Santa Cruz Real Estate

Blog by Lauren Spencer

Aptos, California

Market advice and tips on buying and selling real estate in Santa Cruz County

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Mortgage Rate Outlook

Posted at Santa Cruz Real Estate by Lauren Spencer

Sep. 17, 2008

Tagged with: california, market trends, mortgage rate outlook, real estate, santa cruz

August 29, 2008 -- Overall fixed mortgage rates shed another four basis points (.04%) this week, with HSH's Fixed Rate Mortgage Indicator (FRMI) nudging down to 6.95%. Over the past four weeks, the FRMI has wandered aimlessly in a 10-basis-point range. Hybrid 5/1 ARMs, which have put in wide swings in rates at times this summer, have also settled into a mellow pattern, unchanged this week at 6.63%.

Investor appetite for conforming loans was evident, as the average 30-year conforming loan declined by six basis points to an average 6.51%. Private-market jumbos eased three basis points, but remain better than a full percentage point above conforming rates.

Home sales remain mired in the doldrums, but the pattern of continual declines is fading. Over the next couple of months, the double-digit declines in the year-ago comparisons will be replaced with smaller numbers and perhaps even a few favorable reviews.

Existing Home Sales flared 3.1% higher during July, climbing back to a 5 million annualized sales pace. The number of sales has traversed this level back and forth over the past ten months. Inventory continues to pour onto the market, and there's more than 11 months of homes available at the present rate of sale. Prices have continued to ease, with the Realtors noting a 7.1% dip in prices over those paid last July.

One side comment about existing home sales is that somewhere around one-third of sales are homes which had fallen into foreclosure. Commenters have noted (perhaps snidely) that absent their influence, home sales would really be in the tank. We see this situation somewhat differently. The most important factor, we'd argue, is that home sales are happening. Five million annualized remains a solid -- perhaps even remarkable -- level in light of all the challenges facing the market. We'd also argue that the foreclosure influence simply reinforces the fact that buyers will buy once they find the intersection of affordable price and financing availability.