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Larry & Kathy Reichle

Issaquah Real Estate | Call: 206-999-1690

Mortgage Rates Reach All-Time Low

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April 30, 2020

The size and depth of the secondary mortgage market is helping to keep rates at record lows. These low rates are driving higher refinance activity and have modestly helped improve purchase demand from their extremely low levels in mid-April. While many people are benefiting from low mortgage rates, it’s important to remember that not all people are able to take advantage of them given the current pandemic.

Primary Mortgage Market Survey®

U.S. weekly averages as of 04/30/2020

 

30-Yr FRM   
3.23%
0.10 1-Wk
0.91 1-Yr
0.7 Fees/Points
15-Yr FRM
2.77%
0.09 1-Wk
0.83 1-Yr
0.6 Fees/Points
5/1-Yr ARM
3.14%
0.14 1-Wk
0.54 1-Yr
0.4 Fees/Points

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

 

Mortgage Rates Drop Significantly

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August 8, 2019

There is a tug of war in the financial markets between weaker business sentiment and consumer sentiment. Business sentiment is declining on negative trade and manufacturing headlines, but consumer sentiment remains buoyed by a strong labor market and low rates that will continue to drive home sales into the fall.

 

Primary Mortgage Market Survey®

U.S. weekly averages as of 08/08/2019
30-Yr FRM
3.6%
Down 0.15 1-Wk
Down 0.99 1-Yr
0.6 Fees/Points

15-Yr FRM
3.05%
0.15 1-Wk
1.00 1-Yr
0.5 Fees/Points
5/1-Yr ARM
3.36%
Down 0.10 1-Wk
Down 0.54 1-Yr
0.3 Fees/Points

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

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Opinions, estimates, forecasts and other views contained in this document are those of Freddie Mac’s Economic & Housing Research group, do not necessarily represent the views of Freddie Mac or its management, should not be construed as indicating Freddie Mac’s business prospects or expected results, and are subject to change without notice. Although the Economic & Housing Research group attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. The information is therefore provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution. Alteration of this document is strictly prohibited. ©2019 by Freddie Mac.

3 Reasons to Invest in Single-Family Rentals

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A rental investment can be a safe haven in a volatile market.


With high demand and low supply, the housing market should remain strong in 2019

FEW PEOPLE TALK WITH their financial advisors about alternative investments like purchasing a property, but real estate may be a good strategy this year. It’s one that more high net worth investors seem to be employing to cope with market volatility.

A December 2018 survey from Millennium Trust Company found an increasing preference for alternative investments, including real estate. Among those surveyed who held real estate, 73 percent favored single-family rentals.

Robert Mulcahy, senior vice president of production and strategic initiatives at Angel Oak Prime Bridge in Atlanta, says a rental property investment is a great strategy for any investor, regardless of net worth. The market gyrations of 2018 and the outlook for real estate in the year ahead are compelling reasons to examine the benefits of owning a rental property.

“Since markets don’t exist in a vacuum, there tends to be a beta between the rental market and the stock market,” says Jason Haber, a real estate agent at Warburg Realty Partnership in New York. The difference, he says, is volatility.

“The rental market is reactionary to the general direction of the stock market,” Haber says, meaning that daily swings in stock prices don’t effect real estate investors like equity investors. “Real estate investments provide for more stability, and many markets can outperform the Dow and S&P 500.”

That may be music to the ears of volatility-weary investors. Here are three reasons why now is the perfect time to consider a property investment:

  • The 2019 outlook is strong.
  • Housing is bolstered by low unemployment.
  • Renter profiles are shifting.

The 2019 Outlook Is Strong

Quinn Palomino, co-founder and principal at Virtua Partners in San Diego, is optimistic about the outlook for leasing.

“Demand is high and supply is still constrained, particularly for entry-level housing,” she says. “We anticipate rent increases will outpace the overall commercial real estate market, landing in the 5 to 7 percent range.”

