• The main constraint on market activity at this time is the lack of funds available for loans because of the credit crunch, which has been compounded by tighter underwriting standards.
• Historically, mortgage rates on jumbo loans are 0.2 percent to 0.4 percent higher than those on conforming loans, but the spreads since the onset of the credit crunch have been double or even triple that.
• The lack of available funds for loans, even for qualified buyers, has resulted in a dearth of buyers who can close on a home purchase.
• Successful passage in the U.S. Senate of the economic stimulus package proposed by the U.S. House of Representatives should positively impact the market as buyers who previously would have to take out a jumbo loan will qualify for more affordable conforming loans.
• The time a home remained on the market prior to selling improved to 67.2 days in December compared to 72.1 days for the same period a year ago.
• In December, it would have taken 14.5 months to sell all the homes on the market at the current sales rate, an improvement compared to November, when it would have taken 15.4 months.
• Although the Federal Reserve Bank’s action to reduce the federal funds rate to 3 percent will have little near-term direct effect on the housing market, the rate cuts should result in more favorable real estate finance rates as we move through the year.
• Successful passage in the U.S. Senate of the economic stimulus package approved by the U.S. House of Representatives should positively impact the market as buyers who previously would have to take out a jumbo loan will qualify for more affordable conforming loans, thanks to the proposal’s plan to increase the conforming loan limit from $417,000 to as much as $729,750.
SALES ACTIVITY
• Although seasonally adjusted sales fell 33.4 percent year to year in December compared to December 2006, they were above the 300,000-unit level for the first time since August 2007.
• Month-to-month sales increased for the second month in a row, rising 4.7 percent in December compared with November.
HOME PRICES
• The statewide median declined 2.9 percent from $489,570 in November to $475,460 in December, as the median remained below $500,000 for the third month in a row.
• The median also fell 16.5 percent year to year compared to $569,350 a year earlier, the largest year-to-year percent decline on record.
• The magnitude of both the month-to-month and year-to-year declines was very likely the result of the credit crunch, which severely hampered sales over $500,000. The so-called low end of the market -- homes which sold for under $500,000 -- had averaged 38 to 40 percent of total sales for most of 2007, but has risen to about half of total sales activity since September, which has pulled the statewide median down.
MORTGAGE RATES
• Interest rates continue to remain near their historic lows. The fixed-rate mortgage was 6.10 percent in December, below November’s 6.21 percent, and slightly lower than 6.14 percent from December 2006.
• December’s fixed rate was at its lowest level in the past five months, having peaked in July 2007 at 6.7 percent.
• Adjustable-rate mortgages were 5.5 percent, up slightly from 5.48 percent a month ago and 5.45 percent in December 2006.