Buyer Advice

How Global Uncertainty Is Impacting Mortgage Rates

March 10, 2022 By David Warren

If you’re thinking about buying or selling a home, you’ll want to keep a pulse on what’s happening with mortgage rates. Rates have been climbing in recent months, especially since January of this year. And just a few weeks ago, the 30-year fixed mortgage rate from Freddie Mac approached 4% for the first time since May of 2019. But that climb has dropped slightly over the past few weeks (see graph below):

The recent decline in mortgage rates is primarily due to growing uncertainty around geopolitical tensions surrounding Russia and Ukraine. But experts say it’s to be expected.

Here’s a look at how industry leaders are explaining the impact global uncertainty has on mortgage rates:

Odeta Kushi, Deputy Chief Economist at First American, says:

“While mortgage rates trended upward in 2022, one unintended side effect of global uncertainty is that it often results in downward pressure on mortgage rates.”

In another interview, Kushi adds:

“Geopolitical events play an important role in impacting the long end of the yield curve and mortgage rates. For example, in the weeks following the ‘Brexit’ vote in 2016, the U.S. Treasury bond yield declined and led to a corresponding decline in mortgage rates.”

Kushi’s insights are a reminder that, historically, economic uncertainty can impact the 10-year treasury yield – which has a long-standing relationship with mortgage rates and is often considered a leading indicator of where rates are headed. Basically, events overseas can have an impact on mortgage rates here, and that’s what we’re seeing today.

Will Mortgage Rates Stay Down?

While no one has a crystal ball to predict exactly what will happen with rates in the future, experts agree this slight decline is temporary. Sam Khater, Chief Economist at Freddie Mac, echoes Kushi’s sentiment, but adds that the decline in rates won’t last:

“Geopolitical tensions caused U.S. Treasury yields to recede this week . . . leading to a drop in mortgage rates. While inflationary pressures remain, the cascading impacts of the war in Ukraine have created market uncertainty. Consequently, rates are expected to stay low in the short-term but will likely increase in the coming months.”

Rates will likely fluctuate in the short-term based on what’s happening globally. But before long, experts project rates will renew their climb. If you’re in the market to buy a home, doing so before rates start to rise again may be your most affordable option.

Bottom Line

Mortgage rates are an important piece of the puzzle because they help determine how much you’ll owe on your monthly mortgage payment in your next home. Let’s connect so you have up-to-date information on rates and trusted advice on how to time your next move.

The Advantages of Buying and Selling a Home in the Off Season

December 17, 2020 By David Warren

Many people believe that buying or selling in the winter months puts them at a disadvantage. They may assume their listing will sit on the market and buyers may envision a limited selection of listings to view. However, savvy buyers and sellers know that the off season can be a great time to complete a real estate transaction!

Advantages To Buying in the Off-Season

Attentive Service From Lenders – One of the greatest perks to buying in the off season is the enhanced service you will receive from lenders. During the peak season, lenders are busy. But during the slower months you will get a timelier response from your loan officer and underwriting.

Better Rates With Moving Companies – During the peak real estate season, it can even be a struggle to find a moving company that is available. Moving during the slower months will open up your options for what moving company to move with. You will be able to shop around for the highest-rated moving companies and take advantage of lower off-season fees.

Motivated Sellers – The biggest benefit to buying in the off season is the type of sellers on the market. People who list their homes in the slower months are often very motivated. They are typically working against a deadline and want to get their house sold. This can work in the buyer’s advantage when it comes time to negotiate.

Advantages To Selling in the Off-Season

Less Competition – Selling your house in the cooler months is a great strategy for lowering your competition. Markets across the country are already experiencing low inventory and in the winter it will likely reduce even more. Buyers are still extremely motivated to take advantage of historically low interest rates.

A Quicker Process – As your real estate expert, I am committed to providing the best service to you no matter the season. However, when things are slower, the transaction can move along at a quicker clip due to all the players being less-busy – from the lender to the closing agent, inspectors, and more!

Serious Buyers – The off season typically yields more serious buyers than during the warmer months. It takes a little more effort to attend showings during the winter while contending with weather and lack of sunlight, and buyers aren’t going to go out of their way to look at a home that they aren’t really interested in. Off season buyers typically have a deadline they are up against such as relocating for a job or being settled in a home before the holidays. The cooler weather tends to weed out the buyers who are pretending to be on their own episode of House Hunters.

Now is a great time to list your house on the market or buy some real estate. Don’t let the myths of peak season keep you from accomplishing your real estate goals now. Take advantage of the benefits of a slower real estate season.

If you are thinking about selling or buying, please feel free to contact me any time to discuss your plans. I’m always happy to help in any way I can.

Source: https://cdn.nar.realtor/sites/default/files/documents/ehs-08-2020-overview-2020-09-22.pdf

Are We In A Housing Bubble?

