Welcome to my December newsletter, featuring personal insights, advice on mortgage rates, and economic news affecting our local housing market.
The Next Interest Rate Cut
Strong job numbers created a chain reaction that drove the NASDAQ and S&P 500 to new highs yesterday. The reason? The market is pricing in a third rate cut when the Fed meets on December 17th.
Beyond the job news, the tone of the market has changed since the election, and people are feeling more optimistic about the economy and that interest rates will drift downwards in the long term.
Here are the details of the job numbers:
The U.S. added 227,000 jobs last month, according to data from the U.S. Jobs Report, a nice bounce-back from last month’s numbers, which were heavily impacted by weather and manufacturing strikes. All in, the 3-month average payroll gains are around 170,000, which is likely soft enough to help justify another quarter-point rate cut. Unemployment held steady at 4.2%.
The last big piece of data the Fed will consider is the Core CPI report (broadly measures inflation) next Wednesday. Experts predict a modest increase (0.3% MOM, 3.9% YOY) that continues to point towards a 2% inflation level in 2025 and a soft economic landing — precisely what the Fed needs to see.
Mortgage Interest Rates
November was not an ideal moment for mortgage rates. The rate increases surprised many clients because they rose on the heels of two Fed rate cuts. Mortgage rates are influenced by the bond markets, which priced in some longer-term fears of sustained inflation and policy uncertainty.
That said, I’m pleased to share that rates are down again to the lowest levels I’ve seen in the last 45 days.
Rates are down due to traders’ perceptions that the nomination of Scott Bessent as Treasury Secretary will have a positive impact on bonds. The idea is that under his leadership, the deficit will expand more slowly because of the combination of a shrinking government and a less severe effect on tariffs than what we currently hear in the media.
Here are the rates I have available on key mortgage loan products this week:
• 6.250% for 30YR jumbo ARMs up to $10M with income documentation, banking relationship will result in a lower rate.
• 5.875% on a 30YR fixed-rate loan up to $10M with income documentation, banking relationship will result in a lower rate.
• 7/1 ARMs at 5.550% up to $10M with income documentation, banking relationship will result in a lower rate.
• Rates for bank statement loans, depending on loan-to-value, are in the high 6’s, low 7’s with a strong credit score and a lower loan-to-value. These are priced aggressively and aren’t much higher than full documentation loans, and interest-only options are allowed. Please note: NO tax returns are required.
• Applicants with a strong depository private banking relationship and income documentation may qualify for lower rates than mentioned above.
• 15-year fixed-rate loan with rates in the high 4’s. It’s an excellent opportunity to build up equity faster and repay the loan in 15 years.
Local Activity and Closed Transactions
The market appears to be a mixed bag; there is more inventory in most areas, and the average days on market are growing. However, if a property is priced well the demand is there. Also, we will continue to see more cash buyers as investors reap the benefits of the recent highs.
Recent Closed Loans
All purchase loans are closing in 21 days or less!
New Home Purchase | $21M
75% LTV financing – $15.75M loan
10/6 interest-only ARM
Private banking relationship
Interest rate 5.855% | APR 5.95%
Second Home Purchase | San Clemente | $3.75M
80% LTV financing
30YR fixed, 10YR interest-only ARM
5.875% interest rate | 5.99% APR
New Home Purchase | West Hollywood | $5.7M
Condo in a mixed-use building
75% LTV financing – $4M loan
10/1 interest-only ARM
24-mo bank statement loan
No tax returns
New Home Purchase | West LA | $1.85M
80% LTV financing
10YR interest-only ARM
5.875% interest rate | 5.99 % APR
Duplex Purchase | Santa Monica | $5.875M
80% LTV financing
7/1 interest-only ARM
5.875% interest rate | 5.99% APR
14 day close
It’s been a privilege to work with you this year, and your trust in my expertise is genuinely appreciated. I hope this holiday season brings you peace, joy, and the opportunity to look ahead to a successful and prosperous new year.
In the meantime, if you have any questions about mortgage rates, refinancing, or buying a home, please don’t hesitate to reach out. I’m here to help you navigate the complexities of the housing market and find the best solution for your unique needs. Feel free to call me at 310-777-5401.
Sincerely,
Mark Cohen