Well, the last blog about NAR seemed to stir some strong emotions. So, I thought that I would post a “good news” post for something that initially appears to be “bad news”.
The National Association of Realtors (NAR) reported that existing home sales for June 2013 were down 1.2% when compared to May of 2013. This could easily (and perhaps erroneously) be viewed as an easing of the housing recovery. However, it is important to note that the June sales were 15% higher than in June of 2012. Also encouraging is that the national median home price was up 13.5% compared to last June.
Economists speculate that the slow-down was primarily due to the steep increase in mortgage rates in June. Rates went up nearly a full percentage point, which leaves many home owners and buyers wondering if rates will continue skyward. Fortunately for the recovery, rates have slid back down 40 basis points so far in July. Of course we never know when rates have reached bottom until they begin to rise. Historically, when rates begin to rise, there is a rush to buy since the consensus is that the bottom of the rate market has been reached and rates will begin to rise.
According to Bankrate.com, the average rates in Los Angeles, California are around 4.4% for 30-year fixed-rate mortgages, and 4.75% for jumbo fixed loans. Adjustable mortgage rates have also increased, but still seem worth considering at 3.5% for 5-year adjustable refinancing.
The housing market can withstand rate increases as long as employment rates improve, and income levels continue to rise. In the meantime, we expect buyers to react by either locking in financing soon to avoid future increases, or by waiting and hoping rates pull back below 4%.
Overall, this does seem to be encouraging. Things can always be better, but based on the recent past, it seems that the recovery is doing better than anyone could have expected!!!
Paddy Deighan J.D. Ph.D
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