September 29, 2020 By David Warren

The Short Answer is No

The economic landscape of 2020 has been volatile and unpredictable due to the pandemic. Record numbers are being recorded for unemployment claims and we have a portion of the workforce working from home (some balancing kids online school with work). Conversely, interest rates are at all-time historic lows. These juxtaposing factors have some Americans wondering what pandemic-induced recession is going to mean for the real estate world. Are we headed toward another housing market crash that will mimic The Great Recession 2008? The short answer is no. A close analysis of what the market factors at work should leave homeowners feeling more assured.

Housing Values

Housing values have seen dramatic increases in the last year-plus, and in some locations housing values have increased as much as 20%. This is primarily due to a lack of inventory (sellers not wanting to sell, lack of new construction over the past decade) and a large number of buyers taking advantage of historically-low interest rates. This quick increase in housing value and buying frenzy is the main reason people are afraid of the previous recession repeating itself since some of the signs look familiar. The difference is that prior to the last recession, the sharp increase in housing values took place due to a buying frenzy caused by easy access to mortgages (more on this below). One could say that this was artificial demand since a percentage of those buyers should not have been able to qualify for a mortgage.

As compared to the period just before the recession, today’s homeowners have far more equity in their homes. Before the Great Recession, many new homeowners were getting homes with little down payment, meaning they had little or nothing to fall back on when prices declined. That is not the case today.

Interest Rates

Mortgage interest rates in the early 2000’s leading up to the housing bubble averaged between 5-6% for a conventional 30-year loan. Currently, interest rates have dropped below 3% on a conventional 30-year loan for the first time ever. This difference in interest means hundreds of dollars each month in mortgage payment interest savings, especially important if homeowners need to refinance or adjust their loans.

Mortgage Lending Requirements

In addition to the difference in interest rates, there is also a chasm between the underwriting guidelines on mortgages during the housing bubble and the guidelines being enforced now. Much of what caused the housing collapse of 2008 was lenient lending guidelines and predatory lenders. In the early 2000’s loans were being granted to borrowers who were overextended and unfamiliar with their mortgage terms. Many took out adjustable rate mortgages that were a stretch to afford in the first place, and impossible to pay once the rate adjusted.

Since the housing market crash there were a series of regulatory guidelines put into place to protect the American population from predatory lending. Additionally, mortgage lenders have tightened their approval conditions, even more so since the pandemic began to mitigate the risk of mortgages going into default.

By and large, the housing market crash of 2008 was one of the key factors for the recession. The real estate market changes right now represent higher-than-normal demand for scarce inventory plus a reaction to the pandemic economy. While no one can assuredly say exactly what is in our future, real estate experts across the board do not see a looming bubble in our future.

SOURCES:

https://www.bankrate.com/mortgages/foreclosures-crisis-wont-look-like-great-recession/

http://www.freddiemac.com/pmms/pmms30.html

Six Life Changes to Avoid When Closing a Home Purchase

March 16, 2020 By David Warren

Finally, after months of searching, making offers, and waiting for approval, you’ve found your perfect home and are well into the escrow process of closing the purchase. From here on out, it should be smooth sailing, and you’re free to start thinking about the next chapter of your life. Right? Unfortunately, that isn’t quite the case. Until the sale has officially closed, there are still things you can do that, while they seem smart, may actually derail the purchase. Here are six life changes to hold out on until you’re totally settled in your new home.

Changing jobs: No matter how attractive that new position or company may be, any occupation switch counts as a major change in status which could invalidate your mortgage approval. It’s best to wait until the keys are in your hand before making a leap like this.
Changing banks: While bank switching can often be beneficial for your personal funds, doing so can add some serious murkiness to your financial situation, resulting in your lender having to start their verification process over from the very beginning.
Applying for new credit: Remember that your mortgage approval was based on your existing credit availability. Any small changes you make in the credit realm can have huge consequences, especially if your situation was borderline.
Paying off debt: Similar to applying for new credit, paying off debt can change your credit status enough to start an eligibility reevaluation. While getting rid of debt is a smart idea overall, it’s best to hold off that extra bit until you’re sure your home loan situation is set in stone.
Changing marital status: It may seem like buying a home together is the perfect moment to solidify your commitment to your partner, but marriage also means a change in how each of your credit is evaluated. While a couple with similar credit may not experience much change, it’s important to avoid any disruption until you’ve totally closed on your home.
Making large purchases: As tempting as getting that new bed, couch, or table may be as you anticipate move-in, it’s best to hold off on any significant changes to your financial situation until your mortgage is delivered and rock-solid

Closing is an exciting time in every home buyer’s life, but don’t let the heightened emotions get the better of you. Have patience with your life and finances during this period, and you’ll find that things will work out smoothly.

