I heard someone earlier this week say that the housing market has gone from a slow crawl to a brisk walk. I think that is the perfect metaphor to explain the recent changes in the real estate market. The market is coming back. It’s not roaring, but it’s coming back.
This week, according to Reuters.com, U.S. mortgage applications jumped as record low interest rates spurred a surge in demand for home refinancing loans. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 32.2 percent to 1,159.4 for the week ended March 20. Refinancing accounted for 78.5 percent of all applications.
Furthermore, interest rates on mortgages fell after the Federal Reserve last week said it would buy Treasury securities for the first time in more than four decades as well as more than double its planned purchases of mortgage-related securities. Reuters.com reported that “Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.63 percent, down 0.26 percentage point from the previous week, reaching a record low….Interest rates were well below year-ago levels of 5.74 percent.”
Meanwhile, according to Realty Times, housing starts took a surprise jump of 22 percent in February over January's depressed levels. Most of the increase was attributable to apartments and condominiums, but single family starts were up by one percentage point, and new home permits were up by 11 percent, after months of sharp declines.
Existing home sales are also seeing some good trends. NAR reported this week that sales activity for single family, townhomes, condominiums and co-ops rose 5.1 percent to a seasonally adjusted annual rate of 4.72 million units in February from a pace of 4.49 million units in January.
The West is leading much of the nation’s recovery, with California leading the charge. Our median listing price is beginning to rise for the first time in three years. Existing home sales in the West increased 2.6 percent to an annual rate of 1.2 million in February and remain 30.4 percent higher than a year ago.
Coldwell Banker president and CEO, Jim Gillespie on CNBC’s “Roadmap to Rebound” which focused on the state of the housing stated that “the government could do a lot more than they are already doing in order to get the real estate market moving again.” Congressmen and economists continually say that in order to get the economy going, we need to first get real estate going. Gillespie believes that two key changes are needed in order to get the economy moving, and the first item that needs to be addressed is to set a fixed-rate mortgage. “Lowering the interest rate to 4% to 4.5% for 12 months is one way to get the inventory moving.” Along with setting a fixed-rate mortgage, increasing the tax credit to $15,000 and including all buyers of primary residences will help move buyers along and get the market to shift.
Gillespie also stated that the demand side needs to be looked at closely, because once we start to burn off the inventory that we currently have, prices will begin to stabilize and go up again, which will help those in distressed situations. “Fifty-five percent of loan modifications have failed after six months because jobs are not being created and homeowners are losing the jobs they have,” says Gillespie. “In order to create jobs, we need to create demand, both of which will get the housing market and economy moving.”
Now, let’s take a look at this week in real estate:
Santa Cruz County—In the past five months the overall inventory level in the county has dropped by about 30% and the number of pendings have gone up about 10% overall. There seems to be an uptick in activity this week with some positive news from the media and the stock market. Open houses have been very well attended in most areas and new listings are attracting a lot of attention from buyers.
Source: Monthly Market Watch from Coldwell Banker - A Bay Area Real Estate Market Update.