WILL RATES EVER DROP?

MARKET OUTLOOK

As we step into 2025, mortgage rates remain a hot topic. Over a year has passed since the anticipated drop in rates, and while they dipped slightly earlier this year, they’re back to hovering around 7% as I write this. Factors like a strong economy, low unemployment, and uncertainty surrounding the new administration’s policies continue to fuel inflation concerns. Compounding this issue is the persistent lack of housing inventory.

While inventory has increased slightly, it’s still insufficient to curb the rise in home prices. The combination of elevated home prices and higher mortgage rates adds further pressure to inflation.

Looking ahead, rate predictions for 2025 vary widely, ranging from the low-to-mid 5% range to as high as 7%. Despite this uncertainty, we remain optimistic about potential rate declines and an increase in housing inventory, which could stabilize the market.

The Good and the Bad

Home prices continue to appreciate at a historically elevated pace, offering both opportunities and challenges for buyers and sellers.

TIME TO REFI?

While many homeowners currently enjoy rates lower than today’s levels, some may be grappling with consumer debt accumulated in recent years. With credit card rates climbing, tapping into the equity gained during the recent housing boom could be a smart move to consolidate and pay off high-interest debt.

HAPPY NEW YEAR TO ALL!

As we embark on 2025, don’t forget to set your goals and objectives for the year ahead.

Cheers!
Karen

CREDIT CRUNCH FOR THE HOLIDAYS & ALERT FOR CORPORATIONS!

 Rate Update

As we patiently wait for mortgage rates to drop further, now is the time to consider preparing for a cash-out refinance to manage high-interest credit card debt. Consumer credit has surged since COVID, leaving many borrowers with significant balances.

While no one wants to replace a low-interest-rate first mortgage, there comes a tipping point where the savings outweigh the cost of refinancing at today’s higher rates. Though we’re not there yet, we expect this opportunity soon—fingers crossed!

Currently, most mortgage rates are hovering in the mid- to high-6% range, with some requiring points. If you’d like to discuss whether refinancing makes sense for you, reach out!

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Mandatory Report for Corporations

Did you know? The U.S. government now requires all corporations and limited liability companies (LLCs) to file a report disclosing basic ownership information. If you own multiple active corporations or LLCs, you must file this report for each entity before the end of 2024.

What happens if you don’t file?
Failure to submit your Beneficial Ownership Information (BOI) report could result in penalties of $591 per day, up to a maximum of $10,000.

The good news? Filing is quick, easy, and free. You’ll need the following information for each company owner:

1. Address
2. Telephone number
3. A scanned copy of their driver’s license (both sides)

You can file online at this link:
https://boiefiling.fincen.gov/

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We wish you and your loved ones a joyous holiday season filled with laughter, love, and cherished moments with family and friends!

Warm regards,

The Card Team

Karen, Katie and Stephanie

Election Drama, Rates and our Veterans!

We hope you voted!   Many of you may be wondering how political changes will influence interest rates and the real estate market here in Southern California. We want to provide you with insights that can help you navigate these uncertainties.

Interest Rates: Current Trends

Interest rates have been a significant topic over the past year, with the Federal Reserve making adjustments to combat inflation. Currently, we are seeing rates moving back up to around 7% which has impacted borrowing costs for homebuyers. While we hope for stability, it’s essential to recognize that rates can fluctuate based on economic conditions and policy changes. We still expect the Fed to drop the rate again this month by .25% --but the market may have already taken that into account.

The Election’s Impact

The Election outcome can have profound implications for interest rates. Depending on which party gains control, we may see differing approaches to fiscal policy, taxation, and housing regulations. Historically, a change in administration can lead to shifts in market confidence, which, in turn, can influence the Federal Reserve's decisions.  There are many differing opinions as to which party will be better for the economy and for interest rates.

Regardless of the outcome, keeping an eye on post-election economic policies will be crucial for predicting interest rate trends.

VA loans

Assisting our Veterans has always been one of our priorities.  Veterans are eligible for lower interest rates, higher Loan-to-Value (up to and in some cases over 100% of purchase price) and more lenient underwriting guidelines in terms of Debt-to-Income and FICO scores.   

There is no longer any “Loan Limit” for VA loans, so long as the borrower qualifies with automated underwriting for the loan.  We are seeing more jumbo loan amounts such as two-, three- or four-million-dollar VA loans.  But, with higher loan amounts the VA Funding Fee becomes more consequential.  It can be a pretty large number if the VA loan has been used in the past.

