The Rating Game

Mortgage rates have gone mostly down since the beginning of 2019 for multiple reasons: Trade tensions with China, a perception that the economy is slowing, and persistently low inflation. The Federal Reserve cut short-term interest rates by a quarter of a percentage point in July and again in September.
While lower short-term interest rates don’t immediately affect long-term mortgage rates, they do compel longer-term rates to fall over time, which is what we are starting to feel here and now in the 4th quarter—making it a great time to either lock a rate as a buyer or sell a house to a qualified buyer who can afford a little more.
The latest rates are knocking on “4’s” door again (hey, I had a mortgage at 13% in 1985, so don’t be greedy), with the 30-year fixed at 3.875% for purchases up to $726,525 and 4% for loans up to $3,000,000. A 15-year fixed rate of 3.5% applies up to $726,525, which is also a great product to use when re-fi’ing an existing loan at a higher rate and/or longer term.

Millennials Get Rich Quick

There are 618,000 millennial millionaires in the U.S. and their wealth is only expected to grow. According to a report in Barrons, Generation M’s 1% is expected to be five times wealthier in the next decade than they are now. Some of their wealth accumulation can be attributed to what’s been dubbed the “Great Wealth Transfer,” where nearly $68 trillion in assets are flowing—or are expected to flow—to younger generations, mostly from rich baby boomer relatives.
In addition to inheriting money, the report suggests that there is a significant tech influence to the rise of millennial wealth. Some of the top zip codes for millennial millionaires are in Silicon Valley, including Cupertino, home to Apple.
Other data in the report shows that most are employed by corporations, with only 15% working for themselves. Statistics show the millennial millionaires owning 2.8 properties, slightly higher than the 2.4 properties average boomer millionaires possess. They also have larger real estate portfolios than boomers; $1.4 million compared to $919,000.

Rents Go Through the Roof

For the 2nd year running, Westwood is California’s most expensive place to rent an apartment. In the posh neighborhood’s 90024 zip, renters pay an average of $4,944/mo., according to a new study from RentCafe, a listing service for apartments and homes. That’s a 4.1% leap compared with 2018. Westwood rent ranks 4th in the country behind 3 areas in Manhattan. Westwood is pricier than everywhere in the Bay Area. It’s also nearly $50 higher per-month than the second-priciest spot in CA: West Hollywood’s 90048 zip, where the average is $4,896/mo.
In addition to Westwood’s increasing rents, other areas in L.A. showed single-digit increases over last year like Culver City’s 90232 zip at $4,118/mo., Marina del Rey’s 90292 at $3,804, Santa Monica’s 90401 at $3,787, and Playa Vista’s 90094 at $3,735.
With these numbers in mind, renters should be considering today’s record-low mortgage interest rates—and FHA home loans of up to 94% of a purchase price—and make the effort to get out from under ever-increasing monthlies that are making corporations and “Aunt Sylvia” a fortune off of rental income.

The Hunt for Black October

October is one of the most desirable months of the year for a listing to make its market debut. There is plenty of time for sellers to capture a buyer’s interest before they may be dragged away by holiday sojourns. Another reason that makes the Fall a great time for sellers to list: Some buyers “need” or want to close escrow by year’s end for personal or tax reasons. This “urgency” can create scenarios in which buyers are more likely to be flexible during price negotiations in return for sellers’ cooperating with their desired time lines.
Other factors affecting this particular October: Most sellers are “in the black” in terms of home equity growth, but where do they go if they get top-dollar? With inventory tight (which may help sell properties quicker and higher), their options are few. Leases have become a faddish solution for the interim. A year or so in “temporary” housing takes the pressure off and allows for more choices in the long-run.
Also this October: Mortgage rates have continued to decline, which results in a burst of activity in the first-time L.A. buyer price point (around $1,ooo,ooo). Good homes in that range have seen multiple over-asking price offers–a phenomenon driven by the low rates–which can end in record-breaking sales prices. These records then raise an area’s median price (“gentrification”). Consequently, a common refrain from buyers in the market this month: “What slow-down?”

The Fed takes a deep dive

The Federal Reserve lowered interest rates by a quarter of a percentage point this week, its second cut since late July, and suggested it was prepared to move aggressively if the United States economy showed additional signs of weakening. For now, a growing number of Fed officials expect one more cut this year, based on economic projections released after the Fed’s two-day meeting. But an unclear economic outlook and a division within the Fed’s policy-setting committee prevented a clear message about what comes next.
The Fed’s policy interest rate is now set in a range of 1.75% to 2%, and not a single official sees it falling lower than 1.5% to 1.75% through the end of 2022. Stocks initially fell on the Fed’s announcement on Wednesday. But they ended slightly higher on the day, and Treasury yields barely moved, suggesting that the Fed’s decision and communication were roughly in line with investor expectations.
In this period of historically low mortgage rates, numbers out this week settled just above 3.20% for a 15-year fixed loan, and just below 3.75% for a 30-year fixed.


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