Economic update for the week ending May 19, 2018

Crude Oil  $71.35  -    Gold  $1,291.70 -    Silver  $16.46   -    EUR/USD  $1.17

Stocks lower for the week -  Higher interest rates and renewed trade talks put pressure on stocks this week. Oil prices reached a three year high which some believe will spark inflation levels and cause the Federal Reserve to raise rates more swiftly. At the same time the dollar straightening to a 5 month high. That makes imports less expensive and lowers inflationary pressure. We will have to wait and see. Experts are mixed on whether bond rates have topped out for the year. The 10 year Treasury bond yield topped 3% this week, and hit 3.11% at one point before dropping back. Higher interest rates increase corporate borrowing costs, which lowers profits. The Dow Jones Industrial Average closed the week at 24,715.09, down from last week’s close of 24,831.17. It is unchanged year to date. The S&P 500 closed the week at 2,712.97, down from 2,727.72 last week. It's up 1.5% year to date. The NASDAQ closed at 7,354.34, down from 7,402.88 last week. It is up 6.5% year to date.

Treasury Bond yields slightly lower this week -  The 10 year treasury bond closed the week yielding 3.06%, up sharply from 2.94% last week. The 30 year treasury bond yield ended the week at 3.20%, up from 3.10% last week.

Mortgage Rates higher this week -  The May 17, 2018 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.61%, up from last week’s 4.55%. The 15 year fixed was 4.08%, up from 4.01% last week. The 5 year ARM was 3.82% up from 3.77% last week.

California existing home sales and prices increase in April -  The California Association of Realtors reported that existing home sales totaled 416,790 in April, on a seasonally adjusted annualized rate, that was 2.2% higher than last April's sales rate. Prices continued to increase. Statewide the median price paid for a home was $584,460, up 8.6% from April 2107. Local markets posted varying gains. In Los Angeles County, the median price paid for a home was up 10.1% from last April. The median price in Ventura County increased just 4.7% year over year. The Orange County median price gained 5.5%. Inventory levels rose 1.9% in April marking the first rise in three years. The unsold inventory index in April had a 3.2 month supply of homes, up from a 2.9 month supply in March, but still lower than a 3.3 month supply in April 2017.

Offering over asking price on a home. When to pull out the cash and when to hold back -  One tried and true method for standing out among hordes of eager home buyers is to offer more money than the asking price. It's a tactic that makes sense. When a well-priced house in a great neighborhood goes on the market, you'll need to do something to get the seller's attention. Extra cash could be just the thing to make yours the winning offer. But before offering more money than the sellers are asking for, you should consider several factors.

Disadvantages of offering over asking price -  While offering above the listing price can help you outbid the competition, there are also some potentially negative outcomes. You could write this crazy high offer, and it turns out you had no competition and could have purchased the home at the original asking price. And you could be paying more than what it is really worth.

How much over asking price should you offer? -  If you decide to offer over the asking price, determining just how much over can be challenging. There really is no magic formula. It would depend on the market. Your real estate agent can help you come up with a competitive offer. We are the ones in a position to truly understand the market. Sometimes you need to take a big step back and try to see the bigger picture, and it isn't always just about price. One seller, for example, might want a strong buyer who can close escrow quickly above all else. As your real estate agent, I can help you navigate this, and help you determine the buttons to push in getting your deal accepted.

Buying a remodeled home? 6 signs it's a smart move, or a spectacular flop -  Distinguishing a solid remodel from a poor one is harder than it looks. Your real estate agent can help. Your home inspector can find flaws in major systems like the electrical or the roofing. But making the final decision on a remodeled house is up to you, and it can be tricky. To help you before you put down an offer, look for these telltale signs.

  1. The major systems are in working order -  Whether you’re looking for your first home or you’re a seasoned pro, it's easy to get dazzled by brand-new finishes, flooring, and the smell of new paint. Sometimes buyers get distracted by the 'new' factor and forget about the everyday use factor. Makes sure these three things are in good condition: Heat and AC, windows, and roof.
  2. The kitchen isn't disappointing -  From daily use to eventual resale, having a great kitchen is key. But kitchens are expensive to remodel, and if the job was DIY, there's a strong chance that corners were cut. To make sure you’re getting a good deal, start by examining the cabinetry. I've seen homes where they only replaced the bottom cabinets and not the top to match. Check the wood quality and finish on both the top and bottom of the cabinets. Test the drawers. And make sure the countertop rests firmly against the back wall. Check the backsplash. Backsplash tiles that aren't evenly spaced are due to poor installation and a big giveaway that the whole job might not have been well done. Finally, take a good look at the appliances. If you’re viewing a full kitchen remodel that seems to have pulled out the stops on high-end finishes, the appliances should match. If they don’t, it might be a sign that the whole remodel was designed to look good during a walk-through, not necessarily to hold up over time.
  3. Attention was paid to details in the bathroom -  It's easy for bathrooms to look good at first glance, even if the remodel job was poor. To make sure you’re getting the best bathroom possible, examine the tiny details. First, check to see if all the plumbing fixtures are the same make and model. A mismatch could signal that the contractor bought the cheapest available on the market. Then, get down and look at the hidden hardware. The shut-off valves, supply lines, and P-traps should generally be replaced during a major remodel. The trim rings around those hardware pieces should be replaced as well. These are corners typically cut on cheap and quick remodels.
  4. The floors are even -  Flooring is one of the easiest things to screw up and one of the most annoying things to live with if it's done wrong, since it will literally be there with every step you take. Hardwood can buckle or warp if installed incorrectly. Laminate laid wrong can create a fun-house effect, where it seems like the floors are moving up and down when you walk on them. And then there are those pesky porcelain wood-look tiles. They’re extremely popular because they’re durable and, when done right, look great. But they’re also notoriously hard to install. It takes a true professional to install. They will be very uneven if it was a DIY job.
  5. The finishes are pristine -  Better attention to detail on the finishes is typically a good indicator on how much the contractor cared about the project as a whole. Start by examining the doors, which are easy to overlook when every room is open for the walk-through. Look at how doors close. If they latch tightly and if the small gap around the edges of a closed door, is consistent. Doors that don’t line up or close properly hint at the potential for other quality control issues in the house. Make sure molding lines up on the corners, frames seem level and even, and stair railings are snug and secure.
  6. And don’t forget the paint -  Ask yourself. Did the contractor dust off woodwork before painting or can you feel the dust painted over? If you can feel dust, there’s a good chance other issues were overlooked.

Finally, get the house inspected by your real estate agent before you make an offer. Agents have seen countless remodeling jobs, from complete DIYs to the most professional jobs. So don’t be shy!