Welcome to my January newsletter featuring industry insights, plus economic news affecting our local housing market.
Economic Reports Impacting Our Housing Market
Goldilocks Jobs Report
Yesterday, the U.S. Bureau of Labor Statistics Employment Summary reported an addition of 223,000 jobs, beating a forecast of 200,000 and lowering the U.S. unemployment rate to 3.5%, the lowest it has been in decades. Wage growth, however, fell almost a half-point below forecast, which creates the goldilocks labor environment that the Fed needs to see (along with other indicators) to curb future interest rate hikes.
At a regional level, our state employment trajectory remains on the upswing for the 14th straight month. California’s unemployment rate increased slightly to 4.1% but added over 26,000 jobs to the economy, outpacing U.S. job growth. As I have stated before, job stability will continue to empower our local real estate market.
Inflation
The most recent Core CPI Report released on December 13 was the third report in a row that showed inflation is slowing. This data, annualized over the last three months, shows the Core CPI inflation rate is just over 4%, which is finally within striking distance of the Fed’s 2-3% target.
Interest Rates
Benchmark Rates
For the last several months, I have predicted a change of psychology in the market once core economic indicators point to slowing inflation. This has now come to fruition. I expect the Fed will raise interest rates a quarter-point in February, which, frankly, is meaningless because the data already shows that they have succeeded in slowing down the economy enough to return to 2-3% inflation growth. Also, the world has been hyper-focused on inflation in Europe, which this month dropped to its lowest level in a year. The only perceived benefit to the February rate hike is the Fed maintaining its reputation.
Mortgage Rates
The bond market reaction to weaker inflation and manufacturing data continues to push some mortgage rates lower.
Here are a few excellent options available for a home purchase. Of course, we have many other solutions to meet the needs of almost any property buyer or owner.
Jumbo Loan
I have a product available for strong borrowers with up to 80% financing to $5M with no banking relationship at 5.25%. I also have products with rates in the 4’s if a banking relationship can be established.
30-YR Fixed
Rates start at 5.5%.
Recent Transactions
We are proud to provide a variety of loan solutions that will meet the needs of most individuals who want mortgage financing. Here are some recent transactions:
New Home Purchase | Malibu | $5.4M
75% LTV financing
10/1 ARM
1 YR tax returns
Rate in the mid 5’s
Refinance (HELOC) | Santa Monica
$2M Line of credit
No banking relationship
New Home Purchase | Hollywood Hills | $4.9M
Foreign National
70% LTV financing
No U.S. credit
No social security number
New Home Purchase | West Los Angeles | $6.2M
80% LTV financing
10/1 ARM
High leverage, A-paper rate
5% Interest rate | 5.18% APR
Key Economic Reports to watch for this month:
January 10 – Fed Chair Powell Speaks
January 12 – Core CPI, Initial Jobless Claims
January 19 – Building Permits, Housing Starts, Philadelphia Fed Manufacturing Index
January 20 – Existing Home Sales
January 26 – New Home Sales
January can historically be a sleepy time for the market. However, now is the best time to buy that I have seen in over a year. In the next few weeks, there will be more inventory on the market and slightly lower mortgage rates. If you have been waiting for the right time, this is it. Also, if my gut and experience of 36 years are correct, you will be able to refinance at approx. 1% lower than current rates by the end of summer or next fall. But if you wait until then to buy the house you want at the prices you see today, the moment will have passed.
Let’s Go!
Sincerely,
Mark Cohen