Perhaps things are turning around. The vaccine distribution is underway and cases are down sharply. Outdoor dining is reopening in LA. There is general optimism about both the path forward for both the pandemic and for the economy. The consumer is spending more and GDP is estimated to be well over 6% this year. Stocks are near all time highs and there is a strong appetite for financial speculation (as evidenced by the ongoing Gamestop saga and the proliferation of SPAC's in the public equity markets). Single family home prices across the country have been hitting record highs, with inventories down close to 40% year over year and until recently record low interest rates. Don't forget there is still more stimulus on the way! This is all very fantastic and much needed news for all, but it is important to remember that with a stronger economy will come higher interest rates. The Federal Reserve and many others are confident that interest rates will stay low for a long period of time, but I see inflation all around me in my daily life, in almost every good, service and asset class, and where there is inflation there will eventually be higher rates. Over the last few weeks there have been some very sharp moves in interest rates. In fact the average 30 year mortgage rate has increased by 8% in just the last two weeks (from 2.73% to 2.97%) If rates continue to move higher this quickly then it is going to have broad implications for both housing and equity markets. Refinance activity has already declined close to 11% over the last week and combine a rise in interest rates with record high single family home prices and record low inventory and we are looking at much less purchasing power for the first time homebuyer. On a different note however, there seems to be an interesting opportunity emerging in the housing market. While single family homes have been on a blistering tear, condos have been left in the dust. Sure, a condo presents a different type of living environment that is not exactly as "Covid Friendly", but the pandemic will not last forever and condo living is a fantastic alternative for those just looking to get a foot on the housing ladder, not to mention condos have many unique benefits such as less maintenance and desirable amenities. One of the big reasons why housing is so in demand at the moment is that it is one of the only ways you can lock in a 30 year loan at such a low rate, and condos present the same opportunity as single family homes in this regard, but are at the very least less competitive and at the most undervalued. Another interesting opportunity is in the growing TIC (Tenants in Common) market in Los Angeles. Imagine two houses on one lot, being sold separately and governed by an HOA much like a condo. These opportunities present all of the comforts of a detached single family home but are often priced 10-20% lower than a traditional single family sale. This concept has been popular in San Francisco for some time and is just starting to take hold here in Los Angeles. Higher rates are not all bad - they mean that investors are optimistic about the pace of economic growth, which means more jobs, higher incomes etc, but higher rates will have big effects on the outlook for mortgage rates. Even with the recent big moves however, rates are still near historically low levels and the Federal Reserve and many others see no reason why they should move quickly. However, at the end of the day the market will reflect the attitude of market participants and the Fed can only attempt to influence that attitude. I hope your year is off to a great start and thank you for your continued interest and support! Take care, - Gabe
Just Listed!
2427 Centinela Ave Unit L
2 BR | 1 BA | 851 SQ FT | $650,000
Located in a quiet and well maintained complex with low HOA, this beautiful upper corner unit is a fantastic opportunity to enjoy the wonderful sea breeze! The spacious living and dining area feature sparkling hardwood floors and are flooded with natural light, and the bedrooms are a great size and have tons of closet space. The bathroom is very attractively finished and the beautiful kitchen has abundant cabinet space and even a separate entrance for convenience and more fresh air! The charming garden style grounds reflect real "pride of ownership" as many of the dwellings are owner-occupied, and the unit has one gated, secure and covered parking space with extra storage. This property is located minutes away from the beach and has great access to Beverly Hills, Culver City and Downtown. Close to freeways and walking distance to hip local cafes and Trader Joes. Convenient to UCLA and Santa Monica College. Do not miss this exciting opportunity to call highly sought after Santa Monica home!
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Aegis Management Inc. Lic. # 01932663 All material presented herein is intended for informational purposes only and is compiled from sources deemed reliable but has not been verified. Changes in price, condition, sale or withdrawal may be made without notice. No statement is made as to accuracy of any description. All measurements and square footage are approximate. Equal Housing Opportunity.
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