Weekly Economic Update This week’s interest rates rose toward the end of the week. The Freddie Mac Weekly Primary Mortgage Market Survey showed the 30-year fixed rate unchanged from last week at 4.40% while the 15-year fixed inched up to 3.44% from 3.43%. This time last year the survey showed a 30-year fixed rate of 3.62% and a 15-year fixed rate of 2.88%. Unfortunately these weekly averages come out on Wednesday. Rates rose Wednesday after the survey was announced, and rose again today. The week ended with rates about 1/8% higher than they were Wednesday morning. Conforming 30-year rates are about 4.625%, 15-year conforming are around 3.75%. High balance conforming are 4.75% for the 30-year and 3.875% for the 15-year fixed. Jumbo 30-year fixed rates are at about 5% with the 15-year jumbo at around 4.25%. This week the California Association of Realtors reported that closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 443,520 units in July. Sales in July were up 7 percent from a revised 414,670 in June and up 1.5 percent from a revised 436,870 in July 2012. The year-to-year sales increase was the first since December 2012, following six consecutive months of declines. The statewide sales figure represents what would be the total number of homes sold during 2013 if sales maintained the July pace throughout the year. The statewide median price of an existing, single-family detached home rose up a modest 1.2% from June’s median price of $428,620 to $433,760 in July. July’s price was 29.8% higher than the revised $334,220 recorded in July 2012, marking 17 straight months of annual price increases and the 13th consecutive month of double-digit annual gains. The C.A.R. report showed that the inventory level statewide was 2.9 months in July compared to 3.5 months in July 2012. The median number of days it took to sell a single-family home also held fairly steady at 27.8 days in July, compared to 27.7 days in June but was down from a revised 43.2 days in July 2012. The LA metro area had a median sold price of $395,120 up 27.7% over last July’s $309,390. DataQuick’s numbers showed strong home sales in Southern California. Buyers bought 25,419 new and resale houses and condos in July, 23.5% more than a year ago making this the strongest July since 2005. Sales were up 17.6% from June. The LA Times reported that the median sales price in the six-county region was $385,000 last month, unchanged from June but still 25.8% higher than July 2012. In Los Angeles County the median price of a home in Los Angeles County increased by 28.8% in July to $425,000 up from $330,000 in July 2012. The mix of those buying homes has also shifted, with buyers in Los Angeles, Ventura, Orange, San Diego, San Bernardino and Riverside counties purchasing significantly more homes priced $500,000 or higher than a year earlier. Realtor released numbers showing that the nationwide housing inventory rose in July. The data showed that nationally the number of homes for sale stood 5.2% below the levels of a year earlier. Inventories rose by 1.4% from June, and listings increased in 17 of the 30 cities surveyed. The site reported that the 1.96 million homes listed for sale was the highest since last September. According to their data, listings increased in Los Angeles by 6.8%. Inventory levels are rising steadily in homes under $1,000,000 and still very low in the higher prices ranges. I would think this is because prices dropped further in the homes under $800,000 than in the higher price ranges. This is because those no-down-payment sub-prime loans were mostly available up to $800,000. Higher-priced homes required a higher down payment. Someone who put nothing down walked away quicker than someone who put 20% or more down. That is why the vast majority of distressed property sales were in the under $800,000 range causing properties under $1,000,000 to drop a higher percentage than higher priced ones. As prices rise there is a greater percentage of people with equity. Many people who didn’t have enough equity to sell now finally do. That is why inventory levels are up almost 20%, but most of the increased inventories are in the lower and mid-level price ranges. Home builders continue to express confidence in the market. The National Association of Home Builders/Well Fargo housing market index rose another 3 points to 59. Any reading above 50 is considered “good.” The part of the index that measures current sales condition also rose 3 points to 62 while the component measuring sales expectations for the next 6 months rose 1 point to 68. The data shows that builders still believe strongly that there will be a demand for new homes. However U.S. housing starts and permits for future home construction rose less than expected in July. Housing starts increased 5.9% to a seasonally adjusted annual rate of 896,000 and June’s starts were revised up to show a pace of 846,000 from 836,000. The stock market took another tumble this week amid fears of a coming September taper in the bond-buying program. It ended the week at 15,081.47 down -2.23% from last week’s 15,425.51 close. The Nasdaq was off -1.57% from last week’s close of 3660.11 finishing at 3,602.78. The S&P 500 was down, ending the week at 1,655.83, a drop of 2.10% from last week’s finish of 1,691.42. The yield on the 10-year Treasury note spiked to 2.86% the highest since July 2011 before closing out the week at 2.84% sharply up from last week’s 2.57% close. The Labor Department reported this week that the number of Americans seeking unemployment benefits dropped 15,000 last week to a seasonally adjusted 320,000, the fewest since October 2007. The four-week average fell 4,000 to 332,000, the fewest since November 2007. Companies are laying off fewer workers but hiring remains sluggish and net job growth is still low. However, any positive sign on the jobs front tends to spike fears that the taper of the bond buying program is set to begin and cause the stocks to react skittishly. Retail sales rose just .2% in July, shy of the .3% expected rate. At the end of last month the government reported that the economy grew at a 1.7% annual pace in the second quarter but that number is expected to be revised higher. The July number was impacted by a 1% drop in the sales of cars and parts. Sales of furniture and building materials also declined while sales of clothing and other soft goods rose more than expected. It’s been a strange few weeks. We saw slowing in some areas in the beginning of July only to pick up in the last few weeks. This slowing was mostly in the mid-range of around $600,000 to $1 million. Other areas hardly seemed to slow at all, especially the very low end and the high end over $3 million. The increase in inventory has led to a higher number of sales, however, it appear to me that prices are beginning to flatten. Keep in mind that in these economic cycles, when prices are rising, that generally begins in February and increases in velocity through March, April, May and June, then beginning to taper in July, August and September. Sales and prices generally flatten in October, and November, hitting their lowest point in December only to pick back up again in February. There’s no doubt in my mind we will see another tremendous year of appreciation ramp up in February with prices up as much as 20% next year! Have a Great Weekend!
Posted on: Sat, 17 Aug 2013 23:30:02 +0000
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