Palo Alto Real Estate

After the previous week's spike in mortgage rates, we thought we'd see a pullback last week. Unfortunately, that wasn't the case; rates continued to push higher. Bankrate's national survey had the 30-year fixed-rate mortgage averaging 5.65%, while the 15-year fixed-rate mortgage averaged 5.06%. Basically, Bankrate was telling us what we already knew: These two benchmark rates are 50 basis points higher than they were two weeks ago.
So has the mortgage boat sailed too far from shore for those still wanting to jump aboard? Absolutely not. Let's keep in mind that a year ago Bankrate's national survey was showing the 30-year fixed-rate loan at 6.26%. The concern, though, is that potential borrowers are fixated on what they could have had a few weeks ago, so they've thrown in the towel in disgust. It's irrational to think that way, because there is nothing that can be done to change the situation. The logical way to approach it is to ask, where do I go from here?
Unfortunately, most people don't think that way, which could slow down the recovery in the housing market, as people delay buying or refinancing a home to wait for sub-five percent mortgage rates again, which we think is unlikely. There is no doubt that the housing market has been making progress. Indeed, the National Association of Realtors reported pending sales of existing homes rose 6.7% in April, posting the biggest monthly jump in eight years. The latest data are part of a flurry of other reports that suggest the housing market and the broader economy are stabilizing.
Factory orders are included in the data sets showing a stabilizing economy. Orders rebounded in April, rising 0.7% after declining 0.9% in March. It was only the second rise in factory orders in the past 10 months; however, the economic bulls will point to the fact that factory orders have risen in two of the past three months.

The employment situation could also be interpreted bullishly. The United States lost fewer jobs than forecast in May – 345,000, the least in the past eight months – reinforcing signs that the deepest recession in half a century is abating. Yes, the jobless rate increased to 9.4%, the highest since 1983, but it was due, in part, to more people joining the labor force to seek work.

The Power of Marginal Thinking
Here's a dilemma posed by economics professors: You bought two tickets to the NBA finals, which cost $300 a piece. You approach the arena entrance only to discover you've lost both tickets. Replacement tickets from the box office will cost you $400 a piece. What do you do?
Once the cursing has subsided, you have to consider what the game is worth. When considering the situation, most people mistakenly include the lost tickets in the equation, wondering if the game is worth more or less than $1,400. The correct way to approach the dilemma is to ignore the lost $600 – a sunk cost – and to only consider the $800. If the game is worth $800 or more, you buy the tickets. If not, you go home or to a local bar.
The point we are trying to make is that better decisions are made when people think on the margin, which means basing decisions on the reality of the situation from the current point forward. There is nothing we can do about last week's or the previous week's mortgage rates. We can only consider the rates from this point forward, which are still good, by the way. The same decision-making approach applies to home prices. Many people who want to sell are anchored to the price at which they bought, even if it has no basis in economic reality. And the reality is that home prices are darn low, which is why we think potential buyers shouldn't wait too long to pull the trigger, lest they suffer the same anguish that many procrastinating borrowers are.