Palomino says these rentals are positioned to outperform stocks in 2019, as the market reacts to a slowdown in economic growth and recession fears. She cites the Great Recession, in which “single-family rentals did not have a down year in occupancy or rental rates.”

Housing Is Bolstered by Low Unemployment

Haber says that while the fundamentals of individual rental markets differ, two things are driving momentum: employment and interest rates.

“Generally speaking, a low unemployment environment translates into a stronger housing market,” Haber says. “Right now, we have both low unemployment and low interest rates. This dynamic has kept the housing market healthy.”

Additional rate hikes could give the single-family rental market an additional boost, says Nick Giovacchini, director of client services at AlphaFlow in San Francisco.

“With the Fed’s expectation of two more rate hikes this year, mortgage rates should rise once again,” he says. “(This) could potentially price some newer home buyers out of the market and keep them focused on rentals.”

Renter Profiles are Shifting

While low interest rates and job growth are leaving a positive mark on housing, Kevin Sneddon, founder and managing partner of the private client team at Compass in New York, says there’s a larger dynamic to consider.

“Renting single-family homes has become a new norm,” Sneddon says. He identifies three specific renter profiles that are fueling the new normal in the housing market.

The first is renters who can’t afford to buy because they lack a down payment on a mortgage. The second is those who don’t want to buy because they want flexibility. And the third group includes those who choose not to buy because they feel that real estate values will soften in the future.

Palomino says it’s largely millennials who are the main driving factor. “Millennials don’t have the same attachment to homeownership as preceding generations, are more transient and are overburdened with debt,” she says. “Yet, as millennial couples have children, they want to move out of the apartment and into a house with a backyard and garage.”[ 

It’s not just the younger crowd, however, who is on the hunt for homes to rent.

“As boomers are moving out of their previous homes, many are looking to downsize, but have less cash than expected,” Giovacchini says. As a result, they “may have to rent rather than purchase a new home.”

Those set on steering the course of single-family rental homes can benefit from doing their homework.

“The single-family rental market needs to be analyzed on a local level,” says Janine Yorio, CEO of Compound in New York. “We’ve seen tremendous discrepancies in rental growth and price appreciations across different locales.”

The biggest risk, she says, is the cyclical nature of real estate. Yorio makes a case for investing in multifamily properties through a real estate investment trust.

“Single-family investments at the individual level are far more risky than diversified REITs,” she says. “An owner needs to be ready for prolonged periods of vacancy, capital improvement requirements and dealing directly with problematic tenants.”

Yorio also says not all single-family residential investments are created equal: “It’s important to pay attention to more than just the initial rental yield or cap rate and pay attention to the near- and medium-term cash flow at the property level, taking into account required repairs and maintenance.”

There are also subtle differences in investing in a townhouse versus a single-family home. Town homes can carry fewer cost considerations regarding maintenance, repairs and landscaping if those expenses are handled by a homeowner’s or condo association.

Sneddon says the target tenant profile matters, as does your exit strategy. Most important, he says, is the likelihood that the asset will increase in value over time.

“Things like location, property condition, property style, local job growth, etc. are important factors to consider when selecting which single-family rentals to acquire,” he says.

Investors shouldn’t expect renting a home to be a passive investment.

“There’s a lot of work in being a landlord,” Yorio says. But outsourcing leasing or property management to a trusted team can ease the burden. 

By Rebecca Lake, Contributor


Americans are starting to feel better about buying homes — sort of

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  • The share of Americans who say it is a good time to buy a home increased 4 percentage points to 15 percent in January compared with December, according to a monthly survey from Fannie Mae.
  • Home price gains have been shrinking since last summer and are now rising at the slowest pace in more than six years, according to CoreLogic.
  • The share of Americans who say home prices will go up fell 1 percentage point to 30 percent.

Daniel Acker | Bloomberg | Getty Images
Prospective home buyers arrive with a realtor to a house for sale in Dunlap, Illinois, U.S., on Sunday, Aug. 19, 2018.

