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Market Update

S&P Corelogic Case-Shiller HPI

The S&P Corelogic Case-Shiller Index is the leading measure of US home prices. Data released for March 2018 shows that home prices continued their rise across the country over the last 12 months in 20 main cities the index follows. On a year to year basis the index increased 6.8 percent in March, this no different from the year over gain seen in the month prior. The home price index is 7.8 percent higher than 2006’s peak, during the housing boom, prior to the housing market and economic crash. Homebuyers are paying a premium for home ownership as the number of properties up for sale declines and mortgage rates increase, up to a seven-year high. Prices are being driven entirely by the strong demand and extreme low level of inventory, especially at the entry level. Homebuilders have increased production steadily, yet supply is still well below historically normal levels and below home buyer demand. Sales listings over the past 12 months have declined 6.3 percent due to the number of sparse listings; listings on an annual basis have been declining for the past three years.

Consumer Confidence

May’s consumer confidence bounced back in May and remains at historically strong levels. The consumer index rose to 128 from a revised level of 125.6 in April when a slight decline in confidence occurred on a monthly basis; as March fell to 125.6 from February’s 130.0, the highest reading in 18 years. The growth that occurred in April to May suggests steady growth in the months ahead and economic growth in the second quarter of the year, as it is likely to improve from the first quarter. The present situation index is a measure of current conditions, it climbed to a 17 year high of 161.7 from 157.5 in the month prior. Consumers were only slightly positive about the short-term outlook in May despite a small decline in percentage of consumers anticipating improvements in business conditions over the next six months. The outlook for the labor market was mixed, as the percentage of consumers expecting improved short-term income prospects declined. It was reported by the Commerce Department that US retail sales in April increased at a 0.3 percent rate. This is a sign consumers may be back after weak spending was recorded at the beginning of this year.  Overall, however, confidence remains at historically strong levels and should continue to support solid consumer spending in the near term. The index measures American’s sentiment on current economic conditions as well as expectations for the next six months. Consumer spending accounts for about 70 percent of US economic activity.

Mortgage Applications

Mortgage applications decreased 2.9% for its eight consecutive week of declines, even as interest rate decreased slightly. For the week ending in May 25th, the refinance share of mortgage applications decreased 5 percent from the week prior to its lowest level in 18 years. The refinance share decreased to 35.3% from the previous week’s 35.7%. The unadjusted purchase index also decreased, falling 3% from last week, but the seasonally adjusted purchase index dropped only 2% from last week and remains 2% higher from this time last year.

GDP

First quarter US GDP was revised to an annual rate of 2.2% according to the second estimate of GDP growth. It declined from the previous estimate of 2.3% growth. The general picture of economic growth remains the same, however, the new estimate reflects downward revisions to private inventory investment, residential fixed investment, consumer spending and exports that were partly offset by san upward revision to the nonresidential fixed investment sector. Recent tax cuts are expected to boost activity this year, however. Real GDP for the US increased 2.9% in the fourth quarter of 2017. There are signs GDP growth gathered momentum early in the second quarter with solid consumer spending, business investment on equipment and industrial production in April. The housing market, however, will prevent too big of an increase as it appears to have taken a further step back. Economists expect a $1.5 trillion income tax cut package, which came into effect in January, this will hopefully spur faster economic growth this year and lift the annual GDP growth close to the 3 percent target.

Beige Book

The Federal Reserve’s Beige Book in May showed an upbeat outlook for near term growth and a pick up in industrial activity in late April and early May. The members of the reserve stated the US grew moderately from late April to early May in its latest evaluation of the economy, indicating the central bank remains firmly on track to raise interest rates next meeting. In every region of the country, Fed officials characterized the economy as performing well with manufacturers raising production, banks reported stronger demands for loans, and home builders were very busy. A talent shortage is the biggest source of anxiety in the economy. Employers were especially having trouble finding truck drivers, electricians, carpenters, painters, and computer technicians. Despite these shortages in employment and rising costs for some raw materials such as oil and steel, inflationary pressures still appear subdued. The Beige Book confirms the US economy has improved since the first quarter and is on track to top the 3% goal in the spring of this year.

