Economic Update 3/23/14

 This week marked the first meeting of the Fed under new Chair Janet Yellen. The Federal Reserve opted to continue the taper of the mortgage and bond-buying program, dropping participation by another $10 billion per month to a rate of $55 billion per month. The Fed Open Market Committee also changed language that stated the U.S. central bank's key policymaking body would begin to consider raising interest rates once the national unemployment rate hit 6.5%. The new change gives the Fed more room in deciding when to raise rates regardless of the unemployment rate. Rate increases are still off in the future but some economists feel that they could move more quickly once they begin. Yellen indicated that the bond-buying program could end this fall with short term interest rates probably being raised about six months later. It would be the first hike since 2006. Yellen’s frank talk was dubbed a mistake by many in the media.

Yellen’s remarks caused ripples in the market early in the week but stocks rose Friday on positive economic data. The Philadelphia Federal Reserve's manufacturing-activity index for March came in higher than expected showing an increase in regional manufacturing. The Dow rose this week to 16,302.70 up 1.48% from last week’s close of 16,065.67. The Nasdaq saw a more modest increase to 4,276.79 up 0.74% from last week’s close of 4,245.40. The S&P 500 ended the week at 1,866.40, up 1.37% from last week’s 1,841.13 close. 

The Freddie Mac Weekly Primary Mortgage Market Survey showed that the 30-year-fixed rate fell to 4.32%, the rate was 4.37% last week. The 15-year-fixed fell to 3.32% from last week’s 3.38%.  A year ago the 30-year fixed was at 3.54% and the 15-year was at 2.72%. Unfortunately,  rates rose later in the week after the Fed's announcement.  The 30 year rate is closer to 4.5% for loans under $417, 000 and about 4.75% for higher loan amounts. The 15 year is about 3.5% for loans up to $417, 000 and 3.75% for higher balance loans. 

The 10 year treasury note yield rate rose to 2.75% after closing at 2.65% last week. It was at 1.95% one year ago.

The National Association of Realtors® reported that February home sales dropped -0.4% to an annual pace of 4.60 million units, the lowest level since July 2012. Sales have declined in six out of the seven last months.  The median existing home price is at $189,000, up 9.1% from February 2013. In the West alone, existing home sales rose 5.9% to a pace of 1.07 million from January but were down -10.1% from a year ago. The median price in the West was $279,400, up from 18% from last year. Total housing inventory was up 6.4% in February to 2.00 million existing homes for sale. This represents a 5.2 month supply and is up from the 4.6 month supply a year ago. Distressed homes were 16% of sales nationwide compared with 25% a year ago. The median time on market for February was 62 days, down from 67 days in January, and 74 days a year ago. A total of 34% of homes sold in February were on the market for less than one month. First-time buyers accounted for 28% of all sales compared to 26% in January and 30% one year ago. All-cash sales were 35% of transactions compared to 33% in January and 32% one year ago.

Data from the California Association of  Realtors®  shows California home sales fell in February, but housing inventory increased as sellers gear up for the spring home-buying season. Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 361,210units in February, which was down-0.7% from revised 363,930 in January and down -13.7% from a revised 418,520 in February 2013.  The statewide median price of an existing, single-family detached home declined -1.6% from January’s median price of $410,990 to $404,250 in February.  February’s price was 21.3% higher than the revised $333,180 recorded in February 2013, marking two full years of consecutive year-over-year price increases and the 20th straight month of double-digit annual increases. Inventory improved with the available supply of single-family homes for sale now up to 4.7 months from January’s 4.3 months. The index was at 3.6 months in February 2013. A normal supply is generally six or seven months. In Los Angeles County, the median sold price was $389,080 in February 2014, down -8.1% from January’s $423,570 but up 15.2%from February’s $337,630. Sales in Los Angeles were down -8.9% on a month-to-month basis, and down -14.4% year over year. The housing inventory in Los Angeles is currently 4.6 months, up from 4.0 in January 2014, and also up from 3.3 months a year ago.  Median time on market in Los Angeles is currently 43.6 days down from 46.6 days in January and up from 36.5 days in February 2013.

The National Association of Home Builders/Well Fargo builder sentiment index rose to 47 in March, up from February’s reading of 46. Readings below 50 indicate more builders view sales conditions as poor rather than good. The overall index had been over 50 from June through January. The measure of builders' expectations for sales over the next six months fell one point to 53, the lowest level since May, however builders' view of current sales conditions for single-family homes rose one point this month to 52.

The Commerce Department reported that housing starts were down -0.2%to a seasonally adjusted annual rate of 907,000 units, following January’s revised -11.2% drop (it was originally reported at -16%). Groundbreaking was down -5.5% in West and also down in the Northeast but up in the South and Midwest. Permits to build homes were up 7.7% in February to a 1.02 million-unit pace. Permits for single-family homes were down -1.8% but multifamily permits were up 24.5%.

The February numbers from the Southland Regional Association of Realtors® show that inventory is on the rise. Inventory increased 37% from a year ago. At the end of February there were 1,419 homes on the market in the San Fernando Valley as compared with 1,033 a year earlier. The inventory rate is currently 3.2 months versus a 1.9 month supply a year ago.  The median home price was $475,000, up 13% from $422,000 a year earlier but down $10,000 from January’s median. Sales in February dropped -16% from a year ago and -8% from January.

The National Housing Trend Report from realtor.com® showed that the nationwide median list price increased 7.6% year over year to$199,000. The media age of inventory also rose 6.5% to 114 days. The Los Angeles-Long Beach MSA was one of the ten markets nationwide with the biggest year-over-year increase in median price. Prices rose 20% to $449,999.

It was a week full of data! Activity is great and its gearing up to be a very active spring!

Have a great week!

Shohreh Kiaei

Rodeo Realty

818 943 8304

email@shohrehkiaei.com

Tips for buying a house - ShohrehKiaei.com

The top 10 things you need to know when buying a home.-From money.cnn.com

1. Don't buy if you can't stay put.

If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.

2. Start by shoring up your credit.

Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Aim for a home you can really afford.

The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.

4. If you can't put down the usual 20 percent, you may still qualify for a loan.

There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a small down payment.

5. Buy in a district with good schools.

In most areas, this advice applies even if you don't have school-age children. Reason: When it comes time to sell, you'll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

6. Get professional help.

Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.

7. Choose carefully between points and rate.

When picking a mortgage, you usually have the option of paying additional points -- a portion of the interest that you pay at closing -- in exchange for a lower interest rate. If you stay in the house for a long time -- say three to five years or more -- it's usually a better deal to take the points. The lower interest rate will save you more in the long run.

8. Before house hunting, get pre-approved.

Getting pre-approved will you save yourself the grief of looking at houses you can't afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.

9. Do your homework before bidding.

Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that's about eight to 10 percent lower than what the seller is asking.

10. Hire a home inspector.

Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house is worth the price you've agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.

See more at  http://money.cnn.com/magazines/moneymag/money101/lesson8/index.htm