California’s real estate market got a jump start in July from the lowest mortgage interest rates in nearly three years and helped sales rebound from June by 5.6 percent, and sales marked its first yearly gain in 15 months of 1.1 percent.
While it’s encouraging that home sales crept higher, the market continues to be challenged by affordability due to the high median price, which although it pulled back from June, it increased from the same time last year by 2.8 percent.
Home builder confidence inched up by a single point: The NAHB reported a slight improvement of 1 point in the confidence of home-builders in August. Although August’s reading at 66 still signals a solid confidence, the index remains below levels seen a year ago and suggest builders may be growing more concerned about the housing market’s future.
Housing starts slip 4 percent in July, but building permits climb: New residential construction fell 4 percent to a seasonally adjusted rate of 1.19 million and is barely holding on ahead of last year by 0.6 percent.
Meanwhile, building permits rose in July a healthy 8.4 percent from June to a rate of 1.34 million, which is also 1.5 percent above last year.
Macro Economy
California posted more job growth in July: Employers added 19,600 new jobs in California last month — extending the winning streak to 113 months — tied for the longest expansion since the 1960s. Unemployment remains low at 4.1 percent, but job growth has dipped below 2 percent — though California continues to outpace the nation slightly.
Despite obvious signs of economic slowdown, small businesses have positive expectations: The small business optimism index rose 1.4 points to 104.7 as companies continue to generate output, create value, and expand the economy even in the face of possible signs of a recession.
Small businesses want to expand and while they struggle to find qualified workers, they grew their expectations for business conditions and reported a lower uncertainty index.
Consumers spending more than enough to keep economy growing: Despite concerns about the economy, retail sales had the biggest increase in last four months as it increased by 0.7 percent.
Excluding auto dealers and gas stations, sales rose an even stronger 0.9 percent, which was mainly driven by a soaring 2.8 percent increase in sales at internet retailers. The steady pace of consumer spending is a reassuring sign for U.S. economy in the face of imminent slowdown.
Real Estate Finance
Mortgage rates dropped significantly: The 30-year fixed-rate mortgage fell to 3.60 percent from 3.75 percent the week prior. The interest rates for a mortgage are now hovering around a full percentage point lower than they were a year ago, making it cheaper and more attractive to borrow for a similarly priced home.
Housing delinquencies still low: the number of mortgages behind on their monthly payment remains at a 20-year low as rising prices have helped more homeowners regain lost equity, and labor markets remain relatively tight. This is the 17th consecutive month of annual declines in the housing delinquency rate.
*Data prepared by the California Association of Realtors.
— Thomas Schultheis is with Berkshire Hathaway HomeServices California Properties, and can be reached at 805.729.2802 or SbRealtorTom@gmail.com.