Supply-Demand Imbalance and Low Mortgage Rates Drive California Home Price Growth

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Rising demand for real estate and shrinking supply have caused San Francisco to become one of the most expensive places to live in the U.S. since the beginning of the decade, while falling mortgage rates have boosted purchasing power.

According to an analysis by John Burns Real Estate Consulting, home price growth has outpaced income growth by 70 percent in the San Francisco metro area since 2001, the second highest rate in the country, behind Los Angeles. That figure includes the 44 percent benefit homebuyers have obtained from low mortgage rates, which have dropped from 7.2 percent in June 2001 to 3.97 percent for the week ended Dec. 17.

The analysis points out that California homeowners have benefited the most from the imbalance between supply and demand. Six of the nine U.S. housing markets where JBREC says that “home prices have risen faster than can be explained” are located in the Golden State, including San Jose, where they have outpaced incomes by 53 percent over the past 14 years.

Source: Pacific Union blog

(Image: Flickr/FutUndBeidl)

30-Year Mortgage Tops 4%

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

Fixed-rate mortgages last week reached new highs for 2015, with the average 30-year mortgage rising above 4 percent average for the first time in nearly a year, Freddie Mac reported.

Image of arrows pointing upThirty-year fixed-rate mortgages averaged 4.04 percent, up from 3.87 percent last week, and 15-year fixed-rate mortgages averaged 3.25 percent, up from 3.08 percent. One-year adjustable-rate mortgages averaged 2.53 percent, dropping from last week’s 2.59 percent average.

Last year at this time, 30-year rates averaged 4.20 percent, 15-year rates were at 3.31 percent, and one-year ARMs averaged 2.40 percent.

“Markets are responding to strong employment data,” said Freddie Mac economist Len Kiefer, in a statement accompanying the weekly interest rate report. “In May, the U.S. economy added 280,000 jobs. Moreover, job openings surged to 5.4 million in April, up over 20 percent from a year ago.”

The U.S. real estate market continues to improve and is on track for its best year since the peak of the housing bubble in 2006, according to an analysis by

“This time, though, it’s no bubble,” said chief economist Jonathan Smoke. “Job growth is powering the surge in demand for homes. More than 3 million jobs have been created in the past 12 months. And more than 1 million jobs have been created for 25- to 34-year-olds, the age range in which most Americans buy their first home.”

Rising rental rates, meanwhile, are outpacing ring home prices. Record numbers of renting households have driven down apartment vacancies and sent rents soaring, Smoke said. It is now cheaper to buy rather than rent in 80 percent of U.S. counties.

The number of homeowners who owe more than their home is worth continues to fall, with the San Jose and San Francisco metro areas leading the way, according to a new report from Zillow. But there are still plenty of mortgage holders who face a steep climb before their homes are no longer underwater.

The U.S. rate of negative equity among mortgaged homeowners 15.4 percent in the first quarter of 2015, down from 16.9 percent in the fourth quarter on 2014. San Jose, however, reported to lowest negative equity rate, 3.8 percent, followed by San Francisco at 6.1 percent.

The rate of negative equity improved in all of the 35 largest housing markets in the first quarter. But of those homeowners who are still underwater, more than half still owe 20 percent more than the value of their home, making it difficult for them to get out from under their mortgage.

“The depth of negative equity remains incredibly worrisome,” Zillow concluded. “Millions of Americans are so far underwater, it’s likely they may not regain equity for up to a decade or more at this pace.”


Source: Pacific Union blog

(Illustration: Flickr/FutUndBeidl)