Welcome to my November newsletter featuring personal insights, advice on mortgage rates, and economic news affecting our local housing market.
Interest Rates
Benchmark Rates
As expected, the Fed raised interest rates another three-quarters of a point this week, the fourth increase in a row. This time, however, the Fed’s remarks contained some new language that may signal a slowdown in future increases. “That time is coming, and it may come as soon as the next meeting or the one after that,” Fed Chairman Jerome Powell said Wednesday afternoon.
I believe rates will be lower by 1 – 1.25 points within the next 9 – 15 months as we are in the late stages of this tightening. Various forms of economic activity have started to slow as layoffs have begun in certain industries, and some commodity prices have come down, which is needed to moderate rates.
Mortgage Rates
The Fed’s move to increase rates was highly staged and, as such, already priced into the 10-year bond and mortgage markets. Rates are still in the 5’s for jumbo loans for buyers who can qualify based on their tax returns. Please don’t pay attention to what CNBC shows on their screens, as rates in reality are well below what you see.
Local Activity
While there is no doubt recent rate hikes have tampered real estate demand, I still see buyers face competition, especially under $2M. This week, I had three different clients get outbid on a property.
I am also originating many bank statement and private money second mortgages for clients seeking bridge financing to get into a new home while waiting for their primary residence to sell.
I have taken on and closed clients who could not get loans from major banks.
I can’t emphasize enough – now is the time to work with an experienced mortgage broker like me who has access to a variety of lenders and investors. Now more than ever, loan pricing can vary dramatically depending on the product and source. Don’t get boxed in by a bank lender with only one product line.
Recent Transactions
We are proud to offer some of the best mortgage financing in Southern California and can create a variety of loan solutions for buyers.
Here are some recent transactions with full income documentation:
New Home Purchase | Beverly Hills | $5.55M
80% LTV financing
10/1 ARM
4.78% interest rate | 4.99% APR
Closed in 30 days
New Home Purchase | Sherman Oaks | $3.5M
85% LTV financing
10/1 ARM
5.375% interest rate | 5.5% APR
New Home Purchase | Culver City | $1.625M
95% LTV financing
Rate in the high 5’s
Economic Reports Impacting Our Housing Market
Jobs Report
The U.S. Bureau of Labor Statistics Employment Summary on Friday reported an addition of 261,000 jobs edging unemployment up .2% to 3.7%. Experts suggest that while interest rate increases are doing little to significantly tamper job growth, there are signs of cooling. Some employers report that it is getting easier to fill jobs, and there is less of a chase to raise wages and offer signing bonuses to attract workers, which in turn, slows down cost increases that are passed along to consumers.
California’s unemployment rate fell to 3.7%, tying with July 2022 as the lowest reading on record. Obviously, this is good news for our real estate market because strong employment will continue to drive housing demand.
Inflation
Last month’s Core CPI Report continued its slight downward trend on a month-to-month basis as the inflation trend has moderated since earlier this year. Several components, including gasoline, have declined. The one sticky subject is rents and housing, which continue to pose problems. Per my research, costs have started to come down in rents and housing for sale, which is a backward indicator for future CPI numbers. This should help improve headline CPI numbers in the coming months. Therefore, I am optimistic that inflation numbers will come down.
Key Economic Reports to watch for this month:
November 10th – Core Consumer Price Index (CPI), Initial Jobless claims
November 16th – Retail Sales (MOM)
November 17th – Building Permits, Housing Starts, Fed Manufacturing Index
November 18th – Existing Home Sales
November 23rd – New Home Sales
I believe we will continue to experience volatility in the market for the remainder of the year and into 2023. However, aligning with experienced, trusted real estate professionals and working with lenders like me who are highly connected to the best financing available will minimize short-term discomfort. Real estate is a long game, and if played well in an area like Southern California will always be fruitful.
Sincerely,
Mark Cohen