on track, following the strength in the existing home sales market report. New home sales rose a very solid 2.9 percent to an annualized rate of 610,000, near economists’ top estimate. The report also includes a shar4p 24,000 upward revision to April to a level that now stands sat6 593,000. This report, similar to the existing home sales report, shows great strength in the selling prices with the median surging11.5 percent in the month to $345,800. The year on year increase is 16.8 percent which is nearly double the 8.9 percent gain in actual sales. This price traction is related no only to demand but also to supply of new homes which remains very tight. New homes however did move into the market during the month, up 1.5 percent to 268,000 units, but sales relative to supply remain unchanged at only 5.3 months.

Rates Reach Yet Another Low of 2017!!

Now is the time to refinance before rates increase again!!

Refinancing with Central Coast Lending allows borrowers flexibility with their mortgage!

  • We can decrease the term of the loan to save thousands off future interest payments.
  • Help lower the interest rate, reducing monthly payments.
  • Remove mortgage insurance on loan.*
  • With rising equity, now is a great time to consider cash out refinance, for those long delayed home improvements, college tuition payments, etc.

It’s possible to accomplish all this while keeping the payment the same!

Mortgage Rates Hit New 2017 Lows

The Freddie Mac mortgage rate decreased this week for the third consecutive week to the lowest level of 2017! It decreased by just 1 basis point to an APR of 3.94%. APR still remains higher than the APR a year ago when it was at a level of 3.66% APR.

Attributed to Sean Becketti, chief economist, Freddie Mac.

“In a short week following Memorial Day, the 10-year Treasury yield fell 4 basis points. The 30-year mortgage rate remained relatively flat, falling 1 basis point to 3.94 percent and once again hitting a new 2017 low.”

2017 USDA Income Limits Update

2017 USDA Income Limits Update

The income limits for the USDA Single Family Housing Guaranteed Loan Program were recently updated and increased for new mortgages originated in 2017.  The maximum eligible income for this loan program is defined as the greater of 115% of the US median family income or 115% of the average of the state-wide and state non-metro median family incomes or 115/80ths of the area low-income limit.  The updated limits became effective on May 17, 2017.


The income limits for the local Central Coast area are as follows:


San Luis Obispo County

  • 1-4 Person Household – $93,950
  • 5-8 Person Household – $124,000


Santa Barbara County

  • 1-4 Person Household – $104,200
  • 5-8 Person Household – $137,550


Link to the directly to the USDA Single Family Housing Guaranteed Loan Program here, or directly to the USDA income document here.

CCL Market Update

Housing Market Index

New home sales have been leading the home market with home builders reporting strong activity this month and predict even better times ahead. The housing market index topped economists’ predictions In May, rising 2 points to a level of 70. Current sales are also up 2 points to 76 with 6 month sales up 4 points to a very strong 79. Traffic, a key reading, is at 51 and over the breakeven point of 50 for the fifth time in the last six months.  Even though traffic is nearly 30 points behind sales it is still the highlights of the report. This is the best run by fart of the expansion and offers a hopeful hint that first time buyers, who have been priced out of the new home market, may begin to be a factor.

Housing Starts

Levels of the of the April housing starts reports were disappointing in the month. Though, still health starts fell 2.6 percent to a 1.172 million annualized rate that is well below the low estimate economists’ predicted of 1.215 million. Downward revisions are a factor in the report, totaling 27,000 in the prior two months. The strength in the report is in the single family component with starts up 0.4 percent to a rate of 835,000. Besides the increase in single family homes the report is filled with minus signs. Permits for single family homes fell 4.5% to a rate of 789,000 with completions also down 4.5 percent to 784,000. The sharpest weakness, however, comes from the multifamily homes sector where starts fell 9.2 percent to 337,000. Permits did rise 1.4 percent to 440,000 but completions declined by 17.2 percent to a 322,000 rate.

Mortgage Applications

Mortgage applications activity after reaching 8-year highs last week, May 12th, retreated. Purchase applications for home mortgages fell on as a seasonally adjusted basis 3 percent from the previous week and refinance dropped 6 percent. Unadjusted, the purchase index decreased by 3 percent from the prior week, however, the level was still at a sharp 9 percent higher than a year ago. The refinance share of mortgage activity resumed its decline and was down to 41.1 percent, the lowest level since all the way back in September of 2008.Mortgage rates remained flat yet again this week. The week’s decline in purchase application may just be a temporary slackening in volume which is still 9 percent higher than a year ago.

Jobless Claims

Demand for labor is still high judging by jobless claims which remain right at record lows. Initial claims fell 4,000 in the week of May 13th to a lower than expected level of 232,000, this pulls down the four week average by 2,750 to 240,750. The week of May 13 is also the sample week for the May employment report and in comparison with the sample week of April employment showed further improvement, down 11,000 from the 243,000 in the week of April 15th, down 2,000 from the four week average of 242,750. The continuing claims side of the report tells a similar story, down 22,000 in lagging data for the week of May 6th to 1.898 million. This is a 29 year low for this reading. The four week average is down 20,000 to 1.946 million which is a 43 year low. The unemployment rate for insured workers is at 1.4 percent.