And –– we’re back! After a brief intermission, I’ve dethawed myself just in time to be the bearer of both good news and bad. A fresh wave of COVID spurs new aid for struggling homeowners and inspires L.A. Country to extend their eviction moratorium yet again. Also, the Fed affirms its intention to start raising mortgage rates while pending home sales slide down 3.8% in December. Want another uplifting read? Check out my recent post on the Current Risk Factors for Commercial Real Estate in 2022.
COVID aid: 1 in 11 California homeowners struggle to pay mortgage
After launching a pandemic aid program to help renters avoid eviction, California now begins a new program intended to protect homeowners from losing their properties to foreclosure or forced sale. Though homeowners were largely spared from the pandemic’s financial wrath, there were 13,400 California homeowners in some stage of the foreclosure process by the end of December. Landlords, withhold your excitement: the program is limited to those who own just one home. (East Bay Times)
Benchmark Mortgage Rate Holding Near a 2-Year High
The average rate for a benchmark 30-year mortgage inched down one basis point (0.01 percentage points) over the past week. Sitting at 3.55 percent, this is 78 basis points percent higher than at the same time last year and within ten basis points of a 2-year high. Take heed; the Fed has now affirmed its intention to start raising rates and raising them sooner than welcomed, with traders expecting the first quarter-point increase in March and even more by the end of the year. Translation? Higher mortgage rates, less purchasing power for buyers, and downward pressure on home values. Check out the chart here.
Real House Prices, Price-to-Rent Ratio, and Price-to-Median Income in November
If you’re not subscribed to the CalculatedRisk Newsletter, consider subscribing (all content is available for free). Since 1976, Bill McBride has been curating his own affordability index. This month’s index suggests that houses are somewhat affordable right now due to low mortgage rates. However, he cautions that this isn’t necessarily indicative of whether or not now is a “good time to buy.” In November, the average 30-year mortgage rates were around 3.071% versus the current 3.74%. I’d strap in and expect them to increase over the next couple of months.
Pending Home Sales Slide 3.8% in December
Contract signings were down 3.8% across all regions in December from November. Existing-home sales are expected to decline by 2.8% in 2022, and home prices will rise by 5.1% due to the ongoing housing shortage, even as builders ramp up production. Lawrence Yun, NAR’s chief economist, predicts that “the market will likely endure a minor reduction in sales as mortgage rates continue to edge higher.” With December marking three straight months of aggressive home construction, Yun expects housing inventory to continue improving and contribute to slower home price growth in 2022. (National Association of Realtors)
Federal Reserve issues FOMC statement
The Federal Reserve released a statement touting that indicators of economic activity and employment have continued to strengthen. The statement discusses job gains, the unemployment rate, and all the usuals using adjectives such as “solid.” However, the optimism is short-lived as they go on to echo the unwelcomed anthem of the past two years: “the path of the economy continues to depend on the course of the virus.” With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate. (Federal Reserve)
L.A. County extends eviction moratorium through 2022, authorizes nonpayment of rent
Here we go again. It’s like this is the constant in every news roundup. But we’ll go through the debriefing exercise anyway: despite massive opposition from landlords, L.A. County supervisors approved an extension of the local eviction moratorium for the rest of 2022. The local moratorium has been in effect for nearly two years since the COVID-19 pandemic decided to make itself the enemy of the 2020s. (CAA)
