Mortgage rates fall to record lows while consumer confidence moves higher
With the expiration of the federal tax credit, the housing market is facing a key inflexion point as we head into the thick of the summer vacation season. The government stimulus has certainly helped spur a rebound in the real estate market, but the recovery is fragile and observers are watching closely to see if the market can grow without the support of government aid.
Several key economic announcements out this week could bolster the nascent recovery. On Thursday, mortgage finance giant Freddie Mac announced that U.S. mortgage rates have fallen to a record low. Rates for 30-year fixed loans declined this week to 4.57 percent from 4.58 percent. That is the lowest since Freddie Mac began tracking rates in 1971.
While the overall level of real estate activity has eased in recent weeks with the expiration of the tax credit deadline, many economists believe that low mortgage rates will spur growth in the market by reducing borrowing costs for home buyers. Mortgage interest rates have tumbled in the past two months as concern that a debt crisis in Europe may spread boosted demand for the safety of bonds, including mortgage-backed securities.
Meanwhile, Reuters recently reported that consumer sentiment rose in June to its highest level since January 2008 while reports of job losses were down sharply from a year ago.
The Thomson Reuters/University of Michigan’s survey of consumers, a key gauge of consumer sentiment, rose to 76 from 73.6 in May. The figure was above the median forecast of 75.5 among economists polled by Reuters. At the same time, reports of job losses fell by half since last June, from 65 percent of respondents to 29 percent, the survey showed.
“The June 2010 survey recorded the most favorable news heard by consumers about jobs in five years,” Richard Curtin, director of the surveys, said in a statement. But he cautioned that consumers “do not anticipate significant declines in unemployment during the year ahead.”
Consumer sentiment is seen as a proxy for consumer spending, which fuels around 70 percent of the U.S. economy. Positive consumer sentiment is particularly critical to the housing market. If buyers are more optimistic about their future, they’re more likely to take out a mortgage and buy a home.
So where does this all leave us as we look at the Colorado housing picture? As reports from our local offices indicate, the market continues to be steady in most communities. But the recovery from last year’s recessionary lows will likely be a gradual one with its share of fits and starts along the way. Unemployment levels will play a key role in the recovery, as will the health of the stock market and the overall national economy.
While there are certainly economic challenges right now, for buyers with a long-term view, the current market provides an attractive opportunity to invest in real estate while mortgage rates are at historic lows and homes are priced very competitively. Savvy buyers are taking advantage of this great combination of home prices and interest rates.
Now, let’s take a look at this week in real estate:
- Boulder/Longmont— Longmont reports buyers are looking! The showings in Longmont are up 20% week over week. We are still experiencing showings in all price ranges. Homes priced in the mid and upper ranges are among our top 10 shown for both weeks. Interest rates are helping some buyers make that decision that now is the time to purchase. Values are creeping up in select neighborhoods in our area…..how great to see!
- Colorado Springs— Listings have been steady to slowly increasing over the last ten days. Showings have slowed down but sales are strong due to the still low interest rates (under 5%) which should continue for the next few months.
- Evergreen/Conifer— No information reported.
- Denver Central – No information reported.
- Devonshire— Happy 4th of July for Devonshire. We’ve seen a definite slowing in activity in June after the buyer incentive concluded. Now that the closing date for the tax credit has been successfully extended, we are hopeful that we’ll see the resulting closing activity. Showings in June were down somewhat which historically is not surprising. We’ve seen activity pick up the last few days of June as buyers seem to realize that with interest rates at such historic lows they had better be making their buying decisions quickly. The upper end is finally seeing more activity & we’ve now seen several homes go under contract that have been sitting on the market for some time. Sellers are tired of waiting for things to turn around & we may have some new upper end homes coming on the market in July.
- Loveland— The Loveland market is still seeing most of the showing and sales in the entry level price range. Showing activity picked up 58% week over week. This is a good sign that buyers are showing confidence in the economy as a whole. Interest rates are a great reason to make that new home purchase. Inventory in Loveland is down…prices on homes for sales should follow suit by increasing.
- North Metro— The North Metro agents have been very busy writing contracts and getting new listings. We’ve seen our closings continue to increase with a 7% increase in June 2010 as compared to this same time last year. Our Sold average price is up to $260,490 when a year ago it was $239,000. We had 2388 showings on our 221 listings in the month of June. This is an increase in traffic through the homes listed. The CB North Metro office continues to have the market share in active inventory in both Broomfield & Adams County as well as the cities of Westminster & Thornton. Give our agents a call to see what it is they do to differentiate themselves from the competition & get your home sold.
- Parker— Listings and showings have slowed down due to the July 4th holiday and because of family vacations. There are still buyers out looking because of the very low interest rates (under 5%) which should continue for the remainder of the year.
- Southwest Metro – Showings continue to be rather slow these past two weeks. There are numerous buyers who are just sitting on the fence for one reason or another. Sellers are continuing to list their properties. Floor has been very good these past two weeks and open houses have been slow. In spite of that, agents have been able to obtain some good leads. We’re seeing an increase in showings in the higher range homes, $300,000 to $500,000 and less activity in the homes from $150,000 to $275,000. There is a feeling that buyers are waiting for interest rates to continue to fall and they feel quite confident that they will.