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    August Forecast – Rates Are Heated, What’s Next?

    Welcome to my August newsletter featuring insights and economic news impacting our local housing market.
     

    Interest Rates

     

    Benchmark Rates

    At the end of last month, the Feds raised rates again another quarter-point, edging the federal funds rate to its highest level in 22 years. It is widely expected that there will be one more raise before the end of 2023, and next week’s inflation report will help gauge whether the Fed will make another move in September. 

    Mortgage Rates

    Mortgage rates are in high 6’s right now. However, I am optimistic that we will see some relief through the bond market rally that started yesterday.
     
     

    Economic Reports Impacting Our Housing Market

     

    Labor Reports

    The U.S. Bureau of Labor Statistics Employment Summary reported that the U.S. job market slowed last month, adding just 187,000 jobs to the economy in July, while unemployment held steady at 3.5%. Fewer job openings are good news for the Fed, but the fly in the ointment is wages which increased another 0.4%, bringing total wage growth in the past 12 months to 4.4%.

    The monthly Job Openings and Labor Turnover Survey (JOLTS) reported the lowest number of job openings (958,000) in the U.S. in two years. That said, the number is a double-edged sword for real estate. Here’s why:
     
    1 – A 900K+ number still indicates a tight labor market and could influence the Fed to raise rates again.

    2 – We need strong labor numbers because employment drives the real estate market.
     

    Local Activity

    Locally, more inventory is on the market, but good listings, especially under $2M, are going into escrow quickly with multiple offers. This demonstrates demand is still there, so we don’t have any structural issues with the economy. We have a supply problem and homeowners who need to be in more pain to give up rock-bottom interest rates to move.

    Higher mortgage rates have made it challenging for homeowners who are equity rich and want to pull cash out. Still, I have some exciting no-tax return programs that can release equity without touching your first trust deed. I can execute bank statement loans and second trust deeds up to 90% of your appraised home value.

     

    Recent Transactions

    Here are some recent examples:

     
    Cash-Out Refinance | Santa Monica | $4M – all cash 
    70% LTV Financing
    12-Month Bank Statement Loan 
    Rates in low 7’s, Interest-Only

     
    New Condo Purchase | Santa Monica | $1.7M
    80% LTV Financing
    30 Yr Fixed
    Rates in Low 6’s
    14-Day Close

     
    Hard Money Loan | West L.A. | $2M – cash out
    75% LTV
    Private Party Loan
    8-Day Close

     
    New Home Purchase | Laguna Beach | $2.950M
    80% LTV Financing
    No Tax Returns
    12 Months Bank Statements

     

    Key Economic Reports to watch for this month:

     
    August 10 – Core Consumer Price Index (CPI)

    August 16 – Building Permits, Housing Starts

    August 22 – Existing Home Sales

    August 23 – New Home Sales
     
     
    These are trying times for many of us in the real estate industry, but I urge you to stay focused on the long game. The value of real estate in Los Angeles is forever lasting, and today’s challenges are fleeting. Keep your eye on the prize, and remind your clients to do the same.
     
    Sincerely,
    Mark Cohen

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