For years, Southern California real estate agents have watched longingly as Bay Area techies turned IPO riches and, more recently, soaring AI valuations into bidding wars for homes. Now, with SpaceX preparing to go public this week in what is expected to be the biggest IPO in history, the coastal neighborhoods around SpaceX's sprawling Hawthorne hub are hoping for their own liftoff.

"This is LA's Google moment," Chris Tourtellotte, managing director at LaTerra Development, a Los Angeles real estate investment management and development company, told Business Insider, referring to Google's 2004 IPO that is estimated to have minted over 900 millionaires.

The long-awaited SpaceX IPO will dwarf Google's, finally turning paper wealth into cash for not hundreds, but thousands of current and former employees in Southern California. "All of a sudden, you will wake up, and there will be thousands of brand-new millionaires," he said.

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Mortgage rates are starting to trend downward as investors digest the latest updates on the conflict in the Middle East and the steps Kevin Warsh is already taking as the Federal Reserve's new leader.

The reopening of the Strait of Hormuz sent oil prices down — and both bonds and mortgage rates are moving in a similar direction. After jumping to 6.62% on June 17 in the wake of Warsh's first press conference as Fed chair, the 30-year fixed-rate mortgage dropped a bit this morning to 6.58%, according to Mortgage News Daily (MND).

The 30-year rate also dropped on a weekly basis, with Freddie Mac — which uses a different set of metrics than MND in measuring rates — pegging it at 6.47% as of June 18, down from 6.52% one week earlier and from 6.81% a year ago.

Realtor.com Senior Economist Anthony Smith said the latest rounds of negotiations between the U.S. and Iran have proven more promising than previous periods of reprieve in the war, which began in late February.

"A lasting resolution to the conflict would help bring mortgage rates down, boost consumer confidence, and housing market momentum heading into summer, however, the path will likely be rocky," Smith said.

Fed's approach could keep rates elevated — for now

Smith said it may take investors some time to adjust to Warsh's initial moves as Fed chair, which have included shelving forward guidance and providing shorter statements from the Federal Open Market Committee. This period of adjustment could lead to higher rates — at first.

"The logic of Warsh's approach, earning credibility by following through rather than telegraphing, is sound and ultimately the path to lower long-term rates," Smith said. "But a market without clear guidance may demand a premium in the near term, which could keep mortgage rates from falling as quickly as the Iran ceasefire alone might suggest."

Mortgage rates will likely fluctuate in response to the bond market rather than to the Fed's moves "for the foreseeable future," said Kyle Bass, production business manager at Refi.com.

The past few months of elevated mortgage rates have done a number on housing affordability. Redfin estimates that the median U.S. monthly housing payment was $2,647 for the four weeks ending June 14 — the highest this year and only about $100 shy of the all-time high amount in 2023.

Mortgage applications fall

Following the June 10 release of May inflation data, mortgage rates ticked up early this week, leading to a decrease in mortgage application activity. The seasonally adjusted purchase index was down 3% from the week before while refinance applications fell 5%, according to the Mortgage Bankers Association (MBA).

"Last week's CPI data showed that inflation continued to move higher, putting upward pressure on rates early in the week," said Mike Fratantoni, MBA's SVP and chief economist. However, "growing optimism regarding the opening of the Strait of Hormuz brought rates down again by the end of the week," he added.

Inventory is shrinking

As NAR reported earlier this week, May saw an uptick in pending home sales across the country. This, however, has led to a drop in inventory. According to Compass Chief Economist Mike Simonsen, inventory is down about 1% year-over-year — and the gap is growing each week.

"The takeaway from the inventory data continues to be that supply is now shrinking compared to last year nationally. Even in markets where inventory is growing, in most of those it's growing less quickly," Simonsen said.

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Real Estate News
By Dave Gallagher

Pending home sales were surprisingly strong in May, but it may be tough for the housing market to build momentum without tangible improvements in affordability.

Pending sales up across the country: Signed contracts were up 3.8% between April and May and up 4.8% year-over-year, according to the National Association of Realtors. Though well above the 1% increase some forecasters predicted, the rise was in line with Compass Chief Economist Mike Simonsen's weekly market research.

Month-over-month and year-over-year pending sales increases occurred across the U.S., NAR data showed. The Northeast experienced the biggest jump between April and May with an 8.7% increase, followed by the Midwest (up 8.1%), the South (up 1%) and the West (up 0.7%).

The latest pending sales data adds to a growing list of indicators suggesting that housing demand has firmed up this spring — and that homebuyers are proving more resilient than expected, with mortgage purchase applications also trending higher, noted Odeta Kushi, deputy chief economist at First American.

The May rise in pending sales is "particularly noteworthy," Kushi said, because "it has occurred despite mortgage rates moving higher through much of the spring."

NAR Chief Economist Lawrence Yun also acknowledged the past few months of mortgage rate fluctuations in his commentary about the May data. "A late spring buyer rush — even with mortgage rates not budging — is an indication of pent-up housing demand and consumers' acceptance of above-6% mortgage rates as the new normal," Yun said.

Strong headwinds persist: Persistently elevated mortgage rates and high prices continue to limit all but the highest-income buyers, making it tough to see much opportunity for sustained housing market momentum.

"The affordability challenge is accompanied by growing economic uncertainty and rising inflation," said Bright MLS Chief Economist Lisa Sturtevant, who noted that this uncertainty is slowing inventory growth as sellers hold back.

"Even in markets where there are ready buyers, there will be fewer options to choose from," Sturtevant said, "which will result in slower-than-expected transactions this summer." 

What happens with summer home sales may come down to whether widespread economic uncertainty and inflation fears dissipate. While a peace deal in the U.S.-Iran war was announced earlier this week, President Donald Trump has more recently warned that the U.S. will resume a bombing campaign "if they don't behave."

Consumer prices present another wildcard for housing. While inflation hit a three-year high in May, the rise was mostly driven by energy and food price shocks caused by the war in the Middle East. So far, these factors haven't had major impacts on core inflation.
 

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