More consumers now see the door to homeownership slowly squeaking open, but they still think it’s pretty pricey.

The share of Americans who say it is a good time to buy a home increased 4 percentage points to 15 percent in January compared with December, according to a monthly survey from Fannie Mae. The share is still down sizably from the start of 2018, when housing demand was soaring and home prices were rising at a much faster clip.

Home price gains have been shrinking since last summer and are now rising at the slowest pace in more than six years, according to CoreLogic. Consequently, the share of Americans who say home prices will go up fell 1 percentage point to 30 percent. That share has been declining for four straight months and is down a whopping 22 percentage points from a year ago, according to Fannie Mae.

While consumer confidence in housing is rising this year, it was still a bit unsteady in the fourth quarter of last year.

Seventy-six percent of potential home buyers estimated they could afford fewer than half the homes for sale in their markets, according to a year-end poll from the National Association of Home Builders. That share is lower than the 79 percent who shared that perception in the fourth quarter of 2017, but not by much.

“In the year ended in the fourth quarter of 2018, there was not a lot of change in how homebuyers perceived their ability to afford homes available in their markets,” said Rose Quint, author of the NAHB survey.

Attitudes toward homebuying are improving this year because it appears that mortgage rates will not be increasing as much as previously expected. The share of those who expect rates to go up over the next year fell 3 percentage points to 53 percent in the Fannie Mae survey. The Federal Reserve has signaled it may not be as aggressive in hiking interest rates as previously forecast.

“Overall, these results are in line with our forecast that, amid improving affordability conditions, home sales should stabilize in 2019 after declining last year for the first time in four years,” said Doug Duncan, Fannie Mae’s chief economist.

Cooler home prices and lower interest rates certainly increase affordability and help consumers feel better about buying, but the biggest change influencing that sentiment is consumers’ perception of their own wealth.

The share of those who say their household income is significantly higher than it was a year ago increased 8 percentage points to 27 percent. That is 11 percentage points higher from the same time last year.

In addition, fewer Americans said they were concerned about losing their jobs.

Diana Olick

5 Signs It’s Time To Refinance Your Mortgage

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You’ve probably heard that refinancing your mortgage can save you money. While that’s true in many cases, refinancing needs be done at the right time in order to result in a lower monthly payment and it should be done for the right reasons. Below, we’ve outlined some scenarios in which refinancing makes sense. Read them over to determine if it could be the right move for you.

You can get a better interest rate

Interest rates play a huge role in how much money you pay for your mortgage each month, as well as over the life of the loan. For example, if you put 20% on a $200,000 home with a 30-year loan, at a 4% interest rate, you would pay around $763 per month. At a 4.5% interest rate, you would pay around $810 per month. That’s a difference of $47 per month or $564 per year.

You’ve probably also heard on the news that interest rates are climbing. The reality is, however, that while they’re getting higher than they’ve been over the past few years, they’re still relatively low from a historical perspective. If you bought your house before the recession, you’ll likely be able to get a much better interest rate and you should be able to put some money back in your pocket.

Your credit score is higher

The interest rate you pay on a loan will be determined by two things: the prime rate and your credit score. The prime rate is set by the market and refers to the lowest interest rate at which money can be borrowed, commercially. This acts as the base for your rate. Then, a percentage is added to that rate, based on your borrowing history. The better your credit score, the lower that percentage will be.

If your credit wasn’t so good when you first bought your house, it’s likely that your interest rate is fairly high. However, if you’ve taken some steps to clean up your credit since then, there’s a good chance that you’d now qualify for a better rate. Refinancing will give you a chance to access that better rate and to lower your monthly payment, overall.

Your ARM is about to adjust

Typically, what makes adjustable-rate mortgages (ARM) so attractive is they come with an initial fixed-rate period, during which the interest rate you pay is often lower than you might find with a true fixed-rate option. However, after that initial fixed-rate period is over, your interest rate will begin to adjust at regular intervals. At that point, your rate will fall in line with what’s currently being offered on the market, plus the percentage that’s determined by your credit score.