Jobless Claims

New applications for US unemployment fell more than expected last week. Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 221,000 for the week ending in May 26th. Economists forecasted claims falling to 228,000 in the latest week. The labor market is viewed as being close to or near full employment. The jobless rate is near a 17 ½ year low of 3.9 percent, which is within striking distance of the Federal Reserve’s forecast of 3.8 percent by the end of this year. The four week moving average of initial claims rose 2,500 to 222,250 last week. The Fed reported that employers are having difficulty filling positions across skill levels where there were notable shortages in workers.

Personal Income & Outlays

Personal Income and Outlay report estimates income rose by $49.5 billion, or 0.3 percent in April; this is more than what was expected in the month. This is yet another sign that economic growth is regaining momentum early in the second quarter, while inflation continues to steadily rise. Economists forecasted consumer spending advancing 0.4 percent, as spending was boosted by purchases of gasoline and other energy products. Nondurable goods purchases increased 0.9 percent while outlays on services rose 0.5 percent lifted by the demand for household utilities. In April, personal income rose 0.3 percent after rising 0.2 percent in March. Wages increased 0.4 percent while savings fell to $419.6 billion last month from $445.7 billion in March. The savings rate dropped to 2.8 percent from 3.0 percent in March.

Pending Home Sales

Pending home sales, which measure signed contracts to buy existing homes, fell a to a lower than expected 1.3 percent compared to March. This was the third lowest level of the year. Pending sales were 2.1 percent lower compared to April of 2017 the fourth straight month showing an annual decline; this again is blamed on the continuing supply crisis in the housing sector. The demand for buying a home is very robust in today’s market. Listings are typically going under contract in under a month and instances of multiple offers are increasingly common pushing home prices even higher. Weakening affordability is going hand in hand with the short supply especially on the lower end of the market. As home prices continue to rise potential buyers have less room in their wallets. Mortgage rates jumped sharply in April, with the average rate on the conventional 30-year fixed rate mortgage at its highest level in seven years.

Employment Situation

Total nonfarm payroll employment increased by 223,000 in May, and the unemployment edged down to 3.8 percent or 6.1 million. Employment continued to trend up in several industries including retail trade, health care, and construction. On a year on year unemployment rate was down by 0.5 percentage point and the number of unemployed persons declined by 772,000. The number of long term unemployed (those jobless for 27 weeks or more) was little changed at 1.2 million in May and accounted for 19.4 percent of the unemployed. Over the past year the number of long term unemployed has declined 476,000. Both the labor force participation rate, at 62.7 percent, and the employment population ratio at 60.4 percent changed very little in the month of May. The average workweek for all employees on private non-farm payrolls was unchanged at 34.5 hours in May, while average hourly earnings for all employees rose by 89 cents to $26.92. This is a yearly increase in earnings of 71 cents or 2.7 percent.

Construction Spending

US construction spending rebounded more than expected in April as investment in private construction projects had its biggest gain since 2012 and offset a drop in the public outlays.  Spending jumped more than economists’ expectations of a 0.8% increase, as expenditures were 1.8% higher in April compared to March. The April spending pace of $1.31 trillion, seasonally adjusted, was 7.6 percent higher than a year ago. While the monthly spending rates are often revised, expenditures for the first four months of the year are 6.6% higher than the same period in 2017. Private-sector expenditures rose 2.8% compared to March, while public sector spending fell. Residential construction spending was up 4.4 percent during the month and stood 9.7% higher than a year ago. April reversed the drop seen in March, but the most important thing seen here is the fifth 1% plus increase in the past six months. The strength is across the board in public and private, residential and commercial buildings with the state and local government sector being the only soft spot.

Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile
805.543.LOAN info@centralcoastlending.com
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California Becomes First State to Require Solar Panels on New Homes

Under a new policy voted on by California regulators Wednesday, May 9th, solar panels will be a required feature on virtually all new homes built within the state.  This puts California in the fore front of government controls over climate-warming carbon emissions once again. The California Energy Commission voted unanimously, 5-0, to recommend energy efficiency standards that are set to be added to state building regulations later this year and will become effective for all construction after January 1, 2020. These new rules will make California the first state in the nation to require solar panels on new homes.

