World Financial Distress Lowers Mortgage Interest Rates
World Financial Distress Lowers Local Mortgage Interest Rates
By the end of last week, with world financial markets quavering and Wall Street chalking up the worst start for any year ever, you’d think that the area’s real estate outlook would be as worrisome as the rest of the economy’s.
Not necessarily.
For sure, there was enough to worry about. If world trade levels continue to unravel, it’s hard to see how the U.S. economy doesn’t head south—and that’s usually bad news for anyone trying to sell anything. For local home owners planning to add their properties to this spring’s listings, seeing the stock market inaugurate the year with a full-blown correction would normally be unnerving.
Yet there were two outside factors that worked to counteract such a reaction—and at least one of them had not been widely anticipated.
The first factor is the textbook connection between financial assets (Wall Street’s stock in trade) and real goods (local real estate is, if anything, the definition of ‘real’). It’s an inverse correlation. Not always, but often, the more insecure “securities” become, the more money tilts toward real assets: precious metals, commodities, real estate, agricultural land and oil. If for no other reason than the unanimous hand-wringing of the economic commentators, that should make holdings in property a more desirable place to park assets. At least in theory.
The second factor was the widely unforeseen one. By last Friday, Mortgage News Daily’s Matthew Graham was writing about how investors were fleeing riskier assets “seeking safer haven” in the bonds that back mortgages. The result was one that affected local mortgage interest rates—one of the key drivers of affordability for area home buyers. “Mortgage rates surged lower,” Graham noted, “at the quickest pace of the year.”
Ever since the Federal Reserve’s decision to tiptoe into the first interest rate increase in many years, nearly everyone had predicted a slow rise in area mortgage interest rates—one likely to continue throughout the rest of 2016. Instead, by the end of the week, commentators were reporting mortgage rates approaching 7-month lows! It really was a head-spinner: 7 months ago was long before the Fed raised that supposedly crucial Fed Funds rate. And now the commentators were casting doubt on when the next rate hike would take place…if at all…
Lest we fall into the trap of thinking we can predict what lies ahead, one distant mortgage branch manager, after being quoted as saying that the year has been “great for rates” so far, admitted “Things could change quickly in markets like this.” That’s for certain—but for the moment, area mortgage interest rates are one strong factor that makes buying or selling a more doable prospect than would have seemed to be the case just a month ago— as well as a great reason to stop putting off that call to my office!
Do you want top dollar for your home? Fix it right. Price it right.
Today’s real estate market is an alien landscape compared with what it was ten years ago, when it seemed as if a seller could just plant a sign in the front yard and wait for competing offers to roll in. This summer’s real estate scene is equally unlike that of five years ago, when many properties could languish for long months with few showings and fewer legitimate offers.
It’s been a welcome return to a more stable, predictable real estate climate, especially in the San Gabriel Valley. With sale prices rising at a sustainable rate and the average days on market making a return to levels approaching historical norms, real estate participants—both buyers and sellers—gain confidence on what to expect on both sides of home selling transactions. Particularly for local homeowners who are planning to list, that means that their properly prepared property is much more likely to garner a reasonable offer within a reasonable timeframe.
This outcome is only likely when sellers prepare their properties in a deliberate manner. Fix up, de-clutter, renovate, clean—all the common tips that are touchstones for making a strong positive first impression apply. Doing it all before listing is a best practice, just as waiting for buyer feedback to tell you what’s awry is not. Be your own Devil’s Advocate when it comes to repair and maintenance issues as you assess whether you should sell the property as-is, or order repairs. Careful, open-eyed preparation has real value. It makes it much less likely that a home inspection will catch everyone by surprise. You put yourself in a solid negotiating position when your home hits the real estate scene as ready as you can make it.
Preparing the property is Job One, but Job One-and-a-Half is preparing yourself for what you are hoping to achieve. Make sure you have penciled out what the bottom line financial outcome is going to be, which includes what you owe, what price your home is likely to bring, and how the ensuing costs will work out as you move to your next destination. Your agent should be able to give you a good estimate on your costs, so don’t be afraid to ask.
The biggest unknown is, of course, your property’s ultimate sale price. While online valuation models like Zillow’s are easy to use, they can yield results that are so wide of the mark as to be seriously misleading. Since these sites use zip codes to value properties, the benefits of a prime location or the negatives of neglect of a property are not taken into consideration. Have your real estate agent create the up-to-the-minute comparative market analysis (CMA) which will set out how homes similar in location and amenities have performed in recent months. Those listing and sales prices are the strongest indicators of how your home is likely to fare in this market—and provide a realistic pointer to what your asking price should be.
Today’s consumers are inundated with information online. With 94% percent of real estate buyers searching via their iPhones, notepads, computers, and all the rest of our electronic paraphernalia, increasingly the tendency is to make quick decisions, often based on price and photos. In a world where consumers swipe or click through hundreds of pieces of information a day, it’s much more easy to be overlooked if your price seems out of line. That puts a premium on right-pricing the first time out. It’s also not a bad idea to have a firm idea in your own mind of your absolute rock-bottom number should be—one that makes sense when your long term goals are taken into account.
2016 Real Estate Predictions
2016 Real Estate Prediction Roundup Buoys U.S. Observers
Given that the experts have often been as wrong as they were right about predicting at least one real estate trend for 2015 (mortgage interest rates), it’s fair to ask why it’s worthwhile to consult them regarding the coming year. Fair enough. The answer is twofold.
First off, for anyone who will be buying or selling a San Gabriel Valley home in the coming year, much could ride on the wider market factors that influence buyer and seller attitudes.
The other part of the answer is because it’s fun. Trying to take a peek into the future gathers a crowd every time: just tune into any cable TV news or feature show and start counting the experts prognosticating. Besides, it’s even more fun, later, to ridicule the experts who were way off.
But putting together a roundup of real estate predictions for 2016 involves some hard virtual pick-and-shovel work. To begin with, you have to eliminate all the real estate predictions for 2016 that emerged more than a month ago. A month may not seem like such a long time, but in the real estate prediction business, it can turn into too long (especially if what you predicted for 2016 is already heading in the wrong direction). At this juncture, that hasn’t befallen any of these prominent national real estate prediction sources area readers can note:
- Realtor Magazine – ‘Normal’ is coming. Healthy growth in home sales and prices at a more normal pace
- CoreLogic — Interest rates will gradually move higher but dollar volume of single-family mortgage originations will fall approximately 10% [reason given: refis will fall]
- Housingwire — Moderate growth in housing prices and sales (3.5%-4.5%); easier credit; more first-time home buyers
- BofA Merrill Lynch Global Research—Further expansion in U.S. housing. The “good news for anyone planning to sell a home in 2016” is that existing home sales could increase by as much as 5%; good news for buyers: a slowdown in home-price appreciation
- Trulia — “general consensus at the national level…another good year” with hot markets in the West and Northeast cooling down; markets in the South and Midwest “could experience an uptick” in home sales
The researchers and prognosticators behind these projections seem to be in lock-step, at least as we launch into the new year. Whether or not you will be entering local real estate any time soon, it’s certainly good news that the serious folks who forecast future trends agree that conditions look to be settled, stable and hospitable in the coming year.
There is one thing I know you can count on: I’ll be standing by throughout 2016, ready to assist with all your Monrovia and San Gabriel Valley real estate needs!