Welcome to my April newsletter featuring industry insights, plus economic news affecting our local housing market.
Interest Rates
Benchmark Rates
It’s 50/50 between experts on whether the Fed should raise rates again next month, but most agree that if the Fed goes another quarter-point higher, that will be the end of this tightening cycle. As usual, their decision will be heavily influenced by national unemployment and inflation numbers. The unemployment data shows a slowdown in hiring and wage growth which is an argument not to take another increase. We have to see what the inflation numbers do next week, as that could be the deciding factor.
Mortgage Rates
Mortgage rates have declined .375% to .50% based on softer economic news over the last month. The market is still extremely volatile as each economic report can sharply change the trajectory of the market. The bottom line, as I have been saying since January, is that rates are headed lower over time, but it is a choppy path, not a one-way move.
Economic Reports Impacting Our Housing Market
Jobs Report
Yesterday, the U.S. Bureau of Labor Statistics Employment Summary reported an addition of 236,000 jobs to the economy. However, the nation’s unemployment rate dropped slightly to 3.5%. The report also points to yet another month of slower wage growth – which, as I mentioned, will be a major factor in the Fed’s interest rate decision next month. Actually, this report is very favorable to the housing market because job growth is stable, and you have to have a healthy labor market to have a strong housing market.
On Tuesday, the Job Openings and Labor Turnover Survey (JOLTS) reported 9.9 million job vacancies in the U.S. This is the first time the reading has fallen below 10 million in two years and shows there are fewer job openings which is what the Fed is looking for to demonstrate a slowdown in the job market. The report also had a very positive effect on bond markets.
At the state level, California’s unemployment rate report indicated a slight increase to 4.3%. However, the state added over 32,000 jobs which makes up 10.4% of the national number. This is another reminder of how powerful California’s economy is. I want to note that California’s report always trails U.S. unemployment numbers by 30 days.
Local Activity
Sales are the same story, inventory is light, but I hear listings are picking up as the spring market kicks into gear. The strongest part of the market is $5M and under, as the implications of the ULA transfer tax for real property over $5M have led to an increase in inventory which is depressing prices. There seems to be no hurry for buyers to rush into homes at this price point right now.
Recent Transactions
Here are some recent examples:
New Home Purchase | Studio City | $2.2M
90% LTV financing
Full income documentation
30 YR Fixed rate loan
5.625% interest rate | 5.85% APR
21-day escrow closing March 25
New Home Purchase | Hancock Park | $7.25M
4.7M loan
7/1 ARM
4.65% interest rate | 4.87% APR
Closed in 21 days to beat ULA tax
Cash-Out Refinance
75% LTV financing
$4M loan – All cash-out
Full income documentation
5.25% interest rate | 5.68% APR
7/1 ARM
Closed in 35 days
Key Economic Reports to watch for this month:
April 12 – Core Consumer Price Index (CPI)
April 13 – Initial Jobless Claims
April 16 – Building Permits, Housing Starts
April 20 – Existing Home Sales, Philadelphia Fed Manufacturing Index
April 25 – New Home Sales
April 27 – Pending Home Sales
On a final note, I was named the #1 mortgage broker in the U.S. by Scotsman Guide, the leading industry source for performance in lending. This is the 10th year I have appeared in the top 1% of their rankings, thanks to the dedication and work ethic of our team, along with the privilege of helping so many wonderful clients like you. Check out our most recent client reviews here.
Please don’t hesitate to contact me if you are thinking about a purchase or refinance. I am always happy to weigh in on your plans and offer solutions to meet your needs.
Sincerely,
Mark Cohen