Inflation in Our Future: How Inflation Might Effect Your Housing Investment Decisions

How are the latest economic developments going to affect mortgage rates Los Angeles?
Most pundits expect inflation to increase rapidly over the next 24 months.  The massive pumping of the money supply and printing of money by the Fed to keep up with the US deficit is expected to eventually result in too many greenbacks chasing too few goods and services.  This will be especially true as more folks get jobs and pent up demand results in draw downs of inventory. 

We have seen it in the past.  Eventually this will effect both expectations of rising prices for real estate and affordability as incomes rise due to inflation.  There will certainly be an offset due to increased mortgage interest rates, but the overall result is very likely to be increased home and apartment prices.

Mortgage Trends: Historic Low Mortgage Rates Can't Last Forever

In uncertain times, what can we predict about mortgage rates Los Angeles?
Both government rules and free markets tend to overreact to crisis, and nowhere has this been more true than the mortgage market meltdown of 2008.  From the freewheeling, no-proof-of-credit-worthiness times we thought we enjoyed in the first decade of this century, we have now cycled into a climate where the mortgage market is tighter than anyone can remember.  It is very unlikely that this tightness will persist.  As demand increases, there will be those lenders who will want to take advantage of better times.

Interest rates are at lows that no one would have predicted, but only because of low demand, Fed intervention, and a flight to safety in US Bonds.  The Fed is already discussing the timing of when this intervention will end, and any uptick in demand is likely to result in upward pressure on rates.  There is no precedent or imaginable scenario for rates to drop significantly below what they are today.  Could that happen? Sure, but the odds are way more likely that rates will go up significantly than down at all.

Housing Prices: No Where to Go but Up...Unless They Go Down

Are you wondering what will happen with mortgage rates Los Angeles? Housing prices and rents are subject to the same laws of supply and demand in finance as any other product.  The roots of the demand are demographic ebbs and flows which are modified by the self-descriptive statistic, “household formation.”  If you have more households forming due to increases in population in a region plus a diminishing desire of people to share living space, you see increase in demand for houses.  Currently, high unemployment and uncertain incomes push demand down for new homes, so currently we are experiencing low household formation.

As employment increases, young adults will tend to move out of their parents home, those who are sharing living spaces will look to live alone or with fewer individuals sharing.  This will put increased demand on residential prices.  Therefore, in our current environment, household formation is much more likely to increase than to decrease.

The supply side is affected by vacancies – as measured by the number of months of supply of homes on the market as well as how many apartment units and homes are being constructed.  Right now apartment vacancies are around 5%.  Historically this is as low as has been seen and it puts upward pressure on rents.  New apartment units are not yet being constructed in numbers large enough to meet the demand.

New home construction is at historic lows, but the high number of homes for sale is starting to drop from the record highs to more normal levels.  In other words, the supply of both apartments and homes is drying up, and there is no way to increase that supply quickly if household formations increase as expected.  This will put upward pressure on rental rates and home prices.

Costs of materials, labor, and regulation are all going higher for construction of new homes and apartments.  This means that the possibilities of the price of both can't fall much below current levels, as the replacement value would be more than the current pricing.

As rents go up the calculation for purchasing versus renting changes, and more renters become buyers.  Once again this puts upward pressure on housing costs, although it may temporarily dampen rents.

Mortgage Rate Trends in Los Angeles According to Mortage Expert

Both government rules and free markets tend to overreact to crisis, and nowhere has this been more true than the mortgage market meltdown of 2008.  From the freewheeling, no-proof-of-credit-worthiness times we thought we enjoyed in the first decade of this century, we have now cycled into a climate where the mortgage market is tighter than anyone can remember.  It is very unlikely that this tightness will persist.  As demand increases, there will be those lenders who will want to take advantage of better times.

Interest rates are at lows that no one would have predicted, but only because of low demand and Fed intervention.  The Fed is already discussing the timing of when this intervention will end, and any uptick in demand is likely to result in upward pressure on rates.  There is no precedent or imaginable scenario for rates to drop significantly below what they are today.  Could that happen.  Sure, but the odds are way more likely that rates will go up significantly than down at all.

