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Mortgage Rates Trend Higher… is the Discount Window Closed?

Mortgage rates became more and more expensive during May, and home prices continued to rise well above their recent floor. So has the window for buying closed? Has all that record home affordability vanished? An overview of the market suggests that although purchasing power has declined from the previous few months, conditions are still historically positive for real estate purchases.

Home values are indeed increasing. Demand for real estate is up, supply on the market is down, and  the major home price indexes are showing year-over-year price gains at anywhere from 5% to 12%.

Mortgage rates have also risen. On May 2, Freddie Mac’s weekly survey had the national average of  the 30-year fixed at 3.35% – near a record low. By May 29, that number had reached 3.81%.

For some perspective on all of this, let’s turn to the year 2003. So far in 2013, the median price for San Luis Obispo County single-family residential properties is $419,900. In 2012, it was $395,000. These numbers are right around the 2003 median sales price of $410,000, and still 28.5% lower than 2006′s peak level.

What about mortgage rates? We uncovered an article from 2003 that stated “mortgage rates have hit a 45-year low!” The 30-year fixed at the time? All the way up at 5.21%. In the grand scheme of things, current prices and rates are extremely affordable.

The outlook for mortgage rates is a bit more challenging. Over the past year, the Federal Reserve’s stimulus efforts (Quantitative Easing or QE) and the shaky global economy (U.S. fiscal cliff, European debt), have helped keep mortgage rates cheap. Today, we have seen stronger economic indicators (housing prices for one, better employment news for another), and the Fed has said it will consider winding down QE. When this ultimately happens – and it will – rates will continue to move up as guaranteed demand in the bond market vanishes.

Mortgage rates inched lower for the second straight day on June 3. Read HERE for our complete 10 loan program rundown.

Give Central Coast Lending a call at 805.543.LOAN or an email at for a free, honest analysis of your finances and learn if buying a home or refinancing a mortgage might make sense for you.


Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile