ReportWire

Tag: average rate

  • Mortgage rates are rising. Experts cite economic strength, inflation and possible Trump win

    Mortgage rates are rising. Experts cite economic strength, inflation and possible Trump win

    In September, the Federal Reserve lowered its benchmark interest rate for the first time since 2020, giving hope to prospective home buyers that mortgage rates would follow suit.

    But instead of declining, home loan costs marched higher.

    On Thursday, mortgage giant Freddie Mac reported the average rate on a 30-year home loan rose to 6.72%, up from 6.54% a week earlier. It was the fifth consecutive week of increases.

    “People are confused,” said Jeff Lazerson, president of Mortgage Grader in Laguna Niguel. “They are saying ‘What’s going on?’”

    The fact that mortgage rates have gone up despite the cut underscores that while the Federal Reserve influences mortgage rates, it does not set them.

    Instead, rates are determined by what institutional investors who purchase bundles of mortgages are willing to pay for them and a variety of factors influence those investors.

    One is the benchmark rate the Fed cut in September, which sets a floor on borrowing costs throughout the economy. Another is expectations for inflation. That’s because when purchasing 30-year mortgages, investors don’t want to see the value of their investment eaten away as the years march on.

    Mortgage rates fell in advance of the Fed’s decision in September, because investors priced in the expectation the Fed would be able to cut because inflation had eased.

    Experts said one major reason rates have risen since is because economic data has come in stronger than expected. That’s convinced investors inflation will stay higher for longer and the Fed won’t be able to cut rates as much as they otherwise could have. Similarly, if the job market is stronger, there’s less of a need to cut rates to spur growth.

    “You see a lot of positive economic surprises,” said Kara Ng, an economist with Zillow, who cited a strong jobs report in September as one example.

    Political factors could be at play as well as presidential election polls have tightened in recent weeks.

    Chen Zhao, an economist with real estate brokerage Redfin, said it appears investors increasingly believe former President Trump will best Vice President Kamala Harris and retake the White House.

    According to a recent survey from the Wall Street Journal, most economists predict inflation and interest rates would be higher under policies proposed by Trump, who among other measures has called for sweeping tariffs on imported goods.

    “The link between tariffs and inflation is just very stark,” Zhao said. “There is not a lot of controversy there.”

    As rates rise, home buyers feel the pinch.

    Lazerson, the Orange County mortgage broker, said he’s seen business slow to a “trickle” after an initial burst when rates dropped around the Fed announcement.

    The reason is simple math.

    When rates hit their recent bottom of 6.08% in September, the monthly principal and interest payment on a $800,000 house would have been $3,870. It’s now $4,138.

    According to the weekly Freddie Mac survey, rates are still below 7%, a level last seen in May. However, a daily tracker from Mortgage News Daily puts them above that threshold.

    Zhao said what happens with rates next depends on a variety of factors, including who wins the election and what policies they actually enact.

    If there isn’t a policy shift, she would expect mortgage rates to come down next year because inflation is easing. On Thursday, an inflation measure closely watched by the Federal Reserve dropped to near pre-pandemic levels.

    Even so, economists say borrowers shouldn’t expect pandemic-era mortgage rates of 3% and below. Those rates were the byproduct of a massive federal effort to revive an economy where unemployment hit levels last seen in the Great Depression.

    “We are talking about [mortgage rates in] the high fives, low sixes” Zhao said. “If President Trump does win, there is certainly a lot more risk that rates could be higher.”

    Andrew Khouri

    Source link

  • In a first, most California houses sell for over $900,000

    In a first, most California houses sell for over $900,000

    Want a house in California? It’ll likely cost you over $900,000.

    The statewide median sales price for a previously owned single-family house surpassed $900,000 for the first time in April, a shocking figure that underscores just how unaffordable housing has become across the Golden State.

    The April median of $904,210 is up 11.4% from the same month a year earlier, according to data from the California Assn. of Realtors. The median — the point where half the homes sold for more and half for less — has now climbed more than $100,000 in just over two years.

    That rise in home prices comes despite the fact mortgage rates are sky-high relative to recent memory. Last week, the average rate on a 30-year fixed mortgage was 7.02%, more than double the 3% and below rates seen during the COVID-19 pandemic, according to Freddie Mac.

    High prices and high rates have created the most unaffordable housing market in a generation, but economists say prices keep rising because many homeowners refuse to sell and give up their sub 3% rates, creating an extreme shortage of inventory.

    Wealthy Californians also have hordes of excess cash they can plow into down payments that help offset high borrowing costs.

    If prices keep rising at 11% a year, the California median house price would climb above $1 million in 2025.

    That may not happen, however.

    In recent weeks, more homes have started to come onto the market as some owners start to decide a new home is more important than a low rate.