For more on the subject or to discuss how you can lock in the historically low mortage rates in Los Angeles at this time, call Bill Rayman at 310-295-2900 ext 113

California Housing Prices More Likely to Go Up Than Down!

Housing prices and rents are subject to all of the same laws of finance as any other product.  Supply, demand, and cost of goods. At the root of the demand is demographic ebbs and flows.  You can net this out with a statistic called household formation.  If you have more households forming due to increases in population for a given region and changes in willingness to share space, you see an increase in demand.  We currently have low household formation rates due to high unemployment.

As employment increases, young adults will tend to move out of their parents home, those who are sharing living spaces will look to live alone or with fewer individuals sharing.  This will put increased demand on residential prices.  Therefore, in our current environment, household formation is much more likely to increase than to decrease.

As to the supply side, the issue is how many vacancies in apartments, how many months of supply on the market, and how many apartment units and homes are being constructed.  Right now apartment vacancies are around 5%, which is historically about as low as it can go.  This is putting upward pressure on rents.  New apartment units are not yet being constructed in numbers large enough to meet this demand.

New home construction is at historic lows, but the overhang of homes for sale is starting to drop from the record highs to more normal levels.  In other words, the supply of both apartments and homes is drying up, and there is no way to increase that supply quickly if household formations increase as expected.  This will put upward pressure on rental rates and home prices.

Costs of materials, labor, and regulation are all going higher for construction of new homes and apartments.  This means that the possibilities of the price of both can't fall much below current levels, as the replacement value would be more than the current pricing.

As rents go up the calculus for purchasing versus renting changes, and more renters become buyers.  Once again this puts upward pressure on housing costs, although it may temporarily dampen rents.

If you are ready to do something about an investment in California real estate and need a Los Angeles Mortgage Loan Specialist to help out, call Bill Rayman at 310-295-2900 ext 113.

Interview with Mortgage Guru Bill Rayman Part 7: Real Estate Outlook 2012

What is your outlook for the real estate market in 2012?

I deal with property around the nation, but the bulk of my activity is Los Angeles and California. Although the better properties and / or better areas have maintained themselves, home prices in most areas are still declining. This makes it a buyers’ market. It’s a great time to buy. When prices stop declining, people sitting waiting for prices to be the lowest are the ones who lose out. Once prices start to go back up, sellers are no longer eager to sell and it becomes sellers’ market.

Now is an extraordinary time for people to buy. Do I think the market will turn around in the next year? No, but I expect the Los Angeles market to rebound in 2 years. What I tell people is: I’m not a real estate expert. I know real estate finance. I know how to makes things happen. I know how to get people the financing they need. Part of my value is that I have a group of experienced, knowledgeable real estate brokers—each knows their geographic slice of the market. Ask me about real estate, and I’ll happily refer you to an expert

To See the Entire Interview CLICK HERE

Or, Ask Bill Rayman More Questions at: MortgageHelpLosAngeles.com

Interview With Mortgage Pro Bill Rayman Part 6: Refinance Tips

What tips can you provide someone looking to refinance?

Get your credit pulled at the beginning by a mortgage professional. For something so important, it’s astounding how few people actually understand how the bureaus work. Not all credit reports are the same; they vary by industry and by type.

Banks use a Financial credit score, derived from information from the 3 bureaus. Get someone to pull your credit score early and review it. For people who are worried that pulling their credit will lower their score, I tell them, “There’s a kernel of truth in it, and a lot of corn.” It reflects my comment that few know how this vital service works. Pulling credit does not automatically lower your score. The bureaus see who’s pulling it, how often it’s pulled, and what the purpose. Banks and brokers pulling it 10 times in a week will not lower your credit score. The bureaus see that you are shopping for a loan–not asking each company for money.

Knowing what’s on a report is vital to do early. Problems have to be identified and mistakes fixed – a process that can take 2-4 months . Mistakes easily derail a purchase or refinance. I only work with people who let me pull their credit up front.

To See the Entire Interview CLICK HERE


Or, Ask Bill Rayman More Questions at: MortgageHelpLosAngeles.com