Welcome to my March newsletter featuring industry insights, plus economic news affecting our local housing market.
Interest Rates
Benchmark Rates
There is a lot of new economic data for the Fed to digest before the interest rate policy meeting on March 22. A strong jobs report yesterday did little to ease market volatility, especially given yesterday’s collapse of Silicon Valley Bank. This is the largest bank failure since the 2008 financial crisis, which will likely shut down the Fed’s enthusiasm for an anticipated half-point interest rate increase. Instead, investors expect the Fed to revise the next interest increase to a quarter-point.
Mortgage Rates
The mortgage rate market is also rocky. Case in point; 10-year treasury bonds were trading at 4.07 on Wednesday and yesterday dropped to 3.69. This kind of slide is unheard of, and we may see more downward movement depending on whether Tuesday’s upcoming inflation data points to more relief for U.S. consumers.
What does this mean for mortgage rates? If bond yields hold at lower levels or drop further, we will likely see more liquidity in the markets, and rates will go down.
Currently, I have private banking rates in the 4’s. Thanks to my vast connections in the lending community, I have quick-close loan solutions available for almost any kind of situation. I can’t say this enough – right now, with markets in this state of flux, it is critical to work with a mortgage broker with many loan sources at their disposal.
Economic Reports Impacting Our Housing Market
Jobs Report
Yesterday, the U.S. Bureau of Labor Statistics Employment Summary reported another robust addition of 311,000 jobs. However, the nation’s unemployment rate rose slightly to 3.6%. The report also points to another month of slower wage growth – a signal the Fed is looking for that shows past interest rate hikes are cooling down inflation.
Last Wednesday, the Job Openings and Labor Turnover Survey (JOLTS) reported a 6.5% decline in job openings, with the most significant decreases coming from the construction and food services sectors.
Local Activity
Our team has originated a number of loans lately for buyers who want to beat the April 1 start of Los Angeles’s new ULA transfer tax, also known as the mansion tax. The tax applies to all real property $5M and above.
Recent Transactions
Here are some recent examples:
New Home Purchase | Santa Monica | $5.75M
80% LTV financing
Full income documentation
10/1 ARM
5.5% interest rate | 5.7% APR
21-day escrow closing March 21
New Home Purchase | Encino | $6.5M
80% LTV financing
Full income documentation
Bank statement loan
No tax returns
10/1 ARM
Second Home Purchase | Los Feliz | $4.6M
80% LTV financing
10/1 ARM
Full income documentation
5.125% interest rate | 5.33% APR
Closed in 25 days
New Home Purchase | Mid Wilshire | $1.5M
95% LTV financing
30 YR Fixed rate loan
5.75% interest rate | 5.77% APR
New Home Purchase | Santa Monica | $3.6M
80% LTV financing
12-month bank statement loan
5/1 Interest-only ARM
Closed in 18 days
Key Economic Reports to watch for this month:
March 14 – Core Consumer Price Index (CPI)
March 16 – Building Permits, Housing Starts, Philadelphia Fed Manufacturing Index
March 21 – Existing Home Sales
March 22 – Fed Interest Rate Decision
March 23 – New Home Sales
March 29 – Pending Home Sales
Despite some market volatility, strong buyer demand still exists, and good inventory is hard to find, especially in the $1-$3M range. If we see more downward pressure in the bond markets this month, it could lead to lower mortgage rates and higher listing inventory.
Our local economy is strong, so I look forward to a healthy spring market and more daylight ahead!
Sincerely,
Mark Cohen