As a general rule, interest rates on 30-year fixed rate mortgages (“FRMs”) are inversely correlated to the amount of uncertainty in the economy; obviously, there are limits to that. Given the massive economic uncertainty over the last 7 months or so, the 30-year FRM is currently sitting at 2.98%. In theory, this will get buyers to take out loans and purchase homes; while there are established theories to the contrary, most economists believe that spending is a key component to a growing economy (the stimulus checks were an example of that thought process at work).
The reality is that 30-year FRMs haven’t been this low in a very long time, and banks are prepared for the influx of new buyers and current homeowners seeking refinancing. With that said, banks are hedging their bets, as banks have consistently been earning less and less interest on home loans (it appears to track the return on 10-year treasury bonds). Since banks are increasingly wary of lending to people without stable incomes, and because one of COVID-19s many negative effects is to create instability in income, banks are increasing their requirements for loans.
The housing market can feel the impact of banks tightening their belts. According to the National Association of Realtors, home sales fell 17.8% between March and April, and 10% between April and May. Of course, this is a national snapshot. There are certain pockets of Los Angeles that seem to be thriving as a result of the lower FRMs despite the banks heightened lending standards. These tend to be areas that attract more affluent buyers whose incomes haven’t been severely disrupted by COVID-19. Areas like Studio City, Sherman Oaks, Tarzana, and Encino are still thriving, and are likely to continue doing so. At the Chernov Team, we specialize in selling homes in these areas.
At the Chernov Team we understand that knowledge is power, and knowledge of market trends is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.
