What a difference a week makes! Last Wednesday I reported that the days of long-term mortgage rates under 5% were likely at an end. Seven days later we find the thirty-year fixed rate for conforming mortgages near 5.50%. A series of government Treasury auctions last week were met with little enthusiasm as investors are demanding a higher return than these bonds can deliver. The continued strength in the stock market, which saw one of its best months in recent memory in May, has also drawn investors away from bonds putting downward pressure on prices and increasing bond yields significantly. As of Tuesday, the yield on the ten year Treasury note stood at 3.64%
There is good news to on the housing front to report. On Tuesday, the National Association of Realtors reported that pending home sales rose a whopping 6.7% in April after a surprise jump of 3.2% in March. This shattered consensus expectations of a rise of only .5%. Also on Tuesday, the Commerce Department reported a surprise jump in construction spending in April. Commerce said spending rose .8% in April, the biggest increase since August. Analysts were anticipating a 1.3% decline. Most significantly, spending on residential construction rose .7% providing further indication that the housing market is attempting to recover. Another report from the Institute for Supply Management said its index of manufacturing activity rose to 42.8 in May from 40.1 in April – its highest reading since September. This news helped offset a report that showed consumer spending slipped .1% in April after falling .3% in March. All combined, the silver linings seen in reports on the health of the economy continue to lead many analysts to believe the severity for the recession is easing and that a recover will likely begin in the third quarter of this year.
My observations on the local real estate market tend to show the majority of purchasers we are currently seeing in the market are a mix of out of state second-home buyers taking advantage of the incredible deals and first-time homebuyers jumping off the fence sensing that prices will not go lower and seeing rates begin to rise. I am also seeing some locals taking advantage of the market conditions to downsize or make a change from single-family to condominium living. All in all, I see a good mix of buyers right now and plenty of financing options to fit their needs. We are returning to a normal market void of speculators and flippers which should lay the groundwork for long-term recovery and sustainability.Print Story