Last week I listened a discussion by a group of leading bank economists (Doug Duncan, Gary Zimmerman, Kenneth Rosen and Jonathan Miller) at Inman Connect in San Francisco. Their view of the economy was pretty bleak!
Kenneth Rosen said current policies in Washington, D.C. are unsustainable and since mortgage rates are tied to 10 year treasury rates, “mortgage rates will go up by the end of the year and that Buyers should lock in current very low rates in the next 6 months!” The other timing concern is that Freddie Mac will be lowering their cap to $625,500, which certainly effects homebuyers in Saratoga, Los Gatos, Monte Sereno and surrounding communities. Meanwhile, house affordability is the best it has been in 30 years!
Doug Duncan expects it to take several more years to restructure our economy and the overall U S housing recovery may not occur until 2014. However, Rosen stressed the housing market is very local and areas like Silicon Valley are doing quite well.
Today Freddie Mac released the results of its Primary Mortgage Market Survey®, showing mortgage rates dropping sharply amid falling bond yields and signs of a weaker than expected economy. The 30-year fixed averaged 4.39 percent, its lowest level for 2011! Last year at this time, the 30-year FRM averaged 4.49 percent.
Frank Nothaft, vice president and chief economist, Freddie Mac noted: “The economy grew 1.3 percent in the second quarter, which was below the market consensus forecast, and first quarter growth was cut to less than a quarter of what was originally reported. In fact, the first half of this year was the worst six-month period since the economic recovery began in June 2009. Moreover, consumer spending fell 0.2 percent in June, representing the first decline since September 2009.”
“On a positive note, there were indications that the housing market is firming. Real residential fixed investments added growth to the economy in the second quarter after subtracting from growth over the first three months of the year. The CoreLogic® National House Price Index rose for the third straight month in June (not seasonally adjusted) and was the first three-month gain since June 2010. Finally, pending existing home sales rose for a second consecutive month in June and was up nearly 20 percent from June 2010 when the housing tax credits expired.”