What is a FSBO (For Sale By Owner) Home?

March 7, 2018 By David Warren

During your scouring of the Seattle real estate market, you may periodically come across the phrase “for sale by owner”, or “FSBO”. The words themselves are pretty self-explanatory, but what exactly does an FSBO home entail? And, more importantly, what does it mean for you, the buyer?

In the simplest sense, the only difference between an FSBO home and anything else on the market is that the seller is not using a real estate professional to assist with the sale, usually in order to avoid paying commission. Without a hired professional on the seller’s side, it’s up to the seller and you (or your agent) to determine who takes on the duties that might otherwise be handled by the listing agent. These tasks can include holding escrow, writing up contracts, and negotiation.

While the seller is opting to avoid having a professional on their side, it isn’t to say that the seller is necessarily unqualified. While some sellers are not as well-educated as they could be on pricing or negotiation, it’s possible to find sellers who have extensive experience in the market and believe the FSBO route just makes financial sense. The most common places where the seller may stumble are the pricing of their property and the negotiation process. In the case of list price, sellers can sometimes be too emotionally-attached to their home to set a fair price, resulting in an overpriced home that often goes unsold. In the negotiation stage, some sales can be lost due to the seller not wanting to budge, but research by the National Association of Realtors indicates that most FSBO homes actually sell for less than homes sold with agents.

FSBO also doesn’t mean the seller has something to hide. All sellers, whether they have an agent or not, must still adhere to local real estate laws, including full disclosure of problems in the house. However, it’s important to trust your gut, or your own agent, when it comes to how the seller conducts business. Some sellers may not be aware of proper procedure, or want to do things their own way. In these cases, you have every right to request proper procedure, or move on if the transaction becomes questionable.

When considering a FSBO home purchase in Seattle, the important thing is to not treat the house any differently than you would if the home had an agent attached. Negotiate well, enlist help from your real estate professionals, and take the home inspection very seriously. FSBO listings can be viable homes, despite the negative buzz that can sometimes surround them. Who knows—your next Seattle home may end up having been for sale by owner

Why Do I Need A Home Inspection?

March 7, 2018 By David Warren

When faced with the reality of how expensive it already is to buy a home in Seattle, or anywhere else, it’s common to want to cut corners where possible to save money. This is a natural urge, and one of the more common items to consider cutting from the list of fees is the home inspection. After all, why bother paying someone hundreds of dollars to look around a home that you’re perfectly capable of doing a walkthrough on yourself? In reality, the home inspection is one of the most valuable investments you can make during the process of buying a home, and here are a few key reasons why.

Top to Bottom: A typical inspection lasts two or three hours, and costs in the neighborhood of $500. Home inspection often begins at the roof and continues all the way down to the foundation, with several key stops in areas like plumbing, electrical, and heating. Taking in the whole house in one large sweep like this creates a comprehensive list of any and all problems that may need to be addressed before the home is purchased or moved into.

What’s Seen and What’s Not: A home inspector will take a look at many aspects of the house, but there are some things that they will not check, such as inside pipes, the interior of walls, or behind electrical panels. These areas are often best left to specialists, but a good home inspector can usually tell from the exteriors of these areas that there may be a problem in these areas, and offer suggestions on who to contact to take a closer look should that become necessary.

New or Old: Home inspections may seem like a no-brainer for old houses, but what about new constructions? Well, just because a house is new doesn’t mean it’s flawless. A professional home inspector knows not just what to look for in run-down, aged homes, but also what may have gone wrong during a brand-new construction.

Categorizing Issues: A good home inspector won’t just make a list of what’s wrong, but classify the issues as well. This means that they will point out what is an immediate safety hazard, what should be replaced immediately, and what should be monitored but does not need immediate action. Instead of overwhelming you with every issue a potential home has, you will instead come away with something closer to a plan of attack based on the priority of each issue found.

Negotiation Leverage: A full home inspection will provide you with some concrete evidence of what issues your potential purchase has, and you can use these problems in the negotiation phase. You can decide for yourself what is a deal-breaker, what you would like to see fixed before you move in, and what you’re willing to work on yourself after the purchase. The more you know about the home before you purchase, the more room you have to negotiate with the seller for a deal that seems fair on both ends.
Spend Money to Save Money: Sure, a home inspection might cost an additional few hundred dollars up front, but catching small problems before they become big ones can often save you thousands in the long run. Houses are big purchases and big investments, and it pays off to be smart with your money.

A home inspection is among the most valuable tools you have as a home buyer. With the Seattle buyer’s market as competitive as it is, some sellers may consider a buyer willing to waive the inspection as more promising than the competition. This is a risky strategy, and is ultimately your choice. However, a home inspection is far more often than not a worthwhile investment that can make the coming years of home-ownership smoother than going into a new home blind.