Welcome to my June newsletter featuring insights and economic news impacting our local housing market.
Interest Rates
Benchmark Rates
Along with a number of experts, I predict a 30% chance of another rate hike during this month’s Fed meeting on June 14th. There are also strong signals that the Fed is nearing the end of this rate-tightening cycle, which means long-term interest rates have peaked and will begin a downward trek back to where we were pre-pandemic.
Mortgage Rates and Local Activity
Mortgage rates remain stubbornly high because of a lack of competition in the lending market. Big banks like Chase and Wells Fargo have allocated less cash to mortgages, and regional players like First Republic have much less of an impact. Liquidity is a major problem for the time being.
Fixed-Rate financing
I have fixed-rate, jumbo purchase loan products at 6% with the following loan-to-value (LTV) financing:
80% LTV up to $5M
75% LTV up to $10M
Bank Statement / Non-QM loans
Non-QM loans that require only bank statements for income documentation are aggressively priced and popular right now because these loans are tied to Wall Street instead of traditional bank money.
NEW! Doctors and Lawyers Programs
90% LTV financing up to $3M
Home Equity Loans
I have a number of clients who are staying put in their properties and opting to cash out some equity. I can do home equity lines of credit (HELOC) with 65% LTV financing up to $5M.
This is a great quote: You marry your house but date your loan. Bear in mind that this rate environment is not forever. Mortgage rates will likely drop three quarters to a full percentage point in the next 9-12 months. If you find a property you love now, you can refinance later when rates go down.
Economic Reports Impacting Our Housing Market
Jobs Report
According to the U.S. Bureau of Labor Statistics Employment Summary, while the U.S. added 339,000 jobs last month, unemployment rose to a seven-month high of 3.7%. Wage growth also slowed, which is a signal to the Fed that higher interest rates are cooling the economy.
Another positive data point for the Fed is the monthly Job Openings and Labor Turnover Survey (JOLTS) report, which spiked to 10.1 million job vacancies (+358,000) in the U.S.
At the state level, California’s Unemployment Rate Report edged slightly higher to 4.5%. (Side note – our employment rate is up just .4% since April of 2022).
So while there is softening in this employment data, it is important to note that these numbers still point to a robust job market, especially in California. Strong employment will continue to drive housing demand.
Local Activity
We are fortunate enough to have strong relationships with many lenders, which has enabled us to fill the void left by some banks cutting back on mortgage lending.
Lately, we have originated industrial and commercial loans, plus traditional residential financing. Our residential loan clients are most often opting for 30-year fixed and 10-year ARM products.
Recent Transactions
Here are some recent examples:
New Home Purchase | San Gabriel Valley | $1.075M
95% LTV financing
30 YR fixed-rate
Interest rate under 6%
New Home Purchase | Woodland Hills | $2.250M
90% LTV financing
5.625% interest rate | 5.99% APR
30 YR fixed-rate
New Home Purchase | Pacific Palisades | $4.9M
80% LTV Financing
10/1 ARM
5.625% interest rate | 5.81% APR
Highly leveraged buyer
Home Equity Loan | Santa Monica | $3M line of credit
Prime – 1
70% LTV Financing
Key Economic Reports to watch for this month:
June 8 – Initial Jobless Claims
June 13 – Core Consumer Price Index (CPI)
June 14 – Fed Interest Rate Decision
June 20 – Building Permits, Housing Starts
June 22 – Existing Home Sales
I understand the housing market is challenging due to rates, lack of inventory, and a bit of a Mexican stand-off between some buyers and sellers who aren’t in agreement on pricing. I have seen markets like this come and go. Keep in mind market conditions are variable and will eventually change. What has not changed is the long-term value of real estate in this city. Stay positive and surround yourself with trusted advisors like myself who can navigate any conditions to help you reach your goals.
Lastly, I always appreciate referrals, so please feel free to send me any friends, family, or colleagues who you think could benefit from my services.
Sincerely,
Mark Cohen