FOMC Votes to Raise Federal Funds Rate in Latest Meeting

The Federal Reserve in their meeting that took place Wednesday June 13th, voted to raise the US interest rate, this underscores the central bank’s confidence in a steadily growing economy but does acknowledge the recent rise in inflation. The bank as expected lifted its federal funds rate by a quarter of a percentage point to a range of .75%-2% now. The Fed also signaled a shift in thinking by projecting a total of four rate increases in 2018 rather than the previously planned three rate hikes. The Fed members remain closely divided over whether the bank should boost rates three or four times this year; with eight of the Fed officials expecting interest rates to rise at least four times; and seven members forecasting only three forecasts. This lack of consensus among interest rate changes reflects the uncertainty about how high inflation will rise and how far the Fed can go before damaging the economy. Fed Chairman Jay Powell stated, “if you raise rates too quickly, you are just increasingly the likelihood of recession.” The Fed’s preferred inflations has already hit the bank’s long run 2% target rate. The Fed predicts inflation will end up around 2.1% by year end suggesting the central bankers think prices will ease later this week. The Fed found particularly surprising the slow rate of increase in worker pay despite the lowest unemployment rate in almost two decades and growing shortages of skilled labor. The Fed no longer thinks money is very cheap or that the economy needs as much help as it once did, they stated the economy is in great shape. Beyond this year, the Fed predicts it will raise rates three times in 2019 and one more time in 2020 to push its benchmark rate up to 3.4%. Eventually the rate is expected to slip back to around 3% or less.

New Listing! 37+ Acres with Amazing Santa Margarita Views

Amazing views from this almost 40 acres in Santa Margarita. This property is only 20 minutes from downtown San Luis Obispo. Enjoy Nightly views of the Milky Way, and vista views that go all the way to Monterey! The property has a mountain straw bale house. The house is powered by solar and wind, the batteries are less than a 1 year old, and the roof is new on the back section of the house. There is also a Pacific Yurt, plus a storage structure, (down a path). There is not a working well on the property. Seller gets water delivered to a large water tank which is approx. $180 per 2,500 gallons. There is a dirt road to another area on the property that could be a separate building site. The deck around the house overlooks canyons, and coastal ranges. The ultimate in peace, privacy and space. This property is located close to BLM land, lots of wildlife here. Owner will carry with $100,000 down, terms are negotiable, you must have good credit. There are a lot of paths on this property perfect for hiking, horse back riding, or riding a quad. Santa Margarita Lake is nearby for fishing, and boating. The town of Santa Margarita is like a step back in time, with a few popular restaurants only 10 minutes away.
Kathy Birkhahn 805.610.6650
Lic# 00915832

New Listing! 3 Bedroom 2 Bath in Templeton

Situated on approximately five acres, this 3 bedroom/4 bathroom, 3057 +/- square foot home is designed with entertaining in mind. A private driveway located off a quiet cul-de-sac in the highly desirable Templeton School District leads you up to the 3 car garage and inviting entry way. The open floor plan includes a bright kitchen with bar seating, ample storage, and double ovens. Relax by the fireplace in the spacious living room while taking in the views of the pool. A split-wing design provides separation for the master suite which features a walk-in closet, en suite with large soaking tub and generously sized office. Bonus room above the garage is perfect for a game room or optional fourth bedroom. Outside, the covered patio provides shade for relaxing by the pool with a build in rock waterfall with waterslide. Stunning views can be seen at both sunrise and sunset. A built in fire pit extends the entertaining into the evening.
April Fehrer 805.610.0345
Lic# 01446379

New Listing! 5 Bedroom 3 Bath Home

Exquisite 5 bedroom, 3 bath remodeled home in Foxenwoods! This beauty offers over 2400 sq ft of living space along with unique upgrades and features not found nearby. Granite slab countertops, travertine backsplashes, custom designed tile flooring, gorgeous hardwood flooring, scraped ceilings, newer appliances, beautiful fixtures, and all the bells and whistles including dual pane windows. One bed and bath are conveniently located downstairs off of the family room. Indoor laundry and RV parking too!
Wendy Teixeira 805.310.3505
Lic# 01345995

