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The Federal Reserve met last week and decided to pause rate hikes in their latest FOMC meeting. While the Committee held the fed funds rate steady this time around, Fed Chairman Powell suggested that they are prepared to raise rates a couple more times, or another 50 bps, this year to tame stubborn inflation. Next year, Fed officials see interest rates falling by 100 basis points as economic growth slows further. This is the first time since January 2022 that the Fed made no rate change following a policy meeting. Before the Fed’s announcement, the bond market generally priced in one more 25bps rate increase by the end of 2023. Interest rates have been moving sideways since the announcement but will stay elevated longer than what the market previously anticipated.
California housing market back on the upswing: The state housing market bounced back in May after sales dipped back-to-back in March and April. Sales of existing homes in California surged nearly 10% monthly and recorded the highest level in eight months. Mortgage rates reaching the lowest point in two months in early and mid-April might have prompted homebuyers to open escrows then and led to many of these transactions being closed in May. Despite the month-to-month gain, home sales continued to decline by double-digits from the same month of last year. The year-over-year drop in sales was relatively mild compared to recent months and was the lowest yearly decline since June 2022. Through the end of May, sales have declined on a year-to-date basis by 35.1%.
Inflation continues to cool Rates flat after Fed pauses rate hikes: After the initial increase in the run-up to the debt ceiling debate, rates have hovered in the high-6% range and remained there in the wake of the Fed’s decision not to raise their target interest rate at their June FOMC meeting. The weekly Freddie Mac 30-year fixed rate mortgage averaged 6.7% for the week ending June 11th. That is only 2 basis points different from the previous week, and Mortgage News Daily shows average rates at 6.95% at the time of this writing—essentially unchanged from the previous week. However, 10-year Treasuries have begun to rise, so it is possible that mortgage rates will go back above 7%. And with the Fed signaling as many as 2 more rate hikes this year, the return to sub-6% rates is likely to take long than many initially expected.
Mortgage applications probably past seasonal peak: New mortgage purchase applications rose 17% last week, reversing 6 consecutive weekly declines. In addition, the year-to-year declines have begun to slow as applications were down 27% from 2022 levels after averaging 35-40% annual declines for most of the past 6 months. Still, new purchase applications remain relatively depressed, both compared to the pandemic highs as well as much of the pre-pandemic years. And although the limiting factor for homeownership in California currently remains extremely tight inventory, the lackluster buyer demand figures illustrate how rates have impacted purchasing power as well.
California job growth decelerates, but still adding jobs: Although the rate of growth has been slowing in California, the Golden State continue to add jobs in May. Employers added a net of 40,000 new jobs in May after a revised 70,000 increase in April. This puts the year-to-year gains at 2.4%, which is well below the average of 6.4% that persisted during the ‘reopening’ phase of this business cycle. The unemployment rate held steady at 4.5% as signs that the labor shortage continues to thaw slowly. The state’s labor force expanded by more than 25,000 workers last month—most re-entering as unemployed, which prevented the unemployment rate from falling despite a total employment jump of nearly 10,000 in the EDD’s monthly unemployment survey.
Labor force participation rate remains depressed after early retirements: Despite participation having either nearly or fully recovered to pre-pandemic levels for workers aged 54 and under, the participation rate remains depressed for workers aged 55 and above. During the pandemic, home prices rose dramatically and many long-term homeowners sold their homes and moved closer to family or to desirable destinations and retiring early. This has led to a shortfall in available workers, particularly those with extensive experience, to replace those roles and has kept the labor shortage from shrinking more quickly. It has also caused wages to grow more quickly than they have for much of the past decade, which is one factor keeping inflation from falling faster as well.
If you have any real estate questions or would like to discuss if now is a good time to buy or sell, please feel free to contact me.
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1007 Catalina Ave #108
Redondo Beach 90277
2 Bed | 2 Bath | 1,181 SF | $1,200,000
OPEN HOUSE
SATURDAY & SUNDAY 1 - 4pm
Welcome to Your Dream Beach Home! A Stunning 2 story, 2 bedroom, 2 bath condo located half a block to the beach.
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211 Saint Joseph
Long Beach 90803
3 Bed | 2 Bath | 1,057 SF | $1,299,000
Welcome to this charming Belmont Shore home located just 4 blocks to the beach!
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985 S. Idaho Ave. #60
La Habra 90631
2 Bed+Den | 2 Bath | 1,073 SF | $489,000
This 2 bedroom plus a den (currently being used as a 3rd bedroom) is tucked away in a peaceful serene location surrounded by beautiful trees in the Woodlake Villas of La Habra.
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7887 Lampson Ave #54
Garden Grove 92841
2 Bed | 2 Bath | 800 SF | $99,900
Beautifully updated 2 bedroom, 2 bath home in Garden Terrace Estates.
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5528 Pearce Ave.
Lakewood 90712
3 Bed | 2 Bath | 1,592 SF | $845,000
The "Honey Due" list has already been done for you; all you have to do is move in and start enjoying this 3-bedroom 2 bath Lakewood home.
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256 Hermosa Ave
Long Beach 90802
2 Bed | 1 Bath | 780 SF | $475,000
Nicely updated 2 bedroom condo in Alamitos Beach, close to Bluff Park, and just a short walk to the beach, Bixby Park, cafes, nightlife, and great restaurants.
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199 Prospect Ave
Long Beach 90803
5 Bed | 3 Bath | 2,557 SF | $1,878,000
Stunning 4 bedroom, 2 bathroom Belmont Heights Tudor with a nicely-sized Guest Quarters/Rental Unit/Home Office above the 2-car garage!
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200 S. La Fayette Park Pl. #1
Los Angeles 90057
1 Bed | 2 Bath | 1,990 SF | $775,000
Great corner unit 1 bedroom, plus den and loft townhome located close to Korea town, DTLA, and Silverlake.
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100 W. Louise St.
Long Beach 90805
3 Bed | 2 Bath | 1,031 SF | $545,000
Great opportunity to own this 3 bedroom, 2 bath single family home on a corner lot. Bring your imagination as this fixer has so much potential.
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5221 E Patterson St.,
Long Beach 90815
4 Bed | 2 Bath | 1,627 SF | $870,000
Wonderful home in the Stratford Square area of Long Beach. Lovely neighborhood known for its award winning schools.
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939 Appletone Ave #3
Long Beach 90802
1 Bed | 1 Bath | 640 SF | $355,000
Nicely updated top floor end unit 1 bedroom 1 bath condo in the heart of Alamitos Beach just a short walk to the beach.
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939 Appleton Ave #8
Long Beach 90802
2 Bed | 2 Bath | 900 SF | $453,000
Charming two bedroom two bathroom condo sits in a prime location, just blocks away from the popular Alamitos Beach, Shoreline Village, Pike Outlets, 4th Street's Retro Row, Downtown Long Beach, and more.
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64 Corona Ave.,
Long Beach 90803
3 Bed | 3 Bath | 1,532 SF | $1,550,000
Amazing single-story bungalow on an oversized lot located less than a block to the ocean in the heart of Belmont Shore!
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2204 Conquista Ave.,
Long Beach 90815
4 Bed | 3 Bath | 2,629 SF | $1,075,000
Beautifully upgraded 4 bedroom, 3 bathroom home in the highly desirable Los Altos area of Long Beach. This spacious two-story pool home is perfect for entertaining.
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6490 E Saddle Dr
Long Beach 90815
3 Bed | 3 Bath | 2,845 SF | $1,720,000
Presenting this Amazing turnkey opportunity to live in Bixby Hill's 24 hr gated community. An entertainers paradise with your own oversized pool w/ beautiful waterfall.
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