Interest Rate Update
Eric Zunkley
14 weeks ago in a video I mentioned rates are expected to go up. This should come as a surprise to no one as it was completely telegraphed. Since February rates have gone from 3.55% to 5.4% exceeding even what I thought would happen and far quicker.
If you’re buying the median priced house in Los Angles for $1.3m with 20% down the higher interest rate makes your payment 24% higher. To get the same payment now you would have to spend $203k less ($1.07m).
How are prices changing? Prices for SFR in the Mid City area are down -7.6% year over year. However it’s a little soon to call this a new trend.
Keeping an eye on inventory.
5,995 SFR and Condo’s are currently listed. The inventory likely bottomed in Jan 2022 at 5,063 units. On This graph, which only goes back to 2016 peak inventory happened on 11/2018 with 16,557 units. Interestingly if you look at the graph for the 30 year fixed mortgage it peaked at 4.94% in that same month. Will we see a similar trend to higher inventory? I think we will but the market is still digesting new rates. It will take some time to see if this translates to lower prices.
Inventory in Los Angeles
Interest Rates
What can you do as a buyer?
You can buy now and hope to refinance in the future when rates go down.
You can move to a cheaper area.
If you have access to more cash you can put a larger down payment.
You could get an interest only loan and refinance at the end of the interest only period.