Slowdown could create homebuying opportunities
By JEFF LAZERSON / CONTRIBUTING COLUMNIST
The dog days of summer are typically characterized by a bit of a lull in home sales. But not like this.
The last few weeks have been too quiet when it comes to activity, pending sales and even refinances. It serves me right for going on vacation.
Go look outside your front door when you get done sipping your morning coffee. With the exception of the starter market, say $550,000 or less, there are a lot more for sale signs dotting our O.C. neighborhoods with fewer pending and sold signs.
Besides wonderings from realty agents and complaints from industry cohorts along with my whining, there is some statistical data that seems to support a sea change in activity.
This week, the National Association of Realtors reported that pending home sales dropped almost 2 percent from May to June.
Earlier this week, the U.S. Census Bureau reported that the U.S. homeownership rate dropped to 63.4 percent in the second quarter. We haven’t seen such a low number since 1967.
The Mortgage Bankers Association has reported pretty flat readings on new loan applications over the past several weeks and months.
Now, let’s consider the recent accidental release of the Federal Reserve’s economic projections by staff economists.
Bottom line is these number crunchers do not expect the inflation rate to hit the 2 percent target through 2020. These really bright forecasters did not share the same policymaker optimism about the economy going forward.
Consider the Fannie Mae and Freddie Mac hot potato. Right now they are government cash cows, as the billions of dollars in profits are being deposited into the U.S. Treasury.
That can always reverse course, becoming a liability and cash killer should housing crash again. That becomes a nightmare on many levels, requiring the inflow of funds to prop up Fan and Fred.
The good news is that is not going to happen. The housing industry and mortgage giants Fan and Fred are going to continue to be subsidized in various forms.
Fixed rates aren’t going anywhere in the near-term either.
This week we saw fixed rates drift back below 4 percent again. Don’t be surprised if you find fixed rates at 3.5 percent and the 10-year Treasury below 2 percent again before the end of the year (fixed rates benchmark to the 10-year).
The 10-year is running at 2.27 percent as of this writing.
Most important of all, as inventory levels climb in this end-of-summer season, and with many sellers being unrealistic by overpricing their properties (reportedly by my real agent informants), it’s not going to be too hard to find some motivated sellers.
Mortgage rates are dropping again. These are always the times that great values are found at bargain prices.
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