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    Interest Rates Are Up. What’s Next?

    The economy is beginning to show signs of recovery in the hope of additional vaccine support and much-needed financial aid for many Americans. There are a lot of factors driving the constant fluctuation in the Los Angeles housing and mortgage loan markets but overall, both remain strong.

    Here are the key trends.

    Rates have moved up slightly, but it shouldn’t stop home buyers.

    At any other point in time, a loan rate in the 3’s would have us cheering, but after ten months of pandemic-driven rates below 3%, it feels like a letdown to many buyers and homeowners. It shouldn’t. Historically, rates are still extremely low. Do I think we will see rates drop below 3% again? Maybe here and there for certain loan products, but as the economy stabilizes and treasury yields continue inching up, rates in the 3’s will be the new normal. Additionally, borrowers have the option to buy down a rate that can make good financial sense over time.

    Non-QM revival

    Now that refinance loan volume is cooling and the economy is gaining steam, lenders are more confident and eager to generate business. Banks and other lenders have come to the table with more loan programs for Non-QM and Jumbo borrowers. It means I have better opportunities this year for self-employed borrowers who can’t qualify for conventional loans that require W-2 income or the loan amount exceeds traditional loan limits. In particular, this is a good time for cash-out and investment property loans.

    Purchase applications are still strong.

    We are still experiencing a high volume of applications for purchase loans across all price points for both first and second homes. I also see an uptick of clients returning 5-10 times for pre-approval letters because bidding wars are becoming all too common.

    A robust real estate market has created more wealth for homeowners.

    Redfin reported that home equity increased by $3.1 in 2020 – up 10% to $32.4 trillion in January.
    These numbers point to why, through the ups and downs of our economy, fluctuations in mortgage rates, and housing market highs and lows – homeownership remains a solid investment over time. Especially in a city like Los Angeles that will continue to be one of the most sought out places in the world to live and work for generations to come.

    Later this month – UCLA Anderson Forecast

    Even though I am a die-hard USC fan, I greatly respect the work of economists at UCLA. Their March economic forecast will be broadcast via webinar on March 10th.