Welcome to my September newsletter featuring insights and economic news impacting our local housing market.
Economic Reports Impacting Our Housing Market
Labor Reports
I want to lead with the latest job data because there is a lot of good stuff here.
The U.S. Bureau of Labor Statistics Employment Summary reported another gain of 187,000 jobs to the U.S. economy while the national unemployment rate increased to 3.8%.
The Job Openings and Labor Turnover Survey (JOLTS) data indicated a cooling job market. Job openings fell to a two-year low, but the sky is hardly falling. Almost nine million jobs are still available in the U.S., which is still within historic highs.
California unemployment (which trails the U.S. data by 1-2 months) stands at 4.6%, and the state added almost 12,000 jobs. While this growth is more moderate than last year, it is still a healthy job market by any standard.
If one puts all the data together, the trends that matter to the economy and point to a soft landing versus a recession are:
→ Slowing job growth & easing wages (last 3 months)
→ An unemployment rate that is moderately rising
→ More people in the job market
→ Slightly fewer job openings
This is exactly what the Fed wants to see and will likely play heavily into a decision not to raise interest rates during their meeting this month and possibly for the rest of 2023.
Interest Rates
Mortgage rates remain high, but it is obvious from the latest Fed commentary that we are at the tail end of rate increases. It is widely expected there will be at least a one-point cut in federal fund rates in 2024, which will substantially help people buying homes during this tough rate environment. That said, this is actually not a bad time to buy. When the rate cuts begin in 2024, more homebuyers will return to the market, which will inevitably push prices higher. Weathering some short-term rate pain for long-term equity gain can make more sense.
Local Activity
Most clients we are working with right now are first-time buyers. There is heavy demand up to $3 million, and getting into escrow is very competitive.
The Los Angeles ULA tax and economic uncertainty continue to take their toll on the high-end market. I see a great deal of supply and significantly slower buyer activity.
Recent Transactions
Here are some recent examples:
South Bay | $8.750M
70% LTV Financing
Rates in low 6’s
Closed in 30 days
Sherman Oaks | $1.950M
90% LTV Financing
30 Yr Fixed
6.5% interest rate | 6.75% APR
No Mortgage Insurance
Closed in 18 Days
Encino | $4.250M
80% LTV Financing
10 Yr ARM
6.125% interest rate | 6.22% APR
Closed in 25 days
Land Loan | Santa Monica | $4.5M
100% LTV Financing
Cross-collateralized with Existing Home
Pacific Palisades | $3.5M
85% LTV Financing
No Morgage Insurance
Rates in 6’s
All purchase transactions are guaranteed to close in 30 days or less.
Key Economic Reports to watch for this month:
September 13 – Core Consumer Price Index (CPI)
September 19 – Building Permits, Housing Starts
September 20 – Fed Interest Rate Decision
September 21 – Existing Home Sales
The real estate market is cyclical, and we are currently on a bit of a downswing only because of a lack of supply. But don’t worry, the upswing is coming, as the economy is so diverse. The value of real estate in Los Angeles is forever lasting, so let’s stay focused and ride out the storm.
Sincerely,
Mark Cohen