For example, a 5/1 ARM comes with a five-year fixed-rate period, after which the rate will readjust every year. It’s common to see homeowners look to refinance as they near the end of their fixed-rate period. Depending on the introductory rate they were given and current market conditions, they might be facing the threat of a mortgage payment that’s a lot higher than the one they’re used to making. At that point, it makes sense to either refinance into a fixed-rate mortgage, which would offer more stability, or another ARM.

You need money for a big expense

If you need money for one of life’s big expenses, you can do what’s known as a cash-out refinance. Unlike a regular refinancing situation, with a cash-out refinance, you borrow more money than you currently owe on your home. The difference between what you borrowed and your mortgage amount is then given to you in the form of funds that can be used in any way that you see fit.

Since doing a  cash-out refinancing often comes with a lower interest rate than getting a personal loan or paying with a credit card, people tend to use this method of financing as a way to pay for big-ticket items. It’s not uncommon to see someone choose to do a cash-out refinance in order to pay off medical debt, finance home improvements, or to cover the cost of a child’s college education.

You need to pay less

If you suddenly find yourself needing to pay less on your mortgage, either due to a change in income or added expenses, refinancing can be a good option to help put some money back in your pocket. As stated above, though today’s interest rates are rising, they are still at historic lows. Depending on when you first took out your mortgage, you may be able to get a much better interest rate in today’s market, which will save you significantly.

However, if the change in interest rate is not enough, you could also extend the terms of your loan. Since the amount that you owe on your home is lower now than it was when you first bought it, you’re borrowing less money when you refinance. Spread out over a new loan term, – typically either 15 or 30 years – your monthly payment will be smaller.

Tara Mastroeni

When Is the Best Time to Buy a Home in 2019?

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Knowing the right time to buy house is just as important in the home buying process as knowing what house you’re going to buy, where you’re going to buy it, and how you’re going to buy that home.

Why is the “when factor” so important?

As with most financial endeavors, timing can be everything, and that goes double for landing a dream home. Pricing, interest rate levels, the calendar month of the year, and your own personal cash situation all can factor in on when to buy.

There’s also something of a Zen factor in buying a home.

To a prepared home buyer, there’s often a vibe on the time to purchase a home – conditions like cash and opportunity are optimal, the seller of an attractive property is willing to sell at a good price, and the buyer’s personal life (i.e., newly married, expecting a new baby, or just got a big bonus, for example) is in a place where the time to pull the trigger on a new residence is now – and not next month, or even next week.

Reality also dictates when to buy a new home. For instance, your employer has relocated you cross-country and you start your new post in two weeks. In that scenario, the time to buy really is right now, or you may not have a place to call home for a while.

Let’s take a good look at the “when to buy a home” issue, and break down the elements that dictate the “timing” factor in signing on the home mortgage dotted line.

The Best Times to Buy a Home

There are multiple factors that go into the “when to buy a home discussion.” The following factors are among the most critical, and should be evaluated first.

1. Early in the Year

The calendar is a good barometer for the best time to buy a house.

In general, prices are less expensive at the end of the year, especially in December. Primarily, that’s because the inventory that’s on the market comes from owners who have to sell, and are more willing to negotiate.

That could mean an owner whose company is transferring him or her to another state, and the owner must move fast. Or, the homeowner is hard up for cash, and can’t afford to wait until the traditionally busy spring home selling season.

The takeaway on the late-year calendar issue is this – people who are selling their home in November and December, in the midst of the holiday season, are often selling because they have to. Buyers can take advantage of that scenario and cut a better deal on a home price later in the year.

Waiting until January and February can work in the home buyer’s favor, as well.

Data shows that U.S. home prices cost about 8.4% less in the first two months of the year than they do in July and August, in the midst of the busy summer selling season. That scenario also falls in the “have to sell” as opposed to “want to sell” home seller equation.

