Welcome to my December newsletter featuring industry insights, plus economic news affecting our local housing market.
Interest Rates
Benchmark Rates
This week Fed Chair Jerome Powell indicated that the Fed might take a more restrained approach to future interest rate hikes. Analysts expect a half-point rate hike when the Fed meets in mid-December, and likely future hikes will continue to recede as inflation numbers drop.
Mortgage Rates
Chairman Powell’s comments were good for the bond markets this week, which led to a .25% drop in mortgage interest rates. Today, I have jumbo rates in the 5’s. Also, if we can establish a banking relationship, rates are lower, between .25% and .75%.
Economic Reports Impacting Our Housing Market
Jobs Report
Yesterday, the U.S. Bureau of Labor Statistics Employment Summary reported a robust addition of 263,000 jobs, leaving the nation’s unemployment rate unchanged at 3.7%. Experts were surprised by the strong numbers, which hurt the stock market yesterday because investors fear this may affect the Fed’s interest rate decision when they meet on December 13 and 14.
On the flip side, the Job Openings and Labor Turnover Survey (JOLTS) reported a month-over-month decline in job vacancies and a 760,000 drop in openings year-over-year.
California’s unemployment rate rose 3% to 4.0%, which is still near historic lows. The state has fully recovered from the 2020 pandemic loss and is now surpassing pre-pandemic employment numbers.
Inflation
As I anticipated in last month’s newsletter, the most recent Core CPI Report showed a month-over-month decline in consumer price increases. This data is closely monitored by the Fed, and if we see further price decline in the December 13 CPI Report, it will undoubtedly play into a more dovish approach to future rate increases.
Local Activity
Despite the continued negative headlines on our market, I continue to be surprised by the demand I see for real estate in Los Angeles. Yes, the market has cooled due to economic factors. However, there is still strong underlying demand from buyers taking advantage of lower prices by opting into lower-rate, short term or interest-only financing because they understand mortgage interest rates will recede in the next 9 – 15 months. I expect a drop of approximately 1% during this period, opening the door for an early refinance.
I want to repeat what I stated last month – this is the time to work with an experienced mortgage broker like me. I have a wealth of resources that allow me to tap into loan solutions other lenders do not offer.
Recent Transactions
We are proud to provide creative loan solutions that can accommodate almost any type of homebuyer.
Here are some recent transactions.
New Home Purchase |Palisades | $7.75M
75% LTV financing
10/1 ARM
5.00% interest rate | 5.23% APR
Closed in 30 days
New Home Purchase | Sherman Oaks | $2.65M
90% LTV financing
5/1 ARM
Rates in the high 5’s
New Home Purchase | Hollywood Hills| $4.5M
80% LTV financing
10/1 interest – only
Bank statement loan
Rate in the high 7’s
Key Economic Reports to watch for this month:
December 13 – Core Consumer Price Index (CPI) remove comma, remove this – Federal Reserve Meeting (FOMC)
December 14 – Federal Reserve Economic Predictions Report
December 20 – Building Permits, Housing Starts
December 21 – Existing Home Sales
As we approach the close of 2022, I wish you a pleasant holiday season. I thank you for the opportunity to be your trusted advisor in this challenging economy and real estate market. Feel free to lean into my expertise, and know I am always available to work with you on financing solutions that meet your personal needs and goals.
Sincerely,
Mark Cohen