Wednesday, October 01, 2014

Get ready for financial winter.

Even the hottest housing markets are starting to cool.

Well - lets start with the elephant in the room. For around the last week - interest rates have ticked up to around 4.12%. Not a big increase, but honestly - enough for the refi segment to start feeling anxious. I think I'm the only one I know who thinks rates are not going to rise. So there might be a bit of panic as rates bounce around a little. It might make people try to rush through that door because they think it's going to close. Sales just are not strong enough to warrant rate increases. I mean, that doesn't mean they wont raise them, but grab your popcorn if they do.

Judging from the amount of people talking about deflation lately - I think I'm still right and rates will only temporarily rise if they do at all. It's even starting to freak me out, and I've been calling for deflation to end the year for months now. Here, here and here.

I didn't talk about housing last week because of those strong new home sales. I suspected they were providing heavy incentives, but I just haven't had time to look back through the data. Obviously someone is juicing something because the whole world looks like shit right now.

This month will be the first that existing home sales with price reductions have not cleared from the previous month in my city. I wouldn't call it alarming, but notable. Real Estate agents still think they are in the zone because reductions are mostly in the 10 grand range.

I'm not all that surprised at all that prices in San Francisco actually fell. It was only a matter of time.  I've lived through enough cycles now that whenever everyone starts screaming about gentrification - the top is near. Give or take a year.

Also notable was how much construction spending fell. Mr S. and I commuted yesterday and as we were driving through Milpitas and Mountain View - it was hard not to notice just how many new buildings had popped up. I think San Jose has three cranes hovering over the city right now. It's been a long time since I remember so many high rises going up there.

I know this is the time of year when construction shuts down a bit because of the weather, but still.

The weather is still fine in California. Sadly.

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