Current State of Real Estate in Southern California

The Southern California real estate market has shown resilience despite rising interest rates. Home prices remain relatively high, driven by limited inventory and strong demand. However, higher borrowing costs coupled with rising insurance costs have made it more challenging for some buyers to enter the market.

Key Observations:

• Market Adjustments: As interest rates rise, we’re starting to see a slight cooling in the competitive bidding wars that characterized previous years. Buyers are becoming more cautious, and many are waiting for a better entry point.
• Opportunities for Buyers: For those who can navigate the current landscape, there are still opportunities. Some sellers are more willing to negotiate, and there are potential benefits for first-time buyers in specific markets.
• Refinancing Trends: For homeowners considering refinancing, it’s essential to assess whether the potential savings outweigh the costs, especially in a high-rate environment.

Looking Ahead

It is vital to stay informed. Keep an eye on interest rates, local market conditions, and how political decisions may shape the economic landscape.

Call our office if you have any questions or need personalized advice regarding your mortgage options. We are here to help you navigate these exciting yet uncertain times in the real estate market.  We expect activity to pick up in in the next six months.

 

FALL - FALLING RATES AND MAJOR HURRICANES!

Well, the falling rates part is a stretch, as rates fell then moved back up a bit, but appear to be on their way back down... albeit slowly.  We are hoping for another drop to the Fed funds rate this year, although the recent better-than-expected employment figures are not helping the cause.

We’ve said this before and will reiterate….as mortgage rates drop, more buyers and move-up or move-down sellers will come off the sidelines, creating upward pressure on home prices.  We should see more inventory available, but there continues to be pent-up demand, particularly in coastal California. 

NEED MORE CASH FOR A DOWN PAYMENT?

Fannie Mae has a non-borrowing Investor program where a buyer who can qualify for a loan, but needs more cash down, can use cash from an investor to buy a home.  The investor is not a borrower on the loan, but will be on title for a share of the equity.  The investor does not need to be a relative and the funds are not considered to be a gift.

This could get tricky if the investor decides they want to sell but the occupant borrower wants to stay put or cannot buy out the investor, so a legal agreement is likely a good idea to avoid future litigation.

INSURANCE WOES

As I write this Hurricane Milton is on a bullseye path for Tampa, Florida with yet another hurricane this season.  Helene was a doozy, particularly affecting North Carolina!  Insurance has already become a major headache for homeowners and lenders.  The  current fires and hurricanes are certainly adding to the issue.    I fear that many areas of Florida will not be insurable in the future meaning you can only buy with all cash.  The same will likely be the result in fire-prone areas of Southern and Northern California.  We have had more than a couple escrows cancel in light of insurance problems with HOA Master  insurance, as well as individual policies.

FIRST TIME HOMEBUYERS AND CREDIT

We often hear “I need to pay off all my credit cards and loans before I can buy.”  This is absolutely not true.  While credit does play into loan qualifying, it is the monthly payments that are considered, and not the actual balance due.   Always ask a mortgage professional about the best path to qualifying.  It is not always paying off debt first.

SELF-EMPLOYED?

We can help prepare you for a home refinance or purchase.  These borrowers take extra care and assistance.  We love to collaborate with their tax advisors to strategize for the next step.

As always, reach out to us with any questions.  And, have a Happy Halloween!

 

Summer Heat and HOT Rates!

Ok, I admit it.  I missed my August Newsletter. The last few months have been so busy, I failed in my task to complete my newsletter. 

As I write this, this week is projected to bring us yet another heat wave.  Now I am regretting my complaints about the cool start to summer.

We've all had too much fun, and now it is time for back to work and school!  Rates have begun to come down, and a few more properties have come onto the market.  Although prices have begun to decrease slightly in some areas, here in Orange County we have the great good (or bad?) fortune of having prices hold, and even continue to increase.  One of the markets in high demand. 

As soon as rates normalize at or below 6% we expect to see a much higher level of activity.  We are getting closer, but not quite there.  Please remember our mantra:  waiting will only bring more competition for properties and there is tremendous pent-up demand.  Too many on the sidelines, for far too long. 

INSURANCE WOES

Insurance is the bogeyman in the picture!  We continue to face many hurdles with home insurance whether for condos or single family homes, or even commercial space.  Some of the insurers who left the market have returned, but with higher rates as now allowed by our insurance commissioner.