2. When Interest Rates Are Low

In the past few years, the Federal Reserve has sustained a policy of raising interest rates to keep inflation low, and the economy stable.

In early 2019, 30-year fixed mortgage interest rates rose to between 4.5% and 5.0%, depending on the lending institution. Only two years ago, when interest rates were much lower, home buyers could grab a 30-year fixed-rate mortgage for under 4%.

That disparity is important and here’s why.

Consider a $300,000 home, purchased with a $60,000 down payment, at an interest rate of 5.0% (generally where mortgage rates are in early 2019.) With a $240,000 mortgage loan, the average monthly payment on the property would be $1,288.37, while the total of 360 monthly payments amounts to $463,813.88. More to the point, total interest paid over the entire course of the loan would be $223,813.88.

But what if you can get the same mortgage loan at an interest rate of 4.0%, like many buyers got two or three years ago, when rates were lower?

In that event, the monthly mortgage payment would amount to $1,145.80, while the total mortgage principal and interest payment over 360 months would amount to $412,486.82. Total interest paid over the course of the loan would be $172,486.82 – representing a total savings of over $50,000 on your mortgage interest payments.

That’s why it’s important to keep a sharp eye on interest rates. All things being equal, and with good credit, a savvy home buyer strikes when rates are lower, and can save a bundle on the deal.

3. When Your Financial Situation Is Optimal

The best time to buy a new home can also be when you’re cash flush, your credit score is strong, and you don’t have a lot of large debts.

This could be the case in several scenarios:

  • You just finished paying off your student loans, and have extra cash for a home.
  • You just received a big raise or bonus, and you have more money for a good down payment.
  • You just got married, and between two spousal incomes, you have more cash for a new home purchase.
  • You just sold your home of 20 years (for example) and with plenty of cash liquidity in the home, you have plenty of money to buy a new home, without having to resort to a big mortgage.
  • You just finished paying off your kids’ college costs, and have extra cash for a home purchase.
  • You just received a big family inheritance, and you have the money to buy a home.

Of course, here are no absolutes in the above cases, as everyone’s personal financial situation is unique.

The larger takeaway still holds though – the more money you have on hand, the better time it is to buy a new home without having to depend too much on a large, interest-heavy mortgage loan.

4. When Inventories Are High

Another great time to buy a home is when there are plenty of homes available on the market, and home sellers need to be price competitive to sell their homes and get them off the market.

Usually home inventories are heaviest in the spring and summer selling seasons, where plenty of families put their homes on the market because foot traffic is heavy and because buyers want to move in before Labor Day, and get their kids ready for school.

Data shows that the highest month for home-for-sale inventories is May, followed by April and June. The months with the lowest inventories are December, November and January, in that order.

Again, you might be able to strike a great deal in the winter months, as owners are more likely to have to sell their homes. But the data shows there are more homes on the market, and more competition on price, in the spring and summer seasons.

5. When the Economy Is Doing Well

It’s worth looking at key economic indicators like housing starts and the U.S. unemployment figures when evaluating the best time to buy a home.

Besides the likely fact that since the economy is doing well, you must be doing well, too, there are other factors in play when studying the economy. That’s particularly the case with two key indicators:

  • New construction. When new home construction is strong, there are more homes to buy, and ample supply almost always relieves pressure on home prices. That’s a good time to act if you have the cash and are ready to buy a new home.
  • Income and employment numbers. When consumer sentiment is strong, consumer income is up, and employment is near maximum levels, buyers typically have more cash to buy a new home, and stronger credit that translates into lower mortgage interest payments. That could be a good time to buy a home, too – when you’re cash flush.

Buy a Home When It Feels Right for You

Again, there are no hard and fast rules here – just the likely (but not guaranteed) tendencies, time lines and trends that combine to make it a good time to buy a home.

