In The Range Of Neutral (SCC & SMC)
July 29, 2022 — Amid accumulating signs that the economy has both slowed and is slowing, the Federal Reserve raised the federal funds rate by another three-quarters of a percentage point, placing the key monetary policy rate in a range of 2.25% to 2.5%, the highest it has been since July 30, 2019.
The next increase in the federal funds rate — currently expected to be a half-point move in September — will lift the federal funds rate to more than a 14-year high. The Fed is of course trying combat inflation that currently is running at about a 40-year high, and expects to continue to tighten policy until it sees clear signs that inflation is likely to sustainably return to the Fed’s speed limit of 2% core PCE.
Settling back and then some is the housing market, as high prices and high mortgage rates continue to push folks to the sidelines to await more favorable conditions. The latest evidence of this came in the report covering sales of newly-built homes, where a 8.1% decline in June to a 590,000 annual rate of sales was seen. This came on top of a downwardly-revised May figure, where 54,000 homes previously counted were subtracted, leaving May’s tally at 642,000. The 590,000 annual pace for June was barely above the pandemic-shutdown low of 582K, and in reality is more akin to three-and-a-half-year-ago levels than not. Compared to as recently as December, the annual run rate for sales of new homes is down by 29%.
With the ongoing slump in sales, inventories of homes built and ready to be sold continue to balloon; the 457,000 units available in June is the highest level of inventory since May 2008 and represent a 9.1-month supply at the present rate of sale. For the month, the median price of a new home sold in June was $402,400, down 9.5% from May’s $444,500. Perhaps this is a case of more supply than demand shifting some power towards homebuyers who could negotiate lower prices, or perhaps builders simply trimmed asking prices to help attract buyers and move stock. It may also be that challenging affordability conditions saw buyers choosing less costly models with fewer amenities, too.
Existing home sales have been softening for months, and indications are that this may intensify a bit more yet. The National Association of Realtors Pending Home Sales Index for June slumped hard, posting an 8.6% decline compared to May. This measure of contracts signed portends sales 30-60 days down the road and so will be reflected in July and August sales figures. As well, not all executed sales contracts make it all the way to the closing table, so the decline in sales forecast here may ultimately be even more pronounced than what is suggested by the June PHSI. Leaving out the hard-stop months of the pandemic, by our reckoning the June PHSI was the lowest reading since September 2011.
Mortgage applications continue to signal flagging activity, too. The Mortgage Bankers Association reported another 1.2% decline in overall applications for mortgage credit in the week ending 22, and requests for mortgage funds remain at about a 22-year low. Purchase-money mortgage applications slipped 0.8%, a fourth consecutive decline, while those for refinancing dropped another 3.7%. This week’s drop in mortgage rates and the potential for them to hold or decline somewhat more from current levels may see a touch more refinance activity at best, but little more than that.
While acknowledging that the fair bit of data due out next week may make markets a bit restive, we think that the average offered rate for a conforming 30-year fixed-rate as reported by Freddie Mac is likely to decline again, possibly by another 10-12 basis points or so.
For further details and a city-by-city breakdown statistics, go to https://avi.rereport.com/market_reports.
For a focused review of current and historical market trends go to https://avi.rereport.com/market_reports and click “change’’ see below
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By Marisa Kendall
By Lance Lambert
California homeowners interested in building accessory dwelling units on their property just caught a break, potentially shaving off thousands of dollars in fees and permits.
In a move proponents say will help ease the Bay Area’s housing crisis, Gov. Jerry Brown on Tuesday signed Senate Bill 1069, making the so-called “granny units” easier and less expensive to build throughout the state.
Helpful resource for home owners
Many new home owners or owners who consider remodeling or rebuilding their homes should take advantage of their county Tax Assessor web site. These web site and their respective city building departments web site typically have vest information regarding the process for applying for permits, the impact on their taxes and many other resources that home owners should be aware are available for them.
For the San Mateo County Tax Assessor office visit https://www.smcare.org/default.asp
For Santa Clara County Tax Assessor visit https://www.sccassessor.org/index.php
The Silicon Valley 150 Index Corner
The Silicon Valley’s Real estate market is a derivative of the local economy–it prospers and withers depending on how well the local innovation-based sector performs. The San Jose Mercury News tracks the performances of the largest 150 publicly traded companies headquartered in Silicon Valley through an index called the SV150, which may be found at www.mercurynews.com. Stocks are valued based on several criteria, but one of the more important criteria is a company’s future earnings. Therefore, I see the SV150 as a leading indicator for Silicon Valley’s real estate market.
S&P CoreLogic Case-Shiller Index Reports Annual Home Price Gain of 19.7% in May
NEW YORK, July 26, 2022: S&P Dow Jones Indices (S&P DJI) today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for May 2022 show that home prices continue to increase across the U.S. More than 27 years of history are available for the data series and can be accessed in full by going to CLICK HERE
Is it time to seriously consider investing in real estate?