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    May Mortgage Market Update

    Welcome to my May newsletter featuring personal insights and advice on mortgage rates, plus economic news that affects our local housing market.

     

    Interest Rates

    We are in a rough spot with interest rates driven by several forces.

     

    • Russia’s war on Ukraine and the latest lockdowns in China are driving oil and food prices higher and dampening efforts to curb supply chain constraints, which have pushed inflation to its highest level in four decades.

     

    • The Federal Reserve is on a mission to bring inflation back into the 2% range by raising the benchmark interest rate over the next year and ending the bond purchasing program that kept the economy afloat during the pandemic.

     

    The effect on mortgage interest rates is significant this week. For example, the average rate on a 30-year conventional loan rose to 5.64% – the highest since 2000. Not great news for L.A. homebuyers, but if you know where to look, there are still loan products below market. I currently have a jumbo loan product that is still under 4% for the right applicant.

     

    Local Trends

     

    Here are the latest trends in our loan activity.

     

    • Rising rates have made it harder for buyers to qualify for loans, and appraisals are beginning to be an issue because banks are being cautious about aggressive home values.

     

    • Borrowers are leaning into adjustable-rate (ARMS) and interest-only loans to get a lower rate and maintain their affordability.

     

    • Purchase applications for investment properties are rising because rental income is strong. Residential rents are up 15% YOY in L.A.

     

    •   Second-home loans are cooling down, but we have healthy loan volume in popular areas like Palm Springs and Lake Arrowhead.

     

    We are getting deals done with excellent loan terms, even in this rate environment. One advantage to working with me is my longevity in the L.A. marketplace. My network affords me access to loan programs other lenders cannot offer.

    Here are a few examples.

     

    New Home Purchase |Beverly Hills | $12.6M 

    75% Financing

    Full Income Documentation

    3.95% APR

    10 /1 YR ARM

     

    Multi-Family Purchase | Silverlake | $1.744M

    Owner Occupied Duplex

    3 .19% APR

    80% financing

    10-YR ARM 

     

    New Home Purchase | Santa Monica | $3.9M

    80% financing

    10-1 Interest-Only ARM

     

    Economic Reports Impacting Our Housing Market

     

    Jobs Report

    Yesterday, The U.S. Bureau of Labor Statistics Employment Summary reported an addition of 428,000 jobs in April, maintaining the national unemployment rate at 3.6%. This is the 13th straight month new jobs have exceeded 400,000, and wages remain steady with a 5.5% increase YOY.

     

    Key Economic Reports to watch for this month:

     

    May 11 – Core Consumer Price Index (CPI), Crude Oil Inventories

     

    May 12 – Initial Jobless Claims

     

    May 18 – U.S. Building Permits

     

    May 19 – Existing Homes Sales, Philadelphia Fed Manufacturing Index

     

    May 24 – GDP, New Home Sales

     

    I understand rising interest rates, high inflation, and a rocky stock market is challenging for everyone. I have a robust network of lenders that can provide funding for even the most challenged buyer. Please lean on me to help find you the best financing available in this market.

    Mark Cohen

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