All about Life & Real Estate in Silicon Valley – Broker Michael Koo's Blog.

A firefighter surveying debris in Paradise discovered an unlikely companion near the wreckage: an exceptionally friendly, very fluffy cat.

Ryan Coleman with the Fairview Valley Fire Inc. encountered the gray cat and not long after, she appeared to not want to leave his side. Coleman snapped a few photos and took a video of the feline perched on his shoulders while he walked around.

By A Pereira , SFGate

The ultralow mortgage interest rates that fueled a revival of the housing market after the Great Recession are moving higher, posing a potential threat to the economic boom.

The 30-year, fixed-rate mortgage, a popular one held by millions of Americans, is now at 4.6 percent, only slightly below the five-year high of 4.66 percent set in May. It is significantly higher than the all-time low of 3.31 percent six years ago, according to data from Freddie Mac. Data from other analysts suggests that new homeowners could be facing even higher rates.

Even a modest rise in the mortgage rate can raise monthly payments, causing a broad rippling effect throughout the economy.

“Rising rates, combined with home price increases in most markets in the U.S., are causing more affordability issues, especially for first-time home buyers,” said Eric Schuppenhauer, president of home mortgage at Citizens Bank.

Mortgage rates began the year on the most sustained increase in the 40 years Freddie Mac has been tracking the data, rising in 15 of the first 21 weeks of 2018. Rates went from 4 percent to 4.66 percent before plateauing during the summer.

Increases in mortgage rates are both good and bad. They can eventually dampen housing prices, making more homes affordable to more people. For someone buying a home now, high rates reduce the cash they have available to spend on expenses such as dinners, trips, appliances and clothes.

“Last year, if you had a median (priced) existing home costing $250,000 and you put down 20 percent, you borrowed $200,000,” said Brett Ryan, an economist with Deutsche Bank. “At 4 percent, that payment was around $950 a month. Fast forward to today, and median existing home price is around $260,000 and the interest rate you are paying on the loan is 4.6 percent, which means that your monthly payment is roughly $1,060, a little over $100 a month more than last year.”

That eats up a good chunk of the $2,000 or so that the Republicans have said is the annual savings from last year’s tax cut for a typical family of four.

The strong economy can withstand the pressure, for now at least, some analysts said.

“We don’t believe, at these levels, it should really impact consumer spending,” said Craig Holke, an investment strategy analyst at the Wells Fargo Investment Institute. “If rates continue to rise, at some point that could become a head wind.”

Record-low unemployment, government borrowing and trade rhetoric between the United States and China are largely responsible for the increase in mortgage rates.

“At some point each one of these could potentially cause a ripple that leads to some kind unexpected deterioration in the economy,” said Sam Khater, Freddie Mac’s chief economist. “All these factors . . . are risky.”

Experts are quick to point out that the market is not headed toward a repeat of the 2008 housing crash. For one thing, there are fewer real estate speculators. Lending standards have tightened to help ensure that people can afford the purchase.

Khater expects mortgage rates to continue to move higher, probably above 5 percent in 2019.

“We should see consistent or persistent forces pushing rates further up the rest of the year, probably not at the same pace as earlier this year,” he said.

The upswing in rates has not had much of an immediate effect on the housing market.

“My buyers are eager to get into a new home before the year is up due to unpredictable interest rates, but their goals are being thwarted due to the lack of housing supply,” said Gitika Kaul, a real estate agent at Wydler Brothers. “So while buyers are cognizant of the impact of rising rates on purchasing power, the larger looming issue continues to be the squeeze on supply in the marketplace.”

Derrick Swaak, a real estate agent at TTR Sotheby’s International Realty, also said supply is having more of an influence on the housing market than rates. But he warned that if rates continue to go up, they would have an impact.

“If they go north of 5 percent, then we’re going to start hearing that,” Swaak said, but the rising rates are not “making a measurable effect on people’s decisions.”

On the other hand, Ryan of Deutsche Bank said that the housing market is not as integral to the economy as it was in the early 2000s, before the financial crisis.

The homeownership rate has declined five percentage points from its peak in 2004, and home equity lending is roughly 40 percent lower than its peak in 2009.

Despite the swift climb, rates are still at relatively low levels. To anyone who bought a home back in the 1970s or ’80s, when mortgage rates were in double digits, hitting an all-time high of 18.63 percent in 1981, rates remain reasonable.

“They’re extremely low,” Khater said. “The monthly payment is still affordable. I think the obstacle for many buyers is not the monthly payment. The hurdle is a down payment. As prices continue to go up, that gets worse.”

Published by Kathy Orton, Washington Post

The skies of the U.S. economy are clear and sunny, but many analysts see storm clouds on the horizon.

By many measures, the economy is in its best shape since the Great Recession of 2007 to 2009. Unemployment hit an 18-year low of 3.8% in May. Average wage growth is widely expected to reach 3% by the end of the year. And the economy is projected to grow nearly 3% in 2018 for just the second time since the downturn.

Yet the economic expansion is the second-longest in U.S. history, leading many economists to forecast a recession as early as next year. Half the economists surveyed last month by the National Association of Business Economics foresee a recession starting in late 2019 or in early 2020, and two-thirds are predicting a slump by the end of 2020.

Why?

Precisely because things seem to be going so well.

The late stage of an economic expansion is most vulnerable to a popping of the bubble. It’s typically when unemployment falls, inflation heats up, the Federal Reserve raises interest rates to cool the economy down — often going too far — and investors and consumers pull back.

Paul Davidson, USA Today, June 11, 2018