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.