    Inventory is still extremely tight and economists don’t expect the floodgates to open. But in Los Angeles, Riverside, San Bernardino and Ventura counties, total listings in April climbed above year-ago levels for the first time since the first half of 2023, with each county recording an increase of at least 5%.

    Orange County was the only county to see a decline, while in San Diego County, inventory has risen for two consecutive months and is 18% above what it was a year ago.

    Some experts say the supply increase likely isn’t enough to send home prices down, but it should make values climb at a slower pace.

    That might mean a $1-million median is a bit further off, but not by much.

    “If we don’t hit it in 2025, we will probably hit it in 2026 — minus a big downturn in the economy,” said Jordan Levine, chief economist with the California Assn. of Realtors.

    Andrew Khouri

    Source link

  • Looking to buy or sell a home this spring? Here’s what to expect

    Looking to buy or sell a home this spring? Here’s what to expect

    Spring is less than a month away, and with it typically comes a busy time to buy and sell a home in Southern California.

    The holidays have passed. The weather is warmer. At least in theory, families should have enough time to find a home, move and settle in before their children start school in the fall.

    But during four years of a pandemic-influenced market, seasonality has at times gone by the wayside and home prices have whipsawed up, down, then back up again.

    So what should you expect if you are looking to buy or sell a home this spring?

    Borrowing costs

    If you are buying a home, prepare to pay a high mortgage interest rate.

    Prospective buyers had received some good news in recent months as the average rate on a 30-year fixed mortgage fell from a high of 7.79% at the end of October to 6.6% in January.

    Mortgage interest rates tend to follow inflation and during that time inflation showed signs of easing. But in recent weeks, economic reports have signaled inflation may be harder to eradicate than some expected and mortgage rates have resumed their climb.

    As of last week, the average rate on a 30-year fixed mortgage was 6.9%, according to Freddie Mac. That means the monthly payment on an $800,000 house is $128 more a month than that bottom in January, but $387 cheaper than the peak in October.

    According to the latest forecast from the Mortgage Bankers Assn., buyers shouldn’t expect drastic relief this year. The trade group expects rates to average 6.6% during the second quarter and end the year at 6.1%.

    If you are selling your home, high rates mean you will have fewer people touring your open houses than during the pandemic boom and you may need to rethink what your home is worth.

    However, there are buyers out there at today’s higher rates and some houses still receive bidding wars. Wealthy buyers can easier stomach a mortgage rate around 7% and may be able to pay all cash.

    “I wouldn’t call it a hot market,” said Tracy Do, a real estate agent who specializes in Northeast L.A. “It’s very tempered.”

    Homes for sale

    If you are looking for a home, you may wonder where they’ve all gone. However, the experience might be somewhat easier than it’s been.

    For the first time since 2021, new listings in January — homes hitting the market for the first time — were up compared with a year earlier in L.A. County, according to Zillow. Similar trends were seen across Southern California.

    Inventory has been extremely tight because many homeowners have decided not to sell, unwilling or unable to give up their 3% and below mortgages.

    Orphe Divounguy, a senior economist with Zillow, said he believes that “lock-in” effect is starting to wear off, as more people decide they’d rather get on with their lives and move than keep a low mortgage rate.

    But Divounguy and other economists don’t expect a return to normalcy soon, given the depths of the inventory crisis. In part that’s because of the difficulty of building houses in places like California, but also because high mortgage rates will still prohibit some from selling.

    According to Zillow, there were a total of 10,887 homes on the market in January in L.A. County, both new listings and homes that remain on the market unsold. That was 13% below a year earlier, but an improvement from the 26% annual decline recorded in September.

    Real estate agent Do said she is not seeing a flood of calls from people seeking to list their house.

    Some of the calls she does get come from people asking her to run the numbers to see if it makes more financial sense to lease their house rather than sell it since rents are high and they have sub-3% mortgage rates.

    “They are just thinking of keeping it as long-term investment, because they can,” Do said. “They have such a low overhead.”

    High prices

    If you’re looking for a screaming deal, you’ll be disappointed, according to many economists.

    According to Zillow, home prices across the six-county Southern California area dipped slightly in November and December, while they remained largely flat in January.

    Part of the reason is high mortgage rates prevented buyers from bidding up the cost of housing. But economists say part of the lack of movement in values is seasonality, since the winter is typically a slow time in the market.

    As buyers return this spring, some experts predict there will be enough of a mismatch between supply and demand to send prices back up.

    Overall, Zillow expects home prices in January 2025 to be 4.5% higher than January 2024 in the Inland Empire counties of Riverside and San Bernardino. Across Los Angeles and Orange counties, prices are predicted to climb 2.6%.

    However, economists say prices could fall if the Federal Reserve’s actions to beat back inflation push the nation into a recession.

    Andrew Khouri

    Source link