Monday Morning Quarterback

Monday Morning Quarterback

(Monday, September 15, 2025)

Los Angeles landlords listen up – you may soon be required to keep your rental units cool, or at least make it possible for tenants to do so. County supervisors last month passed a law requiring landlords in unincorporated areas to provide a way to keep their rental units at 82 degrees or below. (A measure introduced last Wednesday in the Los Angeles City Council directs officials to draft language conforming to the same standards.) That comes as climate change ratchets up the frequency and intensity of heat waves. Extreme heat already kills more people in the United States each year than any other weather-related event, according to the National Weather Service. Sustained indoor heat above 82 degrees has been linked to increased emergency-room visits, hospitalizations and deaths, according to a news release from Councilmembers Bob Blumenfield and Eunisses Hernandez, who introduced the measure along with Councilmember Adrin Nazarian. “It’s a health issue, first and foremost,” said Nazarian, who points out that the effects of extreme heat fall disproportionately on vulnerable populations like those who are chronically ill. Older residents are much more susceptible to dying from heat or related complications, he says. And poorer people are more likely to live in aging buildings without duct systems or air conditioning units. “It’s critical for us to take steps so that we’re protecting our residents.” The California Department of Housing and Community Development earlier this year urged lawmakers to adopt the 82-degree maximum temperature threshold statewide. State law already requires rental units to include equipment that can heat the unit to at least 70 degrees. Last year was the warmest on record globally, and temperatures are projected to continue to rise. In 2022, a LA Times investigation revealed that heat probably caused about 3,900 deaths in California over the previous decade — six times the state’s official tally — and that the undercounting has contributed to a lack of urgency in confronting the crisis. In other real estate investor news, let’s get under the hood…

Mortgage Rates Dive On Reports Of Worsening U.S. Economy. CBS MarketWatch reports that mortgage rates are taking a deep dive as financial markets try to make sense of reports of a worsening labor market in America. The average rate on a 30-year mortgage fell to the lowest level in nearly a year, to 6.28% last week, according to Mortgage News Daily, which surveys mortgage lenders on a daily basis. The 30-year was last this low in early October 2024. The 30-year has been falling as global markets are worried about the direction of the U.S. economy. Investors are selling off their 10-year Treasury notes, which is driving down the yield. They are also factoring in the possibility of the Federal Reserve cutting interest rates to reflect worsening economic conditions. Mortgage rates don’t directly follow the direction of the Fed’s benchmark short-term interest rate. Instead, they tend to move in tandem with the yield on the 10-year Treasury note, which rises when investors see inflation ahead. Friday’s drop in rates has already prompted some homeowners to seek refinancing options over the weekend. One mortgage broker told me over the weekend that his loan originators saw an uptick in inquiries from investors and homeowners about refinancing. Financial markets are also watching to see if the Fed retains its independence amid increasing pressure from the White House, as well as the levels of federal government spending and debt. Both of these factors also play a role in how the 10-year Treasury moves.

As Fed Nears Highly Anticipated Rate Cut, The Market ‘Really Hinges’ On 10-Year Treasury Yield. As anticipation builds around the Federal Reserve’s likely interest-rate cut this week, J.P. Morgan Asset Management’s Phil Camporeale is keeping his eye on the behavior of a particular Treasury bond amid inflation risks. “The Fed finally has their window” to cut its benchmark rate, as the labor market has slowed to meaningfully” to the point where it’s “just kind of running in place,” with no hirings or firings, said Camporeale. A lower federal-funds rate should create a bit more “breathing room” for the labor market, he added. But for the extension of the Fed’s rate-cutting cycle to be “accommodative” to the U.S. economy, the 10-year Treasury yield would need to stay around its current trading level. A rise in the 10-year yield would increase the cost of borrowing, while the central bank cutting its short-term fed-funds rate would mean “people are making less on their cash” in money-market funds — a dynamic “that is not accommodative,” he says. “That’s why everything really hinges” on the 10-year Treasury yield remaining anchored around its current level. The 10-year Treasury rate edged up to 4.058% last Friday, as investors assessed the latest consumer-sentiment survey from the University of Michigan. The preliminary findings of the September survey found that sentiment fell, while long-run inflation expectations went up for the second straight month to 3.9%. The Fed, which considers its dual mandate of price stability and maximum employment when setting monetary policy, will hold a closely watched meeting this week. The central bank will conclude its policy meeting on Sept. 17 with a decision on where to hold the fed funds rate and will also release its latest “Summary of Economic Projections,” which will include forecasts for inflation. The central bank will mostly likely lower its policy rate by 25 basis points next week, “but I do think that Fed officials will at least be discussing 50 basis points,” he says.

