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Archive for the ‘In the News’ Category

Buyers Scramble As Interest Rates Rise

Yesterday, MSNBC ran an AP story about the effect of rising interest rates on a person’s ability to buy a home. I’ve spoken at length on this subject over the years and I’m happy to see the media is catching on. The bottom line is that it’s important for potential buyers to understand how quickly they can get priced out of the housing market with each uptick in interest rates. The following article does a good job of explaining this concept:




 

MSNBC.com

Homebuyers scramble as mortgage rates rise

Higher payments could price many would-be buyers out of the market

By ADRIAN SAINZ and ALAN ZIBEL

The Associated Press

updated 1:50 p.m. PT, Wed., April 7, 2010

// WASHINGTON – The era of record-low mortgage rates is over.

The average rate on a 30-year loan has jumped from about 5 percent to more than 5.3 percent in just the past week. As mortgages get more expensive, more would-be homeowners are priced out of the market — a threat to the fragile recovery in the housing market.

And if you wanted to refinance at a super-low rate, you may have missed your chance. Mortgages under 4 percent are still available, but only for loans that reset in five or seven years, probably to higher rates.

Rates are going up because of the improving economy and the end of a government push to make mortgages cheaper.

For people putting their homes on the market this spring, rising rates may actually be a good thing. Buyers are racing to complete their purchases and lock in something decent before rates go even higher.

“We are seeing some panic among potential buyers who have not found houses yet,” said Craig Strent, co-founder of Apex Home Loans in Bethesda, Md. “They’re saying: Man, I should have found a house three weeks ago or last month when rates are lower.”

Decline in purchasing power
It’s all about affordability. For every 1 percentage point rise in rates, 300,000 to 400,000 would-be buyers are priced out of the market in a given year, according to the National Association of Realtors.

The rule of thumb is that every 1 percentage point increase in mortgage rates reduces a buyer’s purchasing power by about 10 percent.

For example, taking out a 30-year mortgage for $300,000 at a rate of 5 percent will cost you about $1,600 a month, not including taxes and insurance. But the same monthly payment at a rate of 6 percent will only get you a loan of $270,000.

Good economic news is the first reason rates are rising: U.S. government debt, a safe haven during the recession, is losing its appeal as investors turn to stocks and riskier corporate bonds.

Lower demand for debt means the government has to offer a better interest rate to sell its bonds. The yield on the 10-year Treasury note, which is closely tracked by mortgage rates, has hovered around 4 percent all week, the highest since June.

The second reason is the Federal Reserve. Last week, the Fed ended its program to push mortgage rates down by buying up mortgage-backed securities. When demand from the central bank was high, rates plummeted to about 4.7 percent for much of last year. And business boomed for mortgage lenders as homeowners raced to refinance out of adjustable-rate mortgages and into fixed loans.

As of Wednesday, the Mortgage Bankers Association put the national average for a 30-year fixed-rate mortgage at 5.31 percent. One week ago, it was 5.04 percent.

6 percent rates likely
Many analysts forecast rates will rise as high as 6 percent by early next year. If they go much higher, the already shaky housing recovery could stall. And that could slow the broader economic rebound.

In a normal market, with home prices steadily rising, a jump in rates doesn’t cause a big dip in demand. That’s because people know their homes will eventually rise in value, and are willing to accept a higher mortgage payment.

But now home prices are flat nationally and still falling in some places. Potential buyers are nervous about jumping in.

“In this environment, any rise in mortgage rates does significant damage because people don’t think they’re going to get their money back” if prices fall, said Mark Zandi, chief economist at Moody’s Analytics.

For people who bought their first home in the 1980s, when rates stayed over 10 percent for several years, paying 6 percent for a home loan may seem like a steal. But it’s coming as a shock to many first-time homebuyers this spring.

In Overland Park, Kan., Sirena Barlow checks mortgage rates online once a day. She’s been shopping for a something around $130,000 and wants to sign a contract this month, to take advantage of a tax credit for first-time homebuyers.

Barlow, a legal assistant, has already told her landlord she’s moving, so her stress level is high. Her real estate agent, Michael Maher, has been doing his best to calm Barlow and other clients, but rising rates are making them anxious.

“It’s like giving hyperactive kids ice cream,” he said. “It has really taken the ones who are focused on buying and amped them up a little bit.”

Copyright 2010 The Associated Press.

Written by Lennox

April 8, 2010 at 9:43 am

Seattle and Tacoma Make Smart Money’s List

Smart Money recently published a list of the five cities they predict will be the top performers in the 2010 housing market. And it’s good news for the Puget Sound region because Seattle and Tacoma both made the cut. Several factors went into determining the cities, including the labor market, foreclosure rates, home prices, and the number of adjustable loans that are due to reset in the coming year. They make a good point that the bar is not set incredibly high given the market of late, but it’s certainly encouraging none-the-less to see two Puget Sound cities on the list (Tacoma actually ranks #1). You can read the entire article here: http://realestate.msn.com/article.aspx?cp-documentid=23191526

PS: I recently read another article on CNN Money that has a similar list made up of mid and smaller sized cities; both WA and OR are well represented. Here is a link to the complete story and list:  http://money.cnn.com/magazines/moneymag/moneymag_realestate/2010/biggest_gains.html

Written by Lennox

March 25, 2010 at 11:58 pm

John L. Scott Jumps On Board With Zillow

I’m pleased to announce that John L. Scott is now partnering with Zillow.com, providing additional nationwide marketing exposure for all John L. Scott listings. The way this works is through an automatic feed that sends current listing information from JohnLScott.com to Zillow.com.

Now, every seller who lists their home with John L. Scott will not only have the visibility of over a million JohnLScott.com user visits a month, but also the more than nine million people who visit Zillow.com each month. In addition to this, John L. Scott’s listings will also appear on the Zillow iPhone app, which is the number one real estate application in the iTunes Store.

Zillow joins our national marketing effort which also includes having our listings featured by Leading Real Estate Companies of the World and on realtor.com which sees the most traffic of any real estate website in the nation.

A big thanks to the John L. Scott team members who worked on this project! For more information, you can visit: http://photos.realestateadmin.com/imageurl/CMS/106/zillow.pdf

Written by Lennox

March 15, 2010 at 11:11 am

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