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    Will the Fed start raising Interest rates this month?

    June has begun without much fanfare in the markets – although there is growing uncertainty about the direction of inflation and interest rates. The economy continues to show improvement, and in LA, I notice more people enjoying outdoor dining and public spaces, not to mention, our infamous traffic seems to be back to normal.

    Here are the recent market and rate trends I am following.

    Interest rates are holding steady for now. Interest rates across major loan products have remained relatively unchanged over the last 30 days.

    A few loan opportunities worth noting this month:

    • 30 yr. jumbo loans are near are at 52-week lows averaging 3.11%
    • 5/1 yr ARM are near a 52-week low averaging 2.25%
    • Some lenders we have relationships with are offering up to 100% cash-out refinances

    Last week’s employment data had lenders and Wall Street holding their breath – here’s why.

    Investors are waiting for signs that the Fed will begin a retreat on buying mortgage-backed securities, which will signal the beginning of a more significant rise in interest rates. A robust jobs report would undoubtedly be a catalyst for the Fed to make a move, so there was much anticipation before the Labor Department released the information last Friday. The economy added 559K new jobs last month, which fell shy of the 650,000 median forecasts and certainly not strong enough to for the Fed to switch gears. The net – interest rates will remain where they are for now. However, this may change as the economy gains steam, and most economists forecast a solid third and fourth quarter this year.

    On a state and local level, the unemployment rate in California is 8.3% (as of April), off an April 2020 peak of 16%, and Los Angeles county reports an unemployment rate of 11% for the same time period.

    Loans in Forbearance have declined dramatically.

    According to the data firm Black Knight, the number of forbearances dropped by 71,000 or 3.2 percent week over week ending June 1. This leaves 2.12 million loans, 4.0 percent of the estimated 53 million active mortgages in the U.S. in forbearance, which is a very healthy sign for the economy and U.S. housing market, especially for those who may have wondered if the pandemic-induced recession was going to create a significant wave of foreclosures.

    Locally, loan applications are strong, and the housing market is in overdrive.

    New purchase applications for second homes and investment properties have picked up at all price points in the last 30 days at our firm. Loan activity under $5 million is robust, while the higher end has dropped off a bit. According to Redfin, the number of homes sold in Los Angeles at about $1M+ has increased 64% YOY, and the median price is up 11%. The lack of inventory is preventing the market from posting even larger gains.

    What lies ahead this month

    June 10 – reports on change in U.S. household wealth and the Federal budget

    June 14 – report on consumer inflation expectations

    June 15 – California is due to drop the pandemic tier system and update mask requirements.

    June 16 – Fed interest rate decision

    June 20 – The first day of summer