The Fed Could Lower Mortgage Rates Almost Overnight. There could be a magic button to lower U.S. mortgage rates almost overnight, but it isn’t the one President Trump has been talking about. The Trump administration earlier this week said it was considering declaring a national housing emergency as soon as this fall, noting high borrowing costs as a stumbling block. “We need a little help from the Fed,” Trump said last Tuesday in an Oval Office briefing, while criticizing Federal Reserve Chair Jerome Powell for being “too late” to cut short-term interest rates. The Fed controls short-term rates, but markets and expectations around our economy dictate longer-term rates that underpin things like mortgage loans. That essentially means the U.S. government would need to convince investors to buy its bonds — and get paid less. Two such kinds of government-backed debt are Treasurys and agency mortgage-backed securities. “The interesting conversation would be around what the Fed might do with its mortgage holdings,” says Mike Cudzil, a portfolio manager at bond giant Pimco. “Right now, the market assumes it will be a Treasury-only balance sheet, with it continuing to run off mortgages and purchase Treasurys.” Should the central bank start reinvesting proceeds from its maturing mortgage bonds back into the mortgage-debt market, Cudzil estimates it could lower the rate on 30-year fixed mortgages by about 20 to 40 basis points “almost immediately.” That could spur a refinancing wave for borrowers with recent, higher-rate mortgages — but the path to affording a home for first-time buyers still looks rough. Mortgage rates are so intertwined with the U.S. bond market that pricing gets complicated pretty quickly. Here’s a simple way to look at how the math works: U.S. mortgages are mostly priced off the 10-year Treasury yield plus a spread, or the extra compensation a bond investor earns for taking risks. The recent 10-year yield of 4.2% and a 2.25% spread gets a borrower roughly to the 6.5% 30-year fixed mortgage rate seen in September. “Reducing that spread helps a lot,” said Lawrence Gillum, chief fixed-income strategist at LPL Financial — noting that it had been above 3%, but historically has run closer to 1.75%.

Denser Housing Near Transit Stops? After a tense and sharply divided debate Tuesday, the Los Angeles City Council voted to oppose a state bill that aims to vastly expand high-density housing near public transit hubs. The Council argues that the state should mind its own business and leave important planning decisions to local legislators. The council voted 8 to 5 to oppose Senate Bill 79, which seeks to mitigate the state’s housing shortage by allowing buildings of up to nine stories near certain train stops and slightly smaller buildings near some bus stops throughout California. At the news conference, Councilmembers Monica Rodriguez and John Lee said the bill was an attempt by its sponsor, state Sen. Scott Wiener (D-San Francisco), and other state legislators to “hijack” local planning from the cities. Wiener lamented the City Council’s vote. “Opponents of SB 79 are offering no real solutions to address our housing shortage at the scale needed to make housing more affordable,” Wiener said in a statement. “California’s affordability crisis threatens our economy, our diversity, and our fundamental strength as a state.” In addition to creating more affordable housing, the bill would increase public transit ridership, reduce traffic and help the state meet its climate goals, he says. Councilmember Nithya Raman, who voted against opposing the bill, says the city’s housing crisis is so dire that the council needs to work with the drafters of the bill — even if there are elements of it they do not support. The bill, which passed the Senate and is before the Assembly Appropriations Committee, would allow heights of nine stories near major transit hubs, such as certain Metro train stops in L.A. A quarter mile from a stop, buildings could be seven stories tall, and a half mile from a stop, they could be six stories. Single-family neighborhoods within half a mile of transit stops would be included in the new zoning rules. Near smaller transit stops, such as light rail or bus rapid transit, the allowed heights would be slightly resolution opposing the bill has no binding effect on the state Legislature but gives the council a platform to potentially lobby in Sacramento against its passage. The resolution also called for the city to be exempt from the bill because it has a state-approved housing plan.

Vendors Expo Returns! Our world-famous "Vendors Expo" returns in 2025, on Thursday night, October 9, 2025. The Vendor Expo opens starting at 6:30 pm. We'll have 30+ of the finest vendors featuring real estate products and services you will want to utilize as a successful investor. Our Vendor Expo will be held at the Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Culver City CA. FREE Admission. Please RSVP at our website, LARealEstateInvestors.com.

6th Annual Los Angeles Real Estate Grand Expo. Join the finest builders, contractors, property managers, landlords, investors, and related real estate professionals, at the largest real estate event in Southern California, featuring 12 national speakers, 70 real estate vendors, food trucks, free workshops, and the ultimate networking. Saturday, November 8, 2025, at the Iman Cultural Center, 3376 Motor Avenue, Culver City, CA. RSVP: www.LAGrandExpo.com. Free admission. Street and valet parking.

This Week. Looking ahead, the next Fed meeting will take place on Wednesday. Most investors expect that the Fed will lower the federal funds rate by 25 basis points, but some anticipate a larger 50 basis point reduction. We’ll eagerly wait to see what the Fed does. For economic reports, Retail Sales and Import Prices will be released on Tuesday from the Census Bureau. Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of the economy. Housing Starts will come out on Wednesday from the Commerce Dept.

Weekly Changes:

10-Year Treasuries: Flat 000 bps

Dow Jones Average: Rose 700 points

NASDAQ: Rose 400 points

Calendar:

Tuesday (9/16): Retail Sales

Wednesday (9/17): Fed Meeting

Wednesday (9/17): Housing Starts

For further information, comments, and questions:

Lloyd Segal

President

Los Angeles County Real Estate Investors Association

Lloyd@LARealEstateInvestors.com

www.LARealEstateInvestors.com

310-792-6404