If you are in the market to purchase a home, there is no better time than the present. The National Association of Realtors reported that foreclosures are crushing the values of home prices. NAR announced that in the 1st quarter of 2011 home prices were down 4.6% from the same point a year ago. The national median home price is down 30% from the high of 2006 and home values are down 7% already this year. (For home buyers this is all great news. Home seller, not so much - sorry)
Mortgage rates are almost all the way back down to the historic lows which makes home buying very attractive. The average 30 year fixed rate is at 4.58% and low down payment loans are still available. The combination of low mortgage rates and reduced home prices make purchasing now, especially for first time buyers, very attractive.
Other areas of the economy continue to improve at a steady pace, once again showing that housing is not a critical component to a sustained economic recovery. Whereas in months and years past so called experts would say we can't have an economic recovery without a housing recovery, well...that doesn't seem to be quite true now does it?
Although the economy is improving, without housing, the recovery can only be moderate at best. However, I believe that as the economy improves in all of the other areas, it will eventually move over to housing.
Despite high gas prices putting a damper on some consumers, Retail Sales are still going strong. Retail Sales reported another monthly increase of .5% indicating that consumer spending is continuing at healthy pace.
Oil prices have dropped below $100 and seem to be returning to a more reasonable level. In fact, where high gas prices are having an impact is in the way consumers are traveling. For the second week in a row, a higher than expected gas surplus was reported which has been showing that the public is either traveling less, or simply using more mass transit. The good news is that the recent drop in oil prices has seemed to stop the march towards record gas prices which is where we were headed up until a week ago.
First Time Jobless Claims dropped from 474,000 to 434,000. The drop is a welcome relief from the prior 3 weeks which have showed first time jobless claims rising rapidly. Jobless claims remaining above 400,000 for the 3rd week in a row has many experts concerned that the pace of the recovery is slowing and that unemployment figures may worsen in the coming months.
The Producer Price Index continues to show that inflation on the wholesale level is increasing however it is remaining under control. The main driver of the .8% rise reported for April has been volatile food and energy prices. When you remove this from the equation, core wholesale inflation remained the same as the prior month at a modest .3%. The Consumer Price Index released this morning showed that prices on the retail level are rising at the fastest pace since October of 2008. The inflation rate of 3.2% is due in part to the rapidly rising gas prices. The core inflation rate was up to 1.3% however still far below the target rate of 2% set by the Fed.
Reports due out next week are:
• Monday May 16th - Housing Market Index
• Tuesday May 17th - Housing Starts and Industrial Production
• Wednesday May 18th - MBA Mortgage Applications and FOMC Minutes
• Thursday May 19th - First Time Jobless Claims and Existing Home Sales
Your Mortgage Consultant,
JJ Mack
916-517-1800
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