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Moving to Orange County Real Estate Secrets Revealed

Rising inflation will likely delay rate cuts

Overall inflation rose by 0.4% month-over-month and by 3.5% year-over-year, according to the BLS’s latest CPI report. Both metrics came in higher than the expected 0.3% MOM and 3.4% YOY growth. This makes it almost certain the Fed won’t cut rates in June. Already, mortgage rates have jumped to 7.37%, the highest since November of last year.

Core CPI, which excludes food and energy prices, also came in higher than expectations, rising 0.4% month-over-month (3.8% YOY) versus the predicted 0.3% (3.7% YOY).

40% of the growth in core CPI is due to shelter inflation (or housing costs). Based on real time rent data, shelter inflation declined, but not to the degree market rent data would predict.

My take:

As we feared, rental prices contributed to a hotter-than-expected CPI report. It’s possible that, due to the way the BLS calculates CPI inflation, these numbers are delayed and need more time to catch up. Another explanation: these divergent trends are caused by differences between CPI and market rent data. Whatever the case, it’s very likely interest rates are going to stay higher for longer, and so will mortgage rates.

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Current Mortgage Rates 04/12/24

Where high mortgage rates are having the smallest impact

Boomer homeowners and those living in less expensive metros are least deterred by the lock-in effect of high mortgage rates. That’s the central conclusion reached by Zillow in its latest report. Here are the other key takeaways:

10.8 million people (or 13% of homeowners) are immune to the effects of high mortgage rates. They are mortgage debt-free, and earn a high enough income to afford a home if they bought today.
Boomers and the Silent Generation (born between 1928 and 1945) are the most likely to be unaffected by the lock-in effect
Metros with a higher share of homeowners deterred by the lock-in effect (like San Diego, San Jose, and Los Angeles) had larger declines in new listings
Metros with the highest percentage of rate-lock free homeowners:
Pittsburgh, PA – 27%
Buffalo, NY – 23%
Cleveland, OH – 22%
Oklahoma City, OK – 21%
Detroit, MI – 20%

My take:

We all know homeowners move for many reasons aside from income and lack of mortgage debt. There are major life events like divorce, new jobs, changes in family size, etc. But Zillow’s research shows a clear correlation between the share of homeowners who are mortgage debt-free and the change in new listings since early 2022 when interest rates soared. Locales or metros with a higher percentage of homeowners affected by the lock-in effect had larger declines in new listings.

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Market Report Week of 04/12/24

Anaheim, CA

Fri Apr 12 2024

This week the median list price for Anaheim, CA is $1,100,000 with the market action index hovering around 75. This is an increase over last month's market action index of 73.