We have seen a few notable housing related numbers in the past week with important implications for home prices and mortgage related activity. Interest rates continue to drop, and national existing homes sales continue to decline, even while local existing home sales have increased. Our recent strength suggests that our local market has been relatively resilient to the national housing slump.
Last week, mortgage interest rate averages hit a 50-year low. The average rate for a 30-year fixed loan, for example, dropped from 4.32 percent to 4.15 percent. As a result, refinance activity has increased. For the week ending in August 12, refinance accounted for 78.8 percent of total applications, up 3.2 percent from the previous week. (On a side note, now really is the time to refinance. Central Coast Lending offers a 30 Year fixed at 3.875 percent, 4.028 percent APR, and a 15 Year fixed at 3.250 percent, 3.430 percent APR).
Meanwhile, existing home sales continue to struggle, falling 3.5% to 4.67 million units in July. At this pace, it would take 9.4 months to sell the inventory on the market, which is well above typical supply in a normal market (below 6 months). As a result, economists expect that the imbalance between demand and supply will keep home prices low. In other words, as demand decreases, prices would need to decrease to move the excess supply.
Locally, the picture is quite different. July home sales grew 34.7 percent in San Luis Obispo County, including a 32.8 percent increase in existing home sales. The market is aided by the steady fall of local home prices. Currently, the median overall home price has dropped 13.2 percent from last year to $330,000, and a total of 44 percent since the 2006 high of $585,000.
In the second quarter, Arroyo Grande (sales up 25 percent, 6 month inventory), San Luis Obispo (sales up 10 percent, 5 month inventory), Atascadero (sales up 88 percent, 4 month inventory) and Paso Robles (sales unchanged, 5 month inventory) are showing particularly good health in home sales and supply.
Nationally, the stock market continues to fluctuate, with a general downward trend becoming apparent as the Dow remains settled below 11,000. Gold continues to reach new highs and government bonds remain in high demand, suggesting investors continue to look for safety from stocks. Federal Reserve Chairman Ben Bernanke will speak about short and long term US economic prospects Friday morning during the central bank’s gathering at Jackson Hole, Wyoming. California’s jobless rate climbed to 12 perfect in July after adding just 4,500 payroll jobs for the month. Keep checking in with Central Coast Lending’s Facebook and Blog for frequent updates about market news.