Here is the latest Skinny real-time market update for Los Angeles as we enter the next phase of SIP-
With perspective buyers able to visit properties in person over the last few weeks, the number of deals going under contract has risen significantly. Compass has seen 35% more deals go into escrow this week over last week. Agents are definitely busier and we are constantly receiving e-mails and phone calls from perspective sellers and buyers or just clients wanting to check-in to get a sense of what is happening. This increase in activity has led Compass to raise sales projections for June compared to what was anticipated at the beginning of SIP. While being interviewed on CNBC on Wednesday, Robert Reffkin, Compass CEO, stated “We have seen in-contract listing activity go up back to pre-Covid levels in over 90% of our markets”. Though this is encouraging news, sales volume is still off substantially compared to a normal May.
The California Association of Realtors as well as Compass predicts sales volume to continue to increase significantly throughout the summer as sellers feel more comfortable listing their properties. In terms of valuations, the entry level price points in most So Cal neighborhoods are holding firm while the luxury price points have taken more of a hit (5%+) but not as pronounced as predicted at the beginning of SIP. However, we really will not know the valuation impact for a few more months and whether the recent spike in unemployment will lead to a flood of inventory later this year.
Though we do not have the fervor of buyer activity we experienced in early 2020, the historic drop in housing inventory (new listings dropped by half during the second of week April compared to a year ago), we have seen a surge in multiple offer activity, especially for properties below $1.5M. If you would like information specific to a certain neighborhood, please reach out to us.
A few interesting notes- *LA County saw a drop of 35% in sales volume in April compared to April of last year. However, that was not the case in Pacific Palisades as they experienced the same sales volume for single family homes (12) compared to April of last year. Santa Monica was off 17%.
*Nationally existing home sales volume dropped 17.2% in March. The biggest drop since 2010. The median price rose 7.4%.
*The U.S. mortgage delinquency rate rose to 6.45% from 3.39% in March, the largest monthly increase ever recorded. It was almost triple the previous record gain in 2008, near the beginning of the financial crisis. About 3.6 million homeowners were past due on their mortgages at the end of April, the most since January 2015. The number jumped 1.6 million in a tally that counts forbearances as delinquent if the borrower didn’t make an April payment.
*About 8.8% of U.S. mortgages are in forbearance. The pace of new forbearances requests has slowed to about 27,000 a day, down 85% from April, the mortgage-data firm said.
*Nevada was the state with the biggest increase in mortgage delinquencies during April, climbing 5.2%. New Jersey was next, with a 5.1% gain, followed by New York, 4.9%.
The average U.S. rate for a 30-year fixed mortgage dropped to within one basis point of an all-time low this week. The rate fell to 3.24% from 3.28% last week, close to the 3.23% all-time low reached in April’s final week. The low rates are spurring housing demand as states ease lockdown restrictions, said Sam Khater, Freddie Mac’s chief economist. In fact, in major metro markets like Los Angeles, new mortgage applications have picked up dramatically and are near the same level as last year at this time.
The trend for mortgage rates is downward, according to major forecasters. Fannie Mae projected last week the average this quarter would be 3.2%, followed by 3.1% in the third quarter and 3% in the fourth quarter.
Fannie Mae is forecasting an average of 2.9% for every quarter of 2021.
In terms of the jumbo market which makes up the majority of the sales we deal with on the Westside/South Bay, rates have stayed relatively flat over the past few weeks for both purchases and refinances. Depending on the product (i.e. ARM/30 year fixed), we are seeing jumbo 30-year products being offered around 3% on 30-year jumbo loans. The discount for a 7-10 year ARM compared to the 30-year is not as substantial as one would think unless you place over $500K++ with the offering bank. If you are able to do this, you might get a rate in the 2.4%-2.6% range. We are still hearing stories (though rare) of some institutions offering sub 2% loans when opening a new account with over $1M.
We continue to see each bank act differently when it comes to refinancing and how aggressive they are being. Refinancing volume is on pace to spike at a 17 year-high and to control some of the demand, many banks are not offering advantageous refi rates so they can meet the necessary time-frames of the loans they are currently working on. Thus, we continue to tell clients it is worth the time to shop around with different banks when it comes to refinancing.
Lenders continue to tighten the belt when it comes to credit requirements and reserve amounts, especially on refinances and it appears the only way to get an interest only loan is through the bank that currently has the loan on the property.
*The Federal Housing Finance Agency announced Tuesday morning that Fannie Mae and Freddie Mac will now allow borrowers who went into COVID-19 forbearance to refinance their loan or buy a new home with the support of government sponsored entities (GSE) as long as they’ve made three straight months of payments after their forbearance ends. That’s much different from the previous thinking that a borrower may not be able to get another GSE mortgage for as many as 12 months after they exit forbearance. The CARES Act stipulates that mortgage servicers “shall report the credit obligation or account as current” on any loan that goes into COVID-19-related forbearance.
According to the FHFA, borrowers are now eligible to refinance or buy a new home with GSE backing three months after their forbearance ends as long as they’ve made three consecutive payments under their repayment plan, or payment deferral option or loan modification. Also, there is no waiting period for borrowers once they have repayed the full amount of outstanding payments missed during the forbearance period.
*Even as other parts of the economy tank, lenders will originate $1.5 trillion in refis in 2020, a 51% jump from 2019, according to the forecast. That would be the highest level since 2003 when $2.5 trillion of mortgages were refinanced, according to data from the Mortgage Bankers Association.
New title orders and escrow openings mirror the increase of properties going under contract the past few weeks. Title orders/escrow openings are now down about 30-40% compared to last May while at the beginning of April they were down 50-65% compared to last year. Title officers have noted a recent surge in preliminary title report orders as agents prepare properties to hit the market in June. Escrow cancellation rates have held at around 21% over the past three weeks. They were in the 25% range in mid-April. Cancellation rates were steadily in the 15-17% range pre-Covid.
Earlier this month the LA City Council amended and expanded the scope of the city’s eviction moratorium ordinance and the city is requiring owners to provide NEW written notice of the rights provided by this ordinance to renters by MAY 27th! Owners must use the HCID+LA protection notice and CANNOT write their own notice to renters. You can access the Protections Notice at https://aagla.org/rental-forms/ – *Refer to form J.12.
HAVE A WONDERFUL AND SAFE MEMORIAL DAY WEEKEND!