From the peak of the recent mortgage rates in October ’22 at 7.375%, they then dropped to 6.0% when the Federal Reserve made their last .25% increase in the Fed Funds Rate. The perception of the mortgage bond market was the Fed was beating the inflation monster. But then Rates have been rising at a reasonably quick pace for most of February. The process began in earnest after labor market data on February 3rd. Markets were forced to reassess their outlook for the short-term rates controlled by the Fed and that reassessment causes some spillover to longer-term rates like mortgages.
Generally speaking, higher inflation and stronger economic data mean the Fed is likely to keep short-term rates higher for longer. The major moves by the Fed have been made, but Chair Powell has conveyed several times, they’re going to stay “higher for longer”. It takes up to a year for the effect of a rate hike to take full effect.
There is a disconnect in various areas of the economy. Personal credit card use has hit historic highs, liquidity is being drained, and we’re hearing about companies laying off employees… but the unemployment rate is still at historic lows, hotels are full, and the Producer Price Index came out stronger than expected by the markets. The Fed is not done.
The affordability to buy real estate is being challenged by the uptick in rates, but inventory is still (historically) tight, and the 10% fluff in pricing has already been taken out. There is some pain since the “artificially low” mortgage rates created to offset the COVID closing elements have been taken away. There’s not going to be a crash in prices, but a recasting of the housing market to a more normal balance.
If you are in the Los Angeles area, and have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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