As predicted conventional mortgages continue their march up higher! In late October the average 30-year fixed mortgage rate topped 7.3% a jump from just over 7% at the beginning of the month according to Bankrate.com. Much of the increase is being driven by the Fed’s stoppage of purchasing mortgage securities which artificially suppressed mortgage rates over the past few years. We fully expect rates to continue their slow but steady climb in the short- and mid-term as the Federal Reserve continues to raise rates. The stock market also continues to be in turmoil with a general consensus that the bull market is done and we are headed into a mild recession. The smart money is all rushing towards solid assets such as real estate, real estate funds, precious metals, blue chip crypto currencies & solid, bellwether stocks.

Good quality commercial, industrial and multi-family units are still in demand. Many of these buyers have locked in mortgage pool rates previously or have cash to pounce. We do eventually expect a minor pullback in these segments as rates increase. A and B rated proprieties with low CAP rates on commercial yields are now close to treasury rates which might result in lower purchase demand that is not 1031 exchange driven, now that there is an alternative. The rate increase has left many buyers in the single-family residential market paralyzed. First time home buyers are concerned that they are buying the top of the market and by waiting a few months they can get a deal. Current homeowners, most of whom locked in low rates, are experiencing payment shock when exposed to current rates as compared to their existing sub-4% rates. Rates have more than doubled from last year this time adding more than $1,000 to the monthly payment for a median-priced home in Southern California. What this has done is greatly suppress the number of transactions done in the SFR market. September 2022 sales were down roughly 25% as compared to a year ago, especially on the lower end of the market where buyers are more payment sensitive. On the high $1M price range the volume of sale drop has been much more subdued coming in at just 9% lower as compared to September 2021.

The California Association of Realtors just released their 2023 California Housing Market Forecast earlier this month. We are happy to report that their prediction is right in line with our Insights newsletter predictions this year.