Home prices throughout California are flattening out as we head into the spring selling season. In 2013, home markets throughout the state saw prices move up smartly, in many cases increasing by as much as 20% year over year. Much of the gains, however, can be attributed to a very significant injection of cash from Wall Street groups looking to pick up residential properties at the bottom of the cycle.
So, with a decrease in cash sales, and a rise in rates stacked on top of higher prices causing an affordability challenge for many, sales activity is not showing signs that a big spring/summer s on the way. None of which is to suggest the real estate market is in trouble. However, we have seen quite a bounce off the bottom and it may be that a bit of a pause is in order.
The inventory of available homes available remains unseasonably low in most markets in the state, but at current levels of absorption, prices figure to remain flat nonetheless.
While mortgage rates are more than a point above the historic lows of 2012, they remain at levels that are historically very attractive. It would seem that the message coming out of Washington indicates that there is clear recognition that any further upward movement of mortgage rates could really put pressure on an already cooling real estate market.
So, as much as the Fed has suggested it would like to cut back on their purchases of mortgage bonds, a meaningful reduction of mortgage bond purchasing by the Fed is likely many months off. It would not be wise, however, that the Feds purchasing of mortgage bonds will go on forever, and when the Fed does cut back mortgage rates are almost certainly going to head north.