Leverage the factors listed above and see if they don’t spark something deep down inside of you, the great American home buyer, and see if you can’t get a great deal on the home of your dreams.

By Brian O’Connell

How to Buy a Home When Mortgage Rates Are Rising

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Mortgage rates have risen about half a percentage point since September. What does that mean for you if you’re buying a home now or plan to buy one soon?

For starters, don’t panic.

When you’re buying a home, the mortgage rate matters, but it shouldn’t monopolize your attention, says Robert Frick, corporate economist for Navy Federal Credit Union. “You shouldn’t focus on the rate and let that scare you into making a hasty decision about buying a house,” he says.

How rising rates affect your monthly payment

The average rate on the 30-year fixed-rate mortgage rose to 4.54% on Feb. 16, 2018, according to NerdWallet’s daily rate survey. It averaged 3.99% on Sept. 26, 2017 — meaning it has gone up more than half a percentage point in less than five months.

While a half-point increase doesn’t have a major impact on the monthly payment, the added cost does add up over time. On a 30-year loan for $200,000, the monthly payment would be nearly $59 more at a 4.5% interest rate than at a 4% interest rate. That adds up to more than $21,000 over 30 years.

What to do when rates rise

Mortgage rate fluctuations have been catching home buyers off guard for generations. Your forebears have developed tried-and-true strategies to cope with rising rates. Here are some things you can do when mortgage rates trend higher:

No. 1: Lock your mortgage rate. With a mortgage rate lock, the lender promises a defined combo of interest rate and points. If you close the home loan by the specified date, the rate can’t go up. You can use this tactic after the lender has approved you for a mortgage for a specific house. Some lenders offer a one-time “float down” option allowing you to secure a lower interest rate if rates go down; this option is more common for construction loans and long-term rate locks.

No. 2: Buy “points” to reduce the interest rate. If you have the cash, you can pay for discount points — in effect, prepaying some of the interest in exchange for a lower mortgage rate. One point equals 1% of the loan amount. The discount you get for one point varies as mortgage rates fluctuate. But as a rule of thumb, paying one point often gives a rate cut of one-quarter of a percentage point.

No. 3: Revise your price range. A higher mortgage rate brings higher monthly payments. When you begin your home search, determine a range of interest rates that will still allow you to afford the type of home you want without stretching your budget past the point of reason. Or, rising rates might force you to adjust your home-price range downward. Start with this loan affordability calculator and click “Edit rate” on the right side.

Why rates are rising now

This recent rise in mortgage rates arrived in two stages:

  • The first happened in the weeks after the passage of tax reform in late December
  • The second happened Feb. 2, 2018, when the January employment report indicated that hourly wages had risen 2.9% compared with 12 months before

The tax cuts and the wage report were both regarded as inflationary, because when people have more money in their pockets, they tend to spend it, driving up prices. (Classic supply and demand.) And higher inflation tends to bring higher interest rates for everything, including mortgages.

On top of that, futures traders expect the Federal Reserve to raise short-term interest rates at least two, if not three, times this year, which could exert upward pressure on long-term mortgage rates.

Frick says businesses and governments around the world are ramping up their borrowing. As they compete with one another to borrow money, they bid up interest rates. This upward pressure trickles down to consumers, who end up paying higher interest rates for everything from credit cards to mortgages.

Are higher rates the ‘new normal’?

Talk to any housing economist about mortgage rates, and you’ll hear that rates have been abnormally low in the decade since the housing crash.

“I remember in the mid-’90s, getting a 7% rate, being happy with that,” says Dean Baker, senior economist and co-founder of the Center for Economic and Policy Research. “The rates we’re looking at today are still, by any measure, pretty low. So it’s basically the economy getting back closer to normal.”

Frick says: “People have gotten kind of lulled into these low rates, and a lot of people think this is normal, but this is not normal. We’re returning to normal, and that’s still going to be a painful process because we’ve gotten used to low rates.”

HOLDEN LEWIS

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