Welcome to my March newsletter featuring personal insights and advice on mortgage rates, plus economic news that affects our local housing market.
In the last seven days, the trajectory of interest rates has been unpredictable due to geopolitical developments that have rocked the markets along with posturing by the Fed to raise rates a quarter-point this month to combat mounting inflation.
What’s Ahead? No one knows for sure. The Russian-Ukraine conflict coupled with rising inflation the Fed must address is a unique combination of forces that creates a push-pull on financial markets that can drive interest rates up and down.
There is also a lot of speculation on the number of rate increases the Fed will impose short term. I have heard as many as seven, but whoever says that is misinformed. The reality is two, maybe three, rate hikes by late spring. Current economic volatility makes it impossible for anyone to predict beyond the next month or two.
One thing I am sure of – lenders will not be consistent in how they digest market conditions and price their loans. Unless you want to canvass the market and talk to lender after lender, this is a time when it pays to work with a mortgage broker, not a bank.
I have a 30,000-foot view of lenders and rates because we have access to a long list of institutions and can quickly compare rates and loan terms to help a client make a sensible and educated choice.
Clients are taking advantage of plentiful loan options and rising equity in the real estate they own by pulling cash out to finance more properties, remodeling their current home, or other general investments. I have never seen so many loan options with simplified terms – especially for self-employed borrowers. For instance, I am one of the few originators in the country who can offer bank statement loans up to $10M, along with certainty the deal will close if I give an initial “thumbs up.”
Here are a few examples of loans we have closed in the last 30-days
New Home Purchase | Venice
I secured a 10-YR, interest-only loan with 15% down and no tax returns for a highly leveraged borrower at an APR of 4.49%
Investment Property | Santa Monica
I executed a 19-day close with 70% financing and a 3.89% APR for an investor who qualified solely on rental income.
New Home Purchase | Orange County | $12M
With full income documentation, we secured approval in 14 days for a 10-YR, interest-only loan at 75% LTV.
Economic News Impacting Our Housing Market
The U.S. Bureau of Labor Statistics Employment Summary reported an addition of 678,000 jobs in February, edging the unemployment rate lower to 3.8% and the number of unemployed persons down to 6.3 million.
Another positive note – wage increases were relatively flat after months of gains. This may be a good sign for inflation because wages are one of the most significant components of inflation numbers.
The Core Consumer Price Index, which measures inflation in the U.S., will release February numbers next Thursday. Most economists predict another increase in this month’s report but anticipate that we will start to see numbers recede later in Q2. However, the one caveat is how the recent jump in oil prices will play into the time it takes to beat back inflation numbers.
On March 1, The California Association of Realtors (CAR) reported some long-awaited good news for homebuyers – inventory is rising. According to CAR, “Last week, the total number of actives rose above 20,000 for the first time since Christmas and are approaching levels seen at the beginning of March 2021. If the trend continues, listings could rise on a year-to-year basis for the first time in more than two years in March, which will provide much-needed inventory to potential homebuyers.”
Additionally, buyers in California are showing plenty of resiliency to rising interest rates, existing-home closings were up in February.
Key Economic Reports to Watch for This Month:
March 9 – JOLTS Job Openings Report
UCLA Anderson Economic Forecast
March 10 – Core CPI
March 16 – Federal Open Market Committee (FOMC) Economic Prediction
Fed interest rate decision
March 18 – Existing Homes Sales
March 23 – New Home Sales, GDP Q4
March 25 – Pending Home Sales
I understand recent volatility in Eastern Europe gives us pause because of the swings in the financial markets and the rise in consumer prices, especially goods and services most affected by the cost of oil. I am confident, however, that long-term, inflation will begin to recede, and the economy will continue to thrive. Savvy investors understand this moment will pass and are still taking advantage of a well-capitalized loan market. Allow me to be your trusted advisor to help guide you to the right loan that makes your real estate goals a reality.