New Listing! Beatiful Cottage Home With Picket Fence

Framed by an adorable picket fence and situated on a quiet culdesac in Orcutt, your cottage awaits!! With brand new carpet and custom paint, this spotless home is ready for a new memory maker! This home offers 3 bedrooms and 2 baths along with a large family room with fireplace and built-in bookcases, a dining area with built-in hutch, a breakfast bar and roomy kitchen. Two French doors in the home allow easy access to the park-like backyard–including a large covered patio, custom, built-in BBQ pit and adorable gazebo. This is a must see!!
Wendy Teixeira 805.310.3505
Lic# 01345995

New Listing! Newly Remodeled Atascadero Home

This newly remodeled 4 bedroom, 3 bath home is located among mature trees on a half-acre lot. You’ll love the open concept floor plan that flows seamlessly from the living room into a spacious kitchen. The kitchen features granite countertops, new cabinetry, and stainless steel appliances with a view of your serene property. There is new carpet, new tile and new laminate flooring throughout the entire 1625 +/- square foot home. Keep cool in the summer and warm in the winter with the new energy efficient vinyl windows, new HVAC and a new roof. Master bedroom includes a large walk in closet and en suite with soaking tub. Two full bathroom and one three-quarter bathroom feature new fixtures and faucets. A new tankless water heater will provide you with ample hot water on demand. A private exterior access to the fourth bedroom with en suite allows for possible home office, guest lodging or granny unit. Situated among the quiet of nature, this home isn’t far from shopping and amenities.
April Fehrer 805.610.0345
Lic# 01446379

New Listing! 2 Bedroom 1 Bath Condo

Beautiful Knollwood Terrace 2 bedroom 1 1/2 bath condo(PUD) is clean and move in ready. Updated flooring in Kitchen and Bathrooms. Laundry area located in single car attached garage. Great location that is in the Orcutt School District and easy access to the 101 freeway. The complex includes pool, spa and clubhouse for resident enjoyment. ***Information deemed reliable but not verified or guaranteed by broker***
Shea Hutchinson 805.260.6322
Lic# 01189054

New Listing! Brand New Home in Brand New Community

Brand new home in a brand new community! One of 36 homes in Trillium on the Grand in quaint Arroyo Grande. Stop by and see the 2 model homes. et. Designer-selected standard finishes, including granite slab counters in the kitchen, wood cabinets, and elegant smooth textured finished walls. Well appointed owners suites with large closets and dual sink vanities. 9′ ceilings in second floors and oversized low-e vinyl windows that make these homes light and bright throughout. Handset paver entry walkway. Common community outdoor space is a wonderful gathering place for family, friends, and neighbors. Fenced yard. Attached 2 car garage. You will appreciate the convenient location not far from freeway access, minutes to the beach, downtown, and to San Luis Obispo and South County cities. Photo is a rendering which may not be exact to actual property.
Kim Bankston 805.674.2298 Lic# 01051016
Collette Kutil 805.801.8114 Lic# 01880851

New Listing! 3 Bedroom on 7 Acres- Atascadero

Views, views, and more views!! All to be enjoyed from a lovely home that is comfortable, well maintained, and planned so that these remarkable views can be enjoyed from throughout the house. Located on 7+ acres near the corner of San Marcos, Portal, and Escondido, the location is quiet and private, while being close to downtown Atascadero and Highway 41 West. The well thought-out 2500+ sq.ft floorplan includes 3 bedrooms, 2 ½ baths, living and family rooms, spacious decks, and basement storage area. There is also a large, detached, covered RV parking structure. Don’t miss this exceptional opportunity to live with the world at your feet and oak trees overhead.
Beverly James 805.748.8613 Lic# 00841774
Nancy Heins 805.458.3583 Lic# 01757840

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.


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.