What is happening in the Housing Market?
Recently, an article in Housing Newsletters caught my eye when it was discussing the reasons that housing has room to run. In Palos Verdes and the South Bay, prices seem to be increasing or holding their own when it comes to the market. As seen in my market surveys the market is still moving forward. Here are some of the tips that the article was stating.
Rates seem to be doing more rising than falling recently. In some areas home sales have been leveling off, but that also could be because of time of year. One of the first pieces of evidence was in the form of Friday’s Consumer Price Index CPI. This important inflation report has had a big impact on interest rates in 2017. If this data suggests that the Fed needs to hike rates faster or slower, the bond markets will quickly adjust to account for the shift in expectations.
At the end of 2016 the Fed felt that they could continue to hike rates due to the strong labor market and policies associated with the new administration. However, while continuing to hike rates inflation hasn’t risen to the Feds defense. In fact, inflation is trying to hold the line.
The sharp drop to recent lows is why the rates haven’t moved higher as forecaster predicted. Actually analysts expected inflation to begin lifting off from the lows citing the impact from higher fuel prices due to the hurricane season. While they did rise abruptly, other price measurements offset the fuel effect making the reading lower than expected.
The good new about low inflation is that it does help rates. Even the stock market doesn’t mind the news. Mostly they were already drifting higher due to reports earlier in the week. In focusing only on rates, good things area happening with the inflation data helping to reinforce a bigger ceiling around 2.4% in terms of 10 yr Treasury yield which is the most followed benchmark for longer term rates such as mortgages..
Housing magazine this past week discussed mortgage lending guidelines, which could end up being twice as loose as they are now and that could bring us back in like with historical healthy levels.This would help bring more potential buyers into the market from the guideline changes .
Another interesting piece of the report from CoreLogic was the comparison of the current housing boom/bust cycle to past examples. In many areas prices still haven’t crested to pre-crisis levels, which means there is more room to run. This does vary from market to market, but the bottom line is that some of the price appreciation that has been seen in the past 5 years has to do with how hard we fell at the start of the crisis.
Photo courtesy of the MLS.
If you have any questions about the real estate market, or if you are interested in selling or purchasing residential or commercial property please feel free to contact me.