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    Interest rates keep falling, but for how long?

    August is an opportune time for anyone who wants to finance a real estate purchase. The generally positive trajectory of the U.S. economic recovery is causing rates to hover at six-month lows, and lenders are aggressively competing for business since the tapering of last year’s refinance boom. My perspective is this moment may be a once-in-a-lifetime opportunity to grab a very low interest rate coupled with attractive terms on most loan products.

    Here are major economic trends I am watching that drive loan terms and rates.

    Interest rates are drifting lower, but the Fed may create a change in direction.

    Rates have skirted the bottom the last three weeks but generally drift up a bit on positive economic news, hence the reason there is some fluctuation this week. I doubt we will see much change until possibly the end of the month after the Fed Symposium in Jackson Hole.

    Loan Alert – big banks can be stingy with cash-out loans. Large institutions generally reserve cash-out mortgage loans for existing clients who meet a minimum cash reserve. I have relationships with several lenders who will do cash-out terms for traditional and bank statement-only (NonQM) clients.

    July ISM Services PMI reading sets a new record.

    The key reading for the Institute of Supply Management, the Services PMI set a new record, for the second time in the last three months in July, coming in at 64.1, a 4.0% gain over June’s 60.1, and growing, at a faster rate, for the 14th consecutive month.

    Comments from ISM member respondents in construction highlight a confluence of issues impacting the housing sector. Some of the issues include high levels of demand in a diminished labor pool and dramatically rising costs of supplies.

    U.S. Unemployment report signals significant growth in jobs.

    The Bureau of Labor Statistics Employment report for July was published yesterday. The U.S. picked up 943,000 new jobs last month, and the overall unemployment rate dropped to 5.4%, a 16-month low. U.S. gains in employment are the kind of positive data the Fed will consider for future policy change during the symposium. A reason why I believe now is the optimal moment to pull the trigger on a purchase or refinance loan if you want to time rates at the 2021 bottom.

    California mid-year real estate report points to solid gains and a strong finish to 2021.

    The California Realtors Association (CAR) published a comprehensive mid-year report last week. It’s worth a read – CAR Housing Forecast. Some highlights; 1st half of the year posted solid gains in existing home sales, up 33.6% YTD, the median home price hits a new high of $819,360, and 71% of sales went above asking.

    Forward-looking indicators suggest the 2nd half of ’21 will slow; there will be more inventory and slightly less demand. California will return to a more ‘normal’ growth for prices and sales going forward.

    Key economic data to watch for this month:

    August 11 – Core Consumer Price Index (CPI)

    August 17 – Core Retail Sales

    August 18 – Housing Permits and Housing Starts Reports

    August 23- Existing Home Sales

    August 26 – Q2 Gross Domestic Product (GDP)

    August 26-28 – Fed Economic Symposium, Jackson Hole WY

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