Mortgage rates top 7% for the first time since 2002, chilling L.A. housing market
Mortgage rates topped 7% for the first time in 11 years early Monday morning, according to the California Public Employees Retirement System. That was on top of the 7.1% mark that the market was showing at the beginning of the year and could be a sign that a slowing housing market is coming, said the system’s chief economist.
Home prices in California are down 1.6% from a year ago, according to the S&P/Case-Shiller home price index. It’s the biggest drop since December 2000. In a revised version of the index, that figure was higher, at 1.8%, before Friday’s data.
The state’s housing market is currently cooling and may not be able to recover if things improve in the near term, said Richard Curtin, chief economist for the California Public Employees Retirement System.
“Our view is that housing prices will be down at least another 10 percent this year. If that is the case, this market will never recover from the effects of the great recession,” Curtin said on Monday. “This will be the second or third or fourth real estate correction since the 1930s.”
Curtin is predicting that the state’s housing market will eventually rebound, once the effects of the Great Recession fade.
“After we get the housing market settled down, we are seeing signs that the economy is getting better and people are starting to spend again,” Curtin said. “Housing is one of those areas where we are starting to see some signs of improving, but it’s still too early.”
The S&P/Case-Shiller index is considered to be a more accurate measure than foreclosures because it accounts for sales that did not close after the foreclosure process is complete.
The national housing market has been cooling off since December, but the California index will only show a 7 to 9% decline in housing prices, Curtin said. That could potentially send the state’s housing market into a second bear market, after the previous housing recession ended in 2003, he said.
Another reason Curtin thinks prices may not rebound is because a slowdown
