Rate Update and Has Housing Reached Bottom?

Mortgage rates ended this past week nearly unchanged as all eyes were on the record $109 billion in Treasury auctions. General demand for US debt remained strong, highlighted by foreign buyers purchasing 61% of the 7-Year Treasury Notes auctioned on Thursday. Currently, the 30 Year Fixed sits at 4.750% (4.929% APR) and the 15 Year Fixed is at 4.250% (4.557% APR). This week, we look forward to Jobless Claims and the Unemployment Rate, which will be the most highly anticipated economic data of the month. Mortgage rates could also be influenced this week by Tuesday’s Pending Home Sales, a leading indicator for the housing market.

Real estate appears to be turning around according to the past two weeks of housing data. In the past two weeks, Existing Home Sales rose 7.2%, to the highest level since August 2007, the fourth straight monthly increase; New Home Sales rose 9.6%, to the highest level since September 2008, the biggest jump since early 2005, and the fifth increase in seven months; Home Inventories dropped to a 7.5 month supply nationally, the lowest level since April 2007, and the number of homes on the market dropped to its lowest level in 16 years; and the S&P/Case-Shiller 20-City Home Price Index and 10-City Home Price Index both rose 1.4%, the second consecutive month of increase, and more than double the rate of increase seen in May.

California, one of the infamous “Sand States” hit hard by foreclosure activity along with Nevada, Arizona and Florida, has fared particularly well of late. Home Inventories in the state are well below the national number, currently at a 3.9 month supply. Home values might also be turning the corner as demand for the lower-end housing remains very high. In the latest S&P/Case-Shiller US Home Price Index, San Francisco was one of the few bright spots of the cities surveyed, posting a 3.8% price increase from the prior month.

One large mortgage originator, SunTrust Bank, believes strongly in the California housing market. SunTrust recently announced loan amounts up to $2 million under their “Key Loan Program”. They also updated the “SunTrust Declining Markets Index” to reflect only seven Metropolitan Statistical Areas (MSAs) in California which remain in areas that continue to show declines in property value. Those MSAs are Hanford-Corcoran, Madera-Chowchilla, Merced, Modesto, Riverside-San Bernardino-Ontario, Sacramento-Arden-Arcade-Roseville, and Salinas.

With home purchases increasing at a feverish pace, home values beginning to turn the corner due to waning supply, and mortgage rates poised for a rebound from their historic lows, the opportunity to acquire real estate may never be better than right now.

Central Coast Lending, Inc.
(805) 771-9870