The combination of higher interest rates, rising inflation and a challenging stock market, are finally beginning to affect even strong real estate markets, such as Pasadena, according to some local realtors and mortgage brokers.
While Pasadena has been one of the strongest real estate markets in the state, for the past few years, some realtors say momentum may be beginning to slow in some areas.
“It impacts us and we’re starting to see different types of things happen,” said Realtor Adam Bray-Ali Coldwell Banker. “One thing for sure that’s happening, is that the people who are borrowing money to purchase homes are needing to step back and learn what they can or can’t borrow because the numbers are changing.”
Realtor Jonathan Torres said “in January a lot of people were super interested, and then with interest rates rising, started to be a little bit more cautious and decide to not really enter the market, even though, historically, interest rates are lower than what they have been.”
Torres said Wednesday that he attempts to educate buyers to consider the “bigger picture,” though he remains aware of the overall effect that more expensive loans can have on hopeful buyers.
“It does affect people in the sense of what they can really purchase, and their spending power,” said Torres. “If something goes through 3%, at its lowest and now to 6% as we’re seeing, you are going to get a depleted buyer pool.”
As Bray-Ali explained, “If you’re trying to buy a house, you can afford to borrow as much as the lender will lend you. Some people will borrow much less than what they could borrow. They’re shopping within their own budget.”
“But,” he continued, “there are others who will buy to the edge of that extreme. Pasadena’s a market that has a little bit of both of them.”
There are $5 million houses in Pasadena that are being purchased without loans, Bray-Ali pointed out, as well as $500,000 houses where people are trying to buy with 5% down.
“The ones that are getting a mortgage are going to be facing some sticker shock,” he said.
The local mortgage industry itself is also beginning to see some impact from the current financial scene.
Kenji Tatsuno, president of Kennedy Capital Corporation noted, the mortgage industry is contracting at the moment.
“There is some contraction now, things have slowed down,” he said Wednesday. “This is ultimately a business of supply and demand.”
According to Mortgagenews.com, Wells Fargo confirmed last Friday that it is laying off an undisclosed number of home lending employees due to mortgage market conditions, one week after reporting a major decline in origination volume.
Wells Fargo is the third major mortgage player to recently announce cuts in response to sliding mortgage volumes, following the embattled lender Better.com and the technology firm Blend. The San Francisco Business Times also reported that “The cuts are occurring across the country, according to employees posting online anonymously.”
Along with the increase in lending rates, the stock market has declined due to higher fuel prices and supply chain problems, among a range of issues.
“With a 10% decline in the stock market,” said Bray-Ali, “It’s more expensive to borrow money. People are worried about inflation. There’s a lot of talk. ‘Wait a minute, are we heading towards the recession? What’s going on with things? Maybe now is the time to be a bit less speculative?’”