April Market Report

Prices continue to climb. I thought maybe the Mansion Tax deadline approaching was causing the median price to increase due to the uptick in luxury sales. However, that has passed, and prices are still increasing MoM as inventory remains tight.

It’s now been three consecutive months that prices have increased MoM. The overall data is only showing a 1% increase. However, houses were up 2.5%. It’s condos that had a bad month and decreased by 1.4%. This is likely due to ULA (Mansion Tax), as March saw 10 condos sell above $5M, whereas April only saw 3. The fact we saw house prices increase in April, after the deadline for the Mansion Tax, indicates the market is clawing back. 

Compared to Last Year

Keep in mind April/May last year was the height of the bubble. Prices compared to those months will look like the market is dropping, but those prices weren’t real or sustainable. Prices back then were fueled by fear of rising interest rates. Whereas now, rates should start to go down. With new listings down 38% YoY for the 3rd consecutive month, we will continue to face a lack of supply vs demand. If prices continue to climb this year compared to last year when they began to decline, we will see the price gap YoY start to narrow.

Interest Rates

The Fed just announced a .25% interest rate hike and hinted they would pause raising rates at the next meeting. Even though I’ve said in the past the Fed Funds rate doesn’t always affect mortgage rates, this is significant. This means the Fed feels they can finally see the light at the end of the tunnel concerning inflation. This will, in turn, affect the bond market, which will then cause mortgage rates to trickle down. As rates come down, this should encourage homeowners to give up their super-low mortgage rates and bring more desperately needed inventory to the market.  

Banking Crisis

As I mentioned last month, after the SVB fallout, it appeared the worst was behind us. Well, it doesn’t seem that way. First Republic was the 3rd bank to go under this year and was taken over by Chase. The day after the Chase news was released, even Jamie Dimon said the worst was behind us. Yet more regional banks are under pressure, and their stock prices are plummeting. The important thing to remember is these collapses have been caused by poor decisions by bank executives. This is entirely different from what happened in 2008.

Low Credit Score Assistance

A new national rule went into effect on May 1 that will assist buyers with low credit scores to get them a better interest rate. The controversial rule will do this by effectively charging a higher rate to buyers with good credit scores. However, this only applies to conforming loans up to roughly $1.1M in LA County. This does not apply to jumbo loans, which most LA buyers tend to get. A lender also told me that buyers with a credit score above 780 might actually get a better rate with this new rule. It’s all very confusing and controversial, so best to reach out to your lender so they can explain.