Welcome to my December newsletter featuring personal insights, advice on mortgage rates, and economic news affecting our local housing market.
Interest Rates
Rates are drifting downwards, bringing some much-needed relief for buyers. Here is a quick snapshot of mortgage rates this week:
• 6% for 10-YR jumbo ARMs up to $5M with income documentation
• Mid-6% on a 30-YR fixed loan up to $5M with income documentation
• Rates for bank statement loans, depending on loan-to-value, are in the 7.75% range, with a strong credit score and a lower loan-to-value.
• With a strong depository private banking relationship rates in the mid to high 5’s
As I mentioned last month, rates will continue to drop slowly over the next 6-12 months. We are now in a more stable inflation environment with a reasonable job market and consumers are confident about the economy.
Also, bond markets had a huge rate movement down as just mentioned above, inflation pressures are receding, which positively affects mortgage loan rates. The bond market had the most positive market in the past forty years in November.
The Fed meets next week, and I do not anticipate any move on interest rates – I am extremely confident rate raises are over.
Economic Reports Impacting Our Housing Market
Jobs Reports
There is good news in employment data released this week – the labor market is healthy and at full employment by anyone’s standards. However, job additions, openings, and wage growth have slowed, which points to an economy headed for a soft landing, not a recession.
Here is a quick overview of three important employment reports.
On Friday, the U.S. The Bureau of Labor Statistics Employment Summary reported a healthy addition of 199,000 jobs, and the national unemployment rate edged down to 3.7%. Wage growth jumped 0.4%, which surprised analysts, but the YoY move continues to decline more towards the Fed’s comfort zone.
The Jobs Opening and Labor Turnover Survey (JOLTS) revealed another drop in the number of job openings in the U.S. Today, there are 8.9M open positions compared to the high of 12M in March of 2022. This month’s number is still well above pre-pandemic levels, so while lower, the job market is still quite robust. This is a strong indication that the market is not overheating, which is exactly what the Fed is looking for.
In California, the unemployment rate remains steady at 4.8%. Since 2020, our state has added an average of 77,000 jobs a month, which supports demand in our local housing market.
Local Activity & Recent Transactions
Housing demand remains strong, especially in lower price points, and double-digit multiple offers continue to plague homebuyers looking for property under $3M. Call me if you are actively looking in this price range or know someone who is. I can work with you and your agent to create an offer and financing to make you stand out against the competition and close on time.
Homeowners with adjustable-rate mortgages (ARMs) – this is an excellent time to check the date of your rate reset on the loan, because it may make sense to refinance now so you don’t get hit with an 8%+ rate when the loan adjusts. I have several great options available, so your payments remain manageable.
Big banks are in a challenging position now because mortgages are expensive to fund. Unless you have money with the institution, there is far less enthusiasm to originate home loans. Keep in mind that I work with many different lending sources – smaller banks, private funds, etc. so that every client has options.
Recent Closed Loans:
New Home Purchase | Los Angeles | $2.2M
90% LTV Financing
10-YR ARM
Rates in 6’s
No mortgage insurance
Highly leveraged buyer
Full income documentation
New Home Purchase | Los Feliz | $1.8M
90% LTV Financing
No mortgage insurance
10-YR ARM
Interest Rate in the 6’s
Highly leveraged buyer
Full income documentation
Bridge Loan | Sherman Oaks | $4.8M
100% LTV Financing
Current house cross-collateralized
8% interest-only loan
Profit/Loss statement
No tax returns required
New Home Purchase | Calabasas | $4.6M
80% LTV Financing (which is uncommon for a loan this size)
10/1 ARM
6.625% Interest Rate | 6.72% APR
Key Economic Reports to watch for this month:
December 12 – Core Consumer Price Index (CPI)
December 13 – Fed Interest Rate Decision
December 19 – Building Permits, Housing Starts
December 20 – Existing Home Sales
December 22 – New Home Sales
December 28 – Pending Home Sales
Lastly, the holidays are in full swing for everyone, but I want to acknowledge the beginning of Hanukkah. Every member of the Jewish community has been touched in some way by the recent conflict in Israel, and my family feels the pain as well. I wish you a moment of light, love, and healing.
Sincerely,
Mark Cohen