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Housing Market, Mortgage Rate Overview: Where we Stand

Welcome back from Memorial Day! We hope that your day was a relaxing one. If you missed them, our last two posts:

  • Mortgage Report: the Second Lien Makes a Comeback (May 19)
  • SLO County Real Estate Update (May 12)

This week, we will break down the housing and economic data released during the month of May.

National Home Sales & Prices

Home prices across the nation continue to rise, though the pace of their gains has slowed. Take a look at the top headline on this morning:

Home Prices Jump in March

The month of May is nearly done, but data collected from March makes the top headline.

One of the inherent difficulties in tracking the economy is simply the data lag. Headline economic numbers do not reflect conditions that are dealt with in the present day and on the ground.

What these numbers can do, however, is give us an idea about longer-term trends that might help us prognosticate where everything might be going. So what do the numbers say?


Up ArrowS&P/Case-Shiller Home Price Index (March) – Prices rose 0.8%  from the previous month, and 12.4% from the previous year. (CNBC)

Case-Shiller 20-city y:y

To the right, we have posted a screenshot of a graph published by Econoday. Prices continue to rise, but total gains have slowed a bit as demand has dipped. Higher home prices and higher mortgage rates have reduced what buyers can afford. As competition for property declines, sellers are not able to ask for quite as much.

Another limiting factor for real estate has been a shift in demographics and the rate at which households are formed.

The 2010 U.S. Census reported that the median age of marriage for men (28.2) and woman (26.1) rose. Young adults in the United States are delaying household formation – and  renting in the meantime.

So when you read Tweets like this…

… consider that the new normal is not the same as the old normal. Prices rose to a 2006 peak under a different set of conditions (available, easy credit) at a time when household formation occurred at a faster pace.


Up ArrowFHFA  Home Prices (March) – The FHFA index reported that prices rose 0.6% month-over-month and 6.6% year-over-year in March. FHFA reported a slowdown in the year-over-year gains, though 2014’s first quarter still marked the 11th-straight quarter that prices had increased (FHFA).


Up ArrowNAR Existing Home Sales (April) and U.S. Census New Home Sales (April) – Existing home sales rose 1.3% month-over-month to a seasonally adjusted annual pace of 4.65 million units. Sales were down 6.8% from April 2013 levels. Notably, available inventory jumped to 5.9 months, from 5.1 (about 6 months is considered healthy)  (National Association of Realtors).

New home sales also rose, but mostly on the strength of multifamily homes. (Bloomberg)


Mortgage Rates

Down ArrowMortgage rates have dipped over the past month. Freddie Mac’s weekly Mortgage Rate tracker placed current rates at the lowest level in seven months, with the 30-year fixed national average at 4.14%.

During the recovery, rates have typically moved at an inverse to economic outlook. When general consensus has been positive about the strength of the U.S. economic recovery, rates have increased. During periods of negativity or uncertainty, rates have improved.

So why have rates dipped, even as people generally seem to be feeling better about the economy? Rob Chrisman explains in his widely-read Daily Mortgage News & Commentary:

So why, if the economy is picking up some steam, do rates remain low? Well, it is not picking up that much steam, and the discussion among economists is centered on just how disappointing it is. Most data continue to show modest improvement but overall economic growth shows little indication of breaking out of the underwhelming trend from recent years.

Chrisman continues, speculating possible reasons for the weakness:

Blame it on the weather, on people being under-employed or dropping out of the labor force, on the Millennials not buying houses, on problems overseas, whatever. And housing is definitely not setting the world on fire: we are more than halfway through another disappointing spring selling season and we are beginning to hear more talk about new policy initiatives to boost home buying and new home construction.

At the beginning of May, we wrote about “the new normal.” Analysts continue to compare economic growth and the real estate recovery to previous economic cycles, however the underlying conditions (read: demographics) are starting to look very different. We need to figure out what “the new normal” really is, and analyze  sectors like real estate and employment on their own terms given current conditions.

As the market slows, now is a time to get creative with your home financing. As both a direct lender and a broker, Central Coast Lending has uniquely positioned itself in the industry to offer its clients home loan solutions to almost every kind of property or financial situation.


Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email to set up a free pre qualification. We are The Mortgage Experts: ask us anything!

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