Before you complain, please understand that our country (and the world) are experiencing a much higher number of natural disasters…hurricanes, fires, floods, mudslides etc. etc.  Insurance companies are not non-profits.  They can’t continue to lose money.

Real estate ownership is still the best investment you can make, hands down. In the long term you will reap many rewards and provide for future generations.

 SUMMER NEWS

This summer for us was filled with quick trips here and there… Boulder for a wedding;  girl’s trip to La Quinta;  a week in the Eastern High Sierra with almost the entire family;  Paso Robles for wine;  Catalina for swimming and snorkeling;  grandkids sailing championships in San Diego; and grandkids sailing lessons in Dana Point;  music events at the Festival of the Arts in Laguna;  the Pageant of the Masters.  Steve had a show in the Art-A-Fair in Laguna, along with an ongoing exhibit at Studio 7.

We feel incredibly blessed with friends, family, health and happiness. 

Here’s to Fall!  Bring it on!  Football has started! And, USC won their opener!  😊

 

Salute to the USA and our Vets!

Happy 4^th of July!  We hope you all had a safe celebration!

This month we have exciting updates and valuable information on VA loans, and a heartfelt tribute to our veterans.

VA Loans: Empowering Our Heroes

VA loans are designed to provide our veterans with the opportunity to own a home with favorable terms. Here are some key benefits:

• No Down Payment: Qualified veterans can purchase a home with no down payment.
• No Loan Limit: There is no loan limit so long as the Vet qualifies income wise
• Competitive Interest Rates: VA loans often offer lower interest rates compared to conventional loans.
• No Mortgage Insurance (MI): Unlike conventional or FHA loans, VA loans do not require MI.
• Flexible Credit Requirements: VA loans typically have more lenient credit requirements, making homeownership accessible to more veterans. 

For more information on VA loans and eligibility criteria please call us.

Salute to Our Veterans

We want to take the time to recognize the sacrifices and service our Veterans have given.  We salute the Dana Point 5^th Marine Regiment Support Group and their achievements and contributions.  The 5^th Marine Regiment is assigned as the Lead Regiment for Crisis Response should US Ground forces be required. 

Dana Point 5^th Marine Regiment Support Group

• Mission is to provide support and outreach for the benefit of our Wounded, Families of our Fallen and active duty Marines, Sailors and Families.
• Community events include:
•  Combat Golf Tournament
• Dana Point Concerts in the Park
• Baby Shower for expecting Marine families
• Laughs for Leathernecks, a comedy fundraiser

Do you know a veteran or an organization we should feature? Let us know!

 

JUNE GLOOM - Brokers and Bankers Explained

 
MARKET UPDATES

Those of us living in Coastal Southern California are currently experiencing unfortunate but traditional June Gloom.  Many days the sun barely appears and drizzle is apparent almost every morning.

However, the housing market is not nearly as gloomy.  Although interest rates remain stubbornly high, mostly in the 7+ range, this is certainly not deterring buyers from the market any longer.  Prices are up – as much as 18% over the last year, depending where you are….  The Median Home price in Orange County is $1.2M.  There is competition for homes.  If you want to sell, this is a great time to do so.

What is driving those prices sky high you ask, again?  Lack of Inventory!  Simple supply and demand equation.

Things may look a bit different in other parts of the country, as Real Estate values are definitely location driven and quite specific to neighborhoods.

 BROKERS Vs. BANKERS

American Pacific Mortgage is a Mortgage Banker.  That means that we process, underwrite and fund our own loans, in-house with our employees.  This process provides far more control to loan officers since we can manage the process more efficiently.  “Julie, can we please put a rush on this file so we can close timely?”

In this fashion we fund our loans using a “warehouse line” which is similar to a super large Line of Credit.  Once the loans have been funded, we then sell them to one of a number of different places:  Fannie Mae, Freddie Mac, the VA, and a host of other individual investors like banks and large mortgage companies.  We do not service our loans nor hold them in our “portfolio.”  All loans are sold once closed, to a third party.

Brokers typically send loan files off to a third party to process, underwrite and fund the loans.  The broker is paid a fee which is disclosed on the Initial and final Disclosures.  We sometimes send our loans out to other investors “brokering” the loan to them for better pricing.  It is always our goal to find the best loan program and interest rate for our clients.  However, there is a loss of control with brokered loans as the process is managed outside our own company.

Please reach out to us with questions or for advice!  We are here to help!

Karen, Katie and Stephanie