Mid-Summer Market Conditions

As of August 8th, mortgage rates had declined to their lowest point in over a year, while financial markets were experiencing very substantial volatility. Most analysts believe the Fed will finally begin to drop their benchmark rate in September (pending a positive inflation report in mid- August). Lower interest rates, of course, have considerable effect on the cost of homeownership for those financing their purchase, and a sustained decline would almost certainly spark increased market activity - not only of buyers, but potentially of sellers who held off listing their homes in the past 2 years due to the "mortgage lock-in" effect. Much depends on the scale of any decline in rates as well as possible changes in other economic conditions - through the end of the year.

Following the typical seasonal trend, the market cooled in summer from what is usually its most heated selling season in spring. Overbidding declined and and homes took longer to go into contract. New-listing activity also fell, but the number of active listings is running well above last year. Median home sales prices remain higher year-over-year, but the number of price reductions has increased. The market often sees a rebound in September to begin the fall selling season, but August may see an "unseasonal" burst of activity if the decline in interest rates continues in coming weeks.

Finding comprehensive and affordable homeowners' insurance remains challenging: According to the CA Association of Realtors, nearly 7 percent of recent real estate transactions statewide fell out of escrow due to insurance issues, but noted that "The state's largest insurance regulatory reform in 30 years is set to go into effect by the end of this year." Hopefully, this will result in substantial improvement to a very difficult situation in many of our markets.