Welcome to my August newsletter featuring personal insights, advice on mortgage rates, and economic news affecting our local housing market.
Interest Rates
Benchmark Rates
A higher-than-expected jobs report released yesterday could lead the Fed to raise benchmark rates another 50 to 75 basis points next month because job creation was much higher than anticipated. However, it is important to note that the Fed looks heavily into inflation data in its policy determinations.
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Several inflation indicators, including oil, food, and industrial commodities, have had significant pullbacks since the last inflation report in early July. Since then, prices are down 20%, which leads me to firmly believe that the inflation report next Wednesday will be well received by the markets. If this comes to fruition, the markets would have the desired combination of easing inflation and strong employment numbers where possibly we get a Goldilocks economy. However, making assumptions is too early because more data has to be evaluated in the next two months.
Mortgage Rates
As I explained in an email last week, mortgage interest rates are primarily tied to 10-year bond market yields, not the Fed’s benchmark rate. This week the 10-year bond yield rose slightly to 2.85% but is still much lower than the high of 3.49% when the Fed raised rates in June.
Currently, I have 30-year jumbo fixed rate loans available starting at 3.95% up to $3m. I also have 10/1 arm purchase money loans for 3.6% and 7/1 arm purchase money loans at 3.20%. Loan to values can’t exceed 80% as these are relationship banking-based loans.
Local Trends
Here are the latest trends in our loan activity.
· The real estate market is less heated, and inventory is rising, but desirable, well-priced homes still command multiple offers and prices over asking.
· Most of our application activity is purchase loans, and refinance activity is coming from financing for homeowners who want to pull cash out for renovations and other life circumstances.
Recent Transactions
We are proud to offer some of the best mortgage financing in Southern California and can offer a variety of loan solutions for buyers. Here are some examples:
New Home Purchase | Calabasas | $6M
Full Documentation Loan
70% Loan-to-Value (LTV) Financing
High Debt-to-Income Ratio (DTI), over 54%(well above the accepted norm of 45%)
New Home Purchase | Lake Arrowhead | $3.6M
24-Month Bank Statement Loan
No Tax Returns
80% LTV Financing
Closed in 28 Days
New Home Purchase | Encino | $2.3M
90% LTV Financing
One Loan (no HELOC)
Interest rate in the 4’s
New Home Purchase | Calabasas | $4.5M
No Documentation Loan
No Bank Statements or Tax Returns
Letter From CPA Confirming Employment
75% LTV Financing
Closed in 27 Days
Economic Reports Impacting Our Housing Market
Jobs Report
On Friday, The U.S. Bureau of Labor Statistics Employment Summary reported a much higher than anticipated addition of 528,000 jobs. The data surprised investors and drove a tough day on the stock market. The national unemployment rate now stands at 3.5%, a number that reflects 2020 pre-pandemic levels.
The backlog of jobs dropped to 10.7 million, mainly due to decreased openings in the retail trade.
California’s unemployment rate has edged down to 4.2%, a YOY decrease of 3.7%.
Inflation
Last month inflation topped 9%, three times the Fed target of 2%. However, commodity prices like oil and industrial-based and agricultural products continue to recede, which will help inflation long term.
The August Core Consumer Price Index (CPI) report, the most-watched measure of consumer price inflation, will be released on Wednesday, August 10th.
Key Economic Reports to watch for this month:
August 10 – Core Consumer Price Index (CPI)
August 16 – Building Permits, Housing Starts
August 18 – Existing Home Sales, Philadelphia Fed Manufacturing Index
August 23 – New Home Sales
August 24 – Pending Home Sales
August 25 – GDP Price Index (QoQ, Q2)
While a healthy job market does not always signal good news for inflation, it is essential for the real estate industry because it powers the demand for housing. Strong job numbers plus rising inventory will eventually lead to slower but sustained growth in our real estate market.
Always remember that I offer some of the best mortgage financing available in Southern California. Please don’t hesitate to reach out for a pre-qualification letter, loan options, or check the latest rates.