At the start of last week, it looked like mortgage rates might reverse some of their recent increases. The announcement that President Obama had reached an agreement with Republican leaders on a tax package was very unfavorable for mortgage rates, however, and they rose sharply following the news. Mortgage rates ended at their highest levels since June.
 
While investors expected, in the proposed tax deal,an extension of the Bush-era tax rates for all income levels, many were nevertheless surprised by the additional spending measures in the agreement. Those measure include a one-year payroll tax reduction and an extension of unemployment benefits for the long-term unemployed. As a result, estimates for the size of the tax plan are significantly larger than expected, which has in turn led to the large reaction in mortgage rates. Although there is some resistance to the deal, most analysts expect the final version to be similar to the current proposal.
 
Once passed, the tax reform is expected to boost economic growth, but also to increase the budget deficit. Both outcomes are negative for mortgage rates. Faster economic growth generally increases the outlook for future inflation; higher inflation leads to higher mortgage rates. Additionally, an increase in the budget deficit means the government must issue more Treasury securities to pay for the spending. As the supply of Treasuries increases, yields must rise to attract additional investors—so again, mortgage rates must rise.
 
Both buyers and seller beware: buyers who are on the fence waiting for prices to fall may wind up paying higher interests rates; sellers should price their properties to sell before higher rates set in.

Let’s take a look at November home sales in the Los Angeles area.

Caution: In all of these Los Angeles neighborhoods, housing quality and size, as well as lot size, vary greatly. Therefore, the highest and lowest sold prices often reflect which particular houses sold and are not generally indicative of an increase or decrease in overall value. So I caution against reading too much into the following statistics:

Beverly Hills Real Estate Sales Statistics - Single Family Homes

Beverly Hills

Sold Listings

Low Price

Median Price

High Price

Nov 2010

5

$1,338,000

$ 1,400,000

$3,600,000

Nov 2009

9

$1,103,784

$ 1,900,000

$4,900,000

Beverly Hills Post Office Real Estate Sales Statistics - Single Family Homes

Beverly Hills
Post Office

Sold Listings

Low Price

Median Price

High Price

Nov 2010

9

$1,199,000

$ 1,635,000

$16,500,000

Nov 2009

5

$ 700,000

$ 1,275,000

$2,250,000

Bel Air Real Estate Sales Statistics - Single Family Homes

Bel Air

Sold Listings

Low Price

Median Price

High Price

Nov 2010

11

$ 1,025,000

$ 1,890,000

$18,500,000

Nov 2009

5

$ 925,000

$ 992,000

$ 2,950,000

Hollywood Hills East Real Estate Sales Statistics - Single Family Homes

Hollywood Hills
East

Sold Listings

Low Price

Median Price

High Price

Nov 2010

6

$675,000

$ 815,000

$2,100,000

Nov 2009

12

$449,000

$965,000

$1,497,000

Hollywood Hills West Real Estate Sales Statistics - Single Family Homes

Hollywood Hills
West

Sold Listings

Low Price

Median Price

High Price

Nov 2010

33

$ 675,000

$ 1,250,000

$3,800,000

Nov 2009

 29

$ 440,100

$ 1,300,000

$5,000,000

West Hollywood Real Estate Sales Statistics - Single Family Homes

West
Hollywood

Sold Listings

Low Price

Median Price

High Price

Nov 2010

5

$ 599,000

$ 745,000

$ 1,155,000

Nov 2009

6

$ 500,000

$ 1,129,000

$1,700,000