Tuesday, September 03, 2013

Manhattan Beach-Beach Cities: Playimg the interest rate game


The super low interest rates that folks took for granted are gone.   If you are thinking about buying a home or refinancing  you know interest rates have been bouncing around the last few months.  The days of  30 year fixed rates under 4% seem to be a thing of the past. The above rates are for conforming ($417,000 or less) and jumbo conforming loans( $417,000-$625,500).  While the rates have moved up in the last few months,  they are still very low compared to rates for those looking for a non-conforming loan over $625,500. .

Unfortunately as folks know who are shopping in The South Bay-Beach Cities for real estate or to refinance a non-conforming loan;  these loan rates don't apply to them.  A first loan of $625,500  generally means you are looking at a price under  $775,000.  There are  properties in that price range but they are moving fast.  Unless you are willing to buy a townhome or a condo you won't find a home in Manhattan Beach under $800,000.  There are a few smaller homes in Hermosa Beach but not many.  El Segundo and Redondo Beach still have some single family homes that fit that criteria but they move quickly when the hit the market. 

If you are shopping for a larger home or need to refinance a loan above $625,500 then you are going to pay a lot more than the above rates.  Once you start loan shopping above $625,500  the sticker shock hits.  The current rate for a 30 year fixed loan over $625,500 is 5.75%-6%  with at least a 1/4 of a point or more.  Adjustable rate loans remain an option for many buyers who don't plan to stay in the same home over 10 years.

The rise in rates really hasn't affected demand in our local Beach Cities real estate market.  Prices continue to move upward as inventory remains low.  Manhattan Beach seems to be above the prices  at the high point of the market although with fewer sales.  Home prices in Hermosa, Redondo and El Segundo  remain below the high points of the market but are moving upward. 

Many people are hoping that the rise in rates will cool the market but I don't see that happening now.  A few days ago I was looking at some offers I had written in 2005-2007.  Interest rates were 7.5%-8.5% and people were writing offers with home prices not much different than they are today. While loan guidelines are tougher today there are still a lot of qualified buyers who are ready to buy.  Inventory seems more of an issue than loan rates.  I think rates would have to take a huge jump in a very short time to affect  the current market demand.    It will be interesting to see what happens over the next few months. 

**** looks as if  rates  on jumbo loans over $625,500 may be looking better ... more info in a new post..

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