Bernatte Del Chiaro, executive director of the California Solar & Storage Association said, “This will be nothing short of historic for our state and for our country. Her continued, “California is once again betting on the sun and putting real policy behind grand vision.”

This new requirement will apply to single family homes and to apartment and condominium complexes of three stories or less. Solar installations have become so cost effective that they are included in more than 15,000 homes built each year in California, without the state mandating it. In 2020 and beyond that number promises to increase to 80,000, the number of homes built each year in California. Findings that solar power would be cost effective in all climate zones in the state were crucial in moving this proposal forward. The average estimated cost of a solar system $9,500, or $40 a month when amortized over a 30-year mortgage. But the systems are projected to save customers an average of $80 a month on utility bills.

“It’s become more attractive to consumers,” said Kelly Knutsen, director of technology advancement for the solar industry group. “Whenever there is demand you want to meet that demand.” While building industry organizations did not try to block the new rules, they expressed their concern of driving up home prices and said they would have preferred a slower phase in of the new requirements. A leading building organization stated that they appreciated the fact that the rules would allow for smaller installations or waivers in cases in which space is limited or neighboring structures shad roof tops.

The California Building Industry Ass. also praised another part of the new regulation, which gives energy credit to homes that employ battery storage technology. The innovations “will allow the homeowner to capture the cheaper electricity produced by the rooftop solar panels during the middle of the day and keep that power on site for use in the early evening ours when electrical rates go up,” said Bob Raymer, technical director of the building association.

The solar panel rule next goes before the California Building Standards Commission, which typically adopts recommendations from the energy commission. The building group is expected to take up the matter in October or November.

Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile
805.543.LOAN info@centralcoastlending.com
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New Listing! 4 Bedroom 3 Baths on 4.7 Acres


One of a kind custom view home on the Salinas River, near Taft Ranch. This 2×6 construction, 4,400 sq. ft. home on 4.7 acres has everything you might want. Custom rounded walls, gorgeous entry way with natural stone floors and atrium, distressed bamboo flooring, gourmet kitchen with Wolfe 6 burner stove, Sub-zero refrigerator, custom butcher block island, cherry cabinets, and granite counter tops. 3 sliding doors lead to over 2000 sq. ft. of patio overlooking the river. Fenced orchard and gardening area with raised beds. Check out the custom Man Cave/Wine Cellar and your own media room! A complete one bedroom apartment above the 3 car garage for guests or added income. And much, much more! Go to www.12455Chia.net
Bruce Freeberg 805.748.0161
Lic# 01771947

Written by Keith Byrd - Go to Keith's Website/Profile

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New Listing! Charming Cape Cod Cottage


Charming Cape Cod cottage in Southpoint with views! Versatile open floor plan can be used in a variety of ways. Currently set as a formal living room and large dining room with french doors, and open to the kitchen. Kitchen has view to backyard, with stainless steel appliances and generous storage. Main floor master bedroom has slider to backyard, with remodeled master bath and executive style closet. Lots of charming, custom wood work throughout the house and extra storage. Upstairs loft/office is loaded with built-in storage and offers vented skylights! Backyard has been transformed to a low-maintenance oasis with fruit trees and southern views of the Orcutt hills! Enjoy the privacy of living in a gated community, yet walking distance to local shopping, art and dining!
Gina Gluyas 805.310.7208
Lic# 01732656

Written by Keith Byrd - Go to Keith's Website/Profile

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New Listing! 3 Bedroom Vista Del Sol Condo

Great opportunity for affordable ownership in Santa Maria! Spacious three bedroom Villa del Sol condominium with attached two-car garage! Updated kitchen with granite counters. Three spacious upstairs bedrooms plus balcony. Easy to maintain backyard with additional green space and picnic area within the complex. Walking distance to local elementary school, shopping and dining!
Gina Gluyas 805.310.7208
Lic# 01732656

Written by Keith Byrd - Go to Keith's Website/Profile

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New Listing! 4 Bedroom 2 Bath in Morro Bay

