Rates Drop and Tensions Rise

 RATE OUTLOOK

We continue to see market fluctuations influenced by the following:

• Inflation (pretty flat so far)
• Unemployment (low so far, but could rise with government layoffs)
• Monetary policy (no change by the Fed yet)
• Stock market gyrations and uncertainty (causing a flight to security)

What does that mean?  Whenever there is uncertainty there tends to be a move towards the most secure investment there is, currently U.S. Treasuries.  The demand causes prices of bonds to climb, resulting in lower yields (rates).  Most economic analysts expect rates to continue to experience volatility in the coming months, with the potential to rise if inflation does pick up due to tariffs.

INSURANCE

California continues to experience insurance woes…with the specter of increasing premiums for most homeowners due to pass-through of increased costs resulting from shoring up the Fair Plan.  State Farm continues to plead for an increase in excess of 20% for new policies.  So far, our insurance commissioner has not yielded. We are seeing more HOA Master Hazard policies with wildfire exclusions, or severe limitations.  This renders those homes un-lendable in most cases-- as the insurance does not meet traditional lending guidelines.

HOME VALUES AND MARKET ACTIVITY   

New home sales fell by 10% in January and it appears it was the slowest month for sales in general in the last in four years ++.  Many sales cancelled.  This is actually good news for buyers, which can lead to some softening in home prices.  Although homes continued to appreciate at pretty high rates last year (7% annually) they are going to slow down if inflation kicks back in and rates go up.  Nothing is going according to schedule at this point! 

TAX TIME

Income taxes are due April 15^th and Property taxes (2^nd Half) are due just before, on April 10^th.  However, if you are a victim of the recent fires in Los Angeles, you have until October 15th to file income taxes and you will qualify for relief for property taxes.  Let us know if you need any assistance for either of these items. 

You should have received a 1098 showing your mortgage interest paid for the year, which is a deduction, along with your Real Estate Taxes, up to a max of $10,000.  

However, there is talk of the new administration doing away with that cap on those deductions, which would be nice for California.  I’ve also heard whispers of an increase in the capital gains exclusion for homeowners of $250K per person upon sale of your primary residence.  One can only hope as we have built up so much equity in the last five years.

LOAN UPDATES – First Timers and Veterans

We love working with our veterans. There is no longer any loan limit for a VA loan which will go up to 100% of purchase price.  The Vet must qualify, but the guidelines are much more lenient than for any other loan programs. 

First time homebuyers are coming off the sidelines, and there are numerous programs out there to assist them.  For many who are paying high rent, saving for the down payment is difficult.  Don’t despair!  There are many down payment assistance programs available, and some don’t require payback.

 Please give us a call with questions, or for assistance.  Happy March!