Santa Barbara Real Estate Market Update For November 2024

Market Update provided by Jeff Bochsler of Rate 

The recent election has had significant implications for both markets and mortgage rates. Post-election, stock markets surged while mortgage rates saw brief fluctuations, initially rising but then dropping as bond market dynamics adjusted. With the Trump administration’s economic policies, rates are expected to take longer to decline, and Wall Street is remaining cautious. Emotional reactions to the election will also affect clients’ real estate decisions. As we move into 2024, mortgage rates will likely stay in the high 6% to low 7% range, with larger movements expected later in 2025.

Rates Up Then Down

• Post-election volatility: Stocks rose 3.5%, Bitcoin surged, but mortgage rates spiked before dropping to 7.04% by week’s end. Nearly flat with election day.
• Fed rate cut: The Fed lowered rates by 0.25%, yet there was no drop in mortgage rates.
• Current rate expectations: Mortgage rates are expected to remain in the high 6% to low 7% range.

The Trump Trade

• Economic outlook: Trump’s policies may push inflation higher and increase deficits, delaying significant rate reductions.
• Fed’s focus: The Fed aims to reduce inflation to 2% while supporting a healthy job market, but the pace of rate cuts may slow due to Trump’s policies.

Powell’s Role and Fed Policy

• Fed Chair Powell: Jerome Powell remains Fed Chair until 2026, ensuring stability in monetary policy.
• Rate expectations: Powell indicated that the Fed is not in a rush to cut rates, meaning a December rate drop is uncertain. Markets have reduced the likelihood of a rate cut in December from 72% 1 week ago to 56% today.

Post-Election Caution

• Market uncertainty: Wall Street is waiting for clarity on the Trump’s policies and how readily the Senate and House will support them fully.
• Mortgage rate movements: Expect more significant movements in mortgage rates as Trump’s policies take shape.

Emotional Realities

• Public’s Reactions: Emotional responses will vary based on their political leanings. Some may feel uncertain and hesitant to buy or sell, while others may feel more confident and eager to invest.

Inflation and Consumer Spending

• PPI and inflation: The Producer Price Index (PPI) rose by 0.2% in October, with meat and vegetable prices increasing, but egg prices fell.
• Retail sales: October retail sales surpassed Wall Street expectations, signaling strong consumer spending, which could have mixed effects on mortgage rates.
• Inflation outlook: The Fed’s goal remains to reduce inflation to 2%, and while retail spending boosts the economy, it also complicates efforts to manage inflation.

2025 and Beyond – Rate Watch

• Rate expectations for 2025: Mortgage rates are expected to remain in the high 6% to low 7% range into early 2025, with rates potentially improving in the second half of 2025 or early 2026. HousingWire is noting a 5.75% to 7.25% average 30 year fixed range for 2025.
• Rate watch program: If you are interested in getting on a rate watch program to get notifications when rates align with your refinance goals, let us know. We’ll get you in contact with a loan officer we trust, Jeff Bochsler, who can put you on his list. He has rates for your particular situation running daily. It then notifies him once your rate has arrived to a level you’d wish to refinance. He’ll then reach out to you to let you know.

Low Down Jumbo Loan

New jumbo loan product: A 15% down jumbo loan offers the same interest rate as a 20% down loan, leaving more funds for post-closing expenses like repairs or commissions.
ARM product: The loan is available with a 7 or 10-year term, ideal for those planning to refinance soon.