Friday, June 07, 2013

Rising Rates and The Market

Well, it was going to happen some time. The only questions were: "when" and "how far". "When" took place the past week, with 30 year fixed rates rising, on average, to 3.9 plus. That's quite a jump from where it was last summer when it hit the 3.5 range, and then proceeded to drop even further. As the economy has strengthened, there has been pressure for an upward move in mortgage rates. However, the one thing that gave it heavy impetus this past week was a somewhat innocuous comment from the Fed that while they weren't doing it now, at some point in the future they would reduce or stop their policy of Fed action to help keep rates down. The market, always ready and willing to jump off a cliff if anyone even hints that there is a cliff nearby, immediately did its expected over-reaction and rates took off, relatively speaking. However, now that we're in the 3.9 plus range, let's pause for a minute rather than panic, and think about this interest rate level.
Yes, this is quite a bit higher than a year ago--it's even higher than a couple of months ago. BUT, and that's a major "but", it's still ridiculously low when compared to where it has been in the not too distant past. Rates in the early 1980's were over 21%! Rates even as recently as a few years ago exceeded 7%. The Fed has said for quite some time now that they would continue to support low rates as a method of helping to stabilize and grow the economy, at least, they indicated, through the end of 2014. The market may push rates upward, but, assuming the Fed doesn't change its announced plans, they should not skyrocket.
So, what does one do? Well, if you're a buyer, this recent uptick provides a valuable reminder that rates will climb, and that there is no better time than to begin, or step up your search. For every quarter point of interest, the monthly payment increase $ per 100,000. So, if you buy a home for $1 million, what costs you now $3877 per month  on a $800,000 mortgage priced at 4.125%, will be $3994 per month on the same mortgage priced at 4.375%. That's an extra $117 each and every month on that mortgage out of your pocket! In a year, that amounts to $1404 more than today's rate would be. Over 30 years, the total comes to $42,120. That could pay for a lot of things--a year's college tuition, a few nice vacations, a nice addition to your IRA, a new car--whatever you want to do with it. The point here is: the longer you wait, the more it will cost you to buy a house, even if prices weren't continuing their recent rapid rise--and they are!
If you're a seller, the message also is act sooner rather than later. There is still too little inventory in the market, even with a slight rise in the number of people listening to me and finally getting their properties on the market. Too small an inventory available for hordes of buyers will continue to push prices higher, but the arrival of increased mortgage rates may mute that somewhat, reducing at least somewhat the number of folks vying for any particular property. So, if listing your home is a thing you want to discuss, but you aren't sure of its value, or how to market it--don't worry! Let us solve all your challenges. Call us--we can help you sell for the most money in the shortest period of time! In the past two weeks, we have listed one home in Mill Valley, received 21 offers for it and had it close in 6 DAYS almost 30% over asking price. In another case, we put a Mill Valley home on the market and went into escrow with an excellent offer exactly a week later, with a couple of other buyers also giving serious consideration to the home before escrow opened.
Our numbers: Peter: (415) 279-6466; Jane: (415) 531-4091.


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