Truly amazing opportunity to own a potentially multi-use property in beautiful Morro Bay with Views of Morro Rock and slight ocean view. Currently, designed as a duplex with two 2 bedroom units, a nice 3 car garage and lovely outdoor space. The property features gorgeous low maintenance landscaping and a beautiful new paint job combining to make the curb appeal of this property top notch. Long term tenants in both units create stability in income for the investment buyer but with the fantastic Morro Heights location this property will equally appeal to the owner occupant buyer wishing to personalize this property into a gorgeous single family home while maximizing the view potential. Currently the property offers approximately 1900 square feet of living area but potential may exist to add square footage or second story outdoor space.
Wes Burk 805.801.7061
Lic# 01815339

Written by Keith Byrd - Go to Keith's Website/Profile

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New Listing! In Las Jollas de Rancho Grande

Fabulous location and sophisticated styling this custom designed single level home is located in Las Jollas de Rancho Grande which boasts some of the best weather on the central coast. This pristine property has been lovingly cared for. It has wide passage ways making it wheel chair accessible. The exposed beam ceiling expands to outdoor living areas. Its West facing windows overlook the oversized yard, which includes fruit trees and oak trees. Enjoy nature’s theater with the abundance of fascinating wildlife that visits this area. This spacious lot affords room to expand the current footprint. The kitchen has been strategically appointed with an abundance of cabinetry, counters and prep stations — a terrific space where form and function work cohesively. The master bedroom and en-suite rivals that of a luxury hotel. Detailed features include central air conditioning and so much more. This home is perfect as a second home retreat for any full time life style. Located near world class wineries, the Pacific Ocean as well as the charming Village of Arroyo Grande with its services and eateries. A must see for the most particular buyer.
LeeAnne Fisher 805.440.0251 Lic# 01082922
George Fisher 805.801.0821 Lic # 01894989

Written by Keith Byrd - Go to Keith's Website/Profile

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Mortgage Rates Reach 7 Year High!

The Freddie Mac 30-year mortgage rate increased by 6 basis points to an APR of 4.61%. The APR is now higher than it  was a year ago, at a level that is 59 basis points above where it was at this same time last year when it was at a level of 4.02%. This yearly increase of 59 basis points is substantial and is at the highest point its been at since May 19, 2011. In 2017 we were seeing a wide year on year gap averaging about a negative 55 basis point decrease to APR, however this year the change in rate is positive, as rates continue to rise and the year on year gap continues to wide.
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Attributed to Sam Khater, Freddie Mac chief economist

“Healthy consumer spending and higher commodity prices spooked the bond markets and led to higher mortgage rates over the past week,” he said. “Not only are buyers facing higher borrowing costs, gas prices are currently at four-year highs just as we enter the important peak home sales season.”

Added Khater, “While this year’s higher mortgage rates have not caused much of a ripple in the strong demand levels for buying a home seen in most markets, inflationary pressures and the prospect of rates approaching 5 percent could begin to hit the psyche of some prospective buyers.”

Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile
805.543.LOAN info@centralcoastlending.com
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New Listing! 4 Bedroom 3 Bath Home

Desirable Mesa Verde Estates Home. This Spacious Executive Home has 4 Bedrooms and 4 Bathrooms with over 3,100 square feet of living space. Many of the homes outstanding features include, Engineered Oakwood Flooring, Built-in cabinets in Master and Hallway, Kitchen with Granite Counters/Island/Butler’s Pantry, Formal Dining Area, Canned Ceiling Lights, Whole house is wired for internet, cable and Security system with Cameras. Indoor Laundry Room with Cabinets and Sink, Remote Shades at upper windows, Two Car Garage with Telsa Charging 240 Outlet. 75 Gallon Water Heater and Exterior Outlets for Christmas Lights. Featuring one of the largest lots in Mesa Verde the back yard includes Patio Area wired with Surround Sound , beautiful Drought friendly Landscaping, Putting Green, Custom built Storage Sheds and RV Parking with double gate.
Shea Hutchinson 805.260.6322
Lic# 01189054

Written by Keith Byrd - Go to Keith's Website/Profile