Charging into 2023 we didn’t expect conventional mortgage rates to settle and now we’re back in the low-6% range. This seems to have given some relief in the single-family residence market and spurred a few homebuyers. With the Federal Reserve still poised to raise rates later this week 0.25% this is possibly setting up to be just a temporary reprieve. The Mortgage Bankers Association index for new mortgage applications made big gains during the month. Refinance applications to conventional lenders were up over 15% the second half of the month as compared to the second week of January. Although not an apples-to-apples comparison, here at Coastal Capital we also experienced incredible application volume from our brokers for our business purpose trust deeds.

The California market still has the same issue for both the residential and multi-family markets: Supply! Current owners still have little interest in moving and graduating up to an interest rate that is almost double last years (80% of them locked in at 3.5% or less.) Now to exasperate matters, new builders are delaying new projects as the cost and availability of raw materials is highly questionable. Construction on new U.S. homes fell a seasonally adjusted 1.4% in December to 1.38 million, the Commerce Department said last Thursday. The drop in construction on homes followed the decline in November, when housing starts also fell by 1.8%. In fact, housing starts are at the lowest level since July 2022. The annual rate of total housing starts fell from 21.8% from the previous year. The chart below from the US Commerce Department while not to scale highlights the drop off.