Mortgage rates continued to decline as the disappointing economic news finally caught up with the stock market. The Dow Jones Industrial Average fell for a sixth week in a row, closing below 12,000 for the first time since March 2011 after climbing 89% since its bottom in March 2009. The Fed’s Beige Book report indicated the road to recovery is uneven and slow with four of the 12 districts reporting deceleration while only one district, Dallas, was seeing acceleration. Six of the districts saw further home price declines while the rest indicated no general increase, and credit conditions remained tight. Jobs are scarce and food prices are likely to stay high through next year leaving many financial analysts believing this slump is more serious that the market’s other pauses in the past two years. Once again, the local economic trends are far better than the national trends. According to the 2011 Central Coast Economic Forecast Mid-Year Update, employment, real estate, spending and wages are all on an upward trend in SLO County.
It’s no secret that home prices have fallen since their peak in 2006. In fact, two weeks ago, the S&P/Case-Shiller Home Price Index showed home prices in big cities fell to 2002 levels. This week, two new reports were released related to falling home prices. According to a report from the Federal Reserve, the average homeowner now has 38% equity, down from 61% a decade ago. CoreLogic also reported that nearly 23% of all US homeowners were in a negative equity position with their mortgages at the end of the first quarter of 2011. Almost 11 million borrowers owe more on their mortgages than their property is worth. Here’s an interesting chart that offers some perspective on the magnitude of the decline in home prices… http://www.chartoftheday.com/20110610.htm?T
Currently, the 30 Year Fixed is 4.125% (4.291 APR) and the 15 Year Fixed is 3.375% (3.685% APR). This week is full of news with Retail Sales, Producer Price Index, Consumer Price Index, Jobless Claims, Housing Starts & Building Permits, and Leading Economic Indicators.