Hood Canal Real Estate, Mortgage, and the Economy – www.hoodcanalrealestate.com

Hood Canal Real Estate, Mortgage, and the Economy - www.hoodcanalrealestate.com

Interest Rates Edge Higher After 12 month Low: There has not been strong economic data that one would look for to cause rates to move higher. New inflation data at the business level is also tame. The rate pricing moved modestly higher this week in spite of the lack of typical market pressures. This seems to be due to normal trader and market behavior. It is common for market pricing to move away from new levels not seen in a long period of time. This seems to be the case here. All in all it seems market conditions continue to support low interest rates. The stock market rally has stalled for the moment. A big move lower in the stock market would likely push rates lower than the recent low points.  

Industry News

"You've got to be careful if you don't know where you're going, otherwise you might not get there." Yogi Berra. It's safe to say the Fed is closely watching where our economy is going, as economic reports continue to be mixed.
Retail Sales for May rose by 0.3 percent, led by demand for cars, trucks and home improvement products, though spending eased at most other retailers. The 0.3 percent was less than the 0.7 percent expected and was the lowest level since January's reading. Retail sales account for about one-third of consumer spending, and are the main driver of U.S. economic activity. Growth in this area is a key factor in our economic recovery.

In housing news, RealtyTrac reported that there was a 5 percent decrease in all types of foreclosures from April to May, with a heavy concentration in the northeast and along the west coast. There was also a 26 percent decrease from May 2013 to May 2014. In addition, Fannie Mae's May 2014 National Housing Survey revealed that tepid household income and concerns surrounding the U.S. economy are weighing on the housing sector.

And in labor market news, after hitting lows not seen since 2007, weekly Initial Jobless Claims rose by 4,000 in the latest week to 317,000. While the labor markets continue to overcome obstacles, the sector is still under a cloud of uncertainty with so many people looking at long-term unemployment.

What does this mean for home loan rates? Remember that home loan rates are tied to Mortgage Bonds, so when Bonds improve, rates improve. The weakened Euro, the Fed's Bond-buying program and the tepid economy have been key factors in helping Bonds and home loan rates improve this spring. While Bonds and home loan rates struggled in the latest week, they remain at some of their best levels of the year.

The takeaway is that now remains a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.
 Real Estate Miscellaneous Stats

Extreme Eastside Market Demands Extreme Measures:  Any self respecting Real Estate professional would not typically recommend their buyers to waive inspections, to not bother making an offer on a home unless the are willing to exceed their price range, write cheesy motivation letters to the seller, or ( gasp ) ignore the appraised value. For buyers to compete in the Bellevue, and some other Eastside, markets; that is exactly what it can take to win against highly motivated offers. Forget that, in spite of going to crazy measures, your offer may be blown out of the water by a cash offer that can close in days. In the first 3 months of this year, 39% of all Eastside sales were cash. Data and anecdotal stories describe very difficult circumstances for buyers in these markets. Even the lower appreciation rates this year compared to ’13 can mean a big pricing increase in actual dollars. Eastside prices in April were up 7.2% from one year ago. As recently as February 2012 the median value was $362k. Currently that number has risen to $535k. This is creating a sense of urgency on the part of buyers. For now interest rates have trended down but if that changes it will cause even more motivation. Agents relay that they have not seen many homes sell without a bidding war for months. Multiple offers of at least 15-20 are typical with some seeing many more. Bidding wars are pushing sales prices over $100k above listing price. Agents are having to add new skills to their repertoire to keep buyers engaged in the hunt under very discouraging circumstances. Contact me about options to put your buyers in a position to make a cash offer.  
Lack of First Time Buyer’s Holds Back A Strong Housing Recovery:   Economists and analysts continue to ask why housing is not leading us in to a stronger recovery with so much support from the Fed and time since the turn down. Even Fed Chairperson, Yellen, has made note that housing is not recovering as strong as hoped and they have really spent all their bullets. A recent Wall Street Journal article points out that first time buyers are purchasing at 88% of the average level over the last 10 years. There are many head winds facing first time buyers in the current environment. Recent data points out that income fell most for the age group of 25-34 from 2007 to 2012. Recent appreciation has made homes less affordable, many have credit issues to resolve, inventory is tight in most markets, many have high student loan debt and much tighter credit requirements are all factors. First time buyers are currently 16% of all transactions while they were 22-25% during the 2001 to 2007 period. The good news is we seem to be at the bottom and heading up. NAR chief economist, Lawrence Yun, suggests the market is improving but it may take a few years to get back to normal.

Negative Equity Still A Major Factor Affecting Markets: A recently released report by Corelogic shows a much improving situation overall with more homeowners recovering usable equity in their homes. While over 300000 homeowners returned to positive equity in the first quarter, only one in five homeowners have sufficient equity to sell and purchase another home. Currently 12.7% of all homes with mortgages are underwater. That improved from the same time last year which was at 13.4%. At current appreciation rates another 1.2 million homes are expected to emerge from negative equity over the next year. Another interesting reading from their report is another 10 million homes have less than 20% equity. Most of the total equity is concentrated in the higher end part of the market. Washington ranked #30 out of all 50 states but about #30-#20 states all were at very similar levels. 

Hood Canal Real Estate, Mortgage, and the Economy - www.hoodcanalrealestate.com