Mortgage Rates • July 21, 2023

Explaining Today’s Mortgage Rates

by Drew Jones

As of today, the 30-year fixed rate is at 7%. But what will happen to rates in the future?

If you’re following mortgage rates because you know they impact your borrowing costs, you may be wondering what the future holds for them. Unfortunately, there’s no easy way to answer that question because mortgage rates are notoriously hard to forecast.

But, there’s one thing that’s historically a good indicator of what’ll happen with rates, and that’s the relationship between the 30-Year Mortgage Rate and the 10-Year Treasury Yield. Here’s a graph showing those two metrics since Freddie Mac started keeping mortgage rate records in 1972:

As the graph shows, historically, the average spread between the two over the last 50 years was 1.72 percentage points (also commonly referred to as 172 basis points). If you look at the trend line you can see when the Treasury Yield trends up, mortgage rates will usually respond. And, when the Yield drops, mortgage rates tend to follow. While they typically move in sync like this, the gap between the two has remained about 1.72 percentage points for quite some time. But, what’s crucial to notice is that spread is widening far beyond the norm lately (see graph below):

If you’re asking yourself: what’s pushing the spread beyond its typical average? It’s primarily because of uncertainty in the financial markets. Factors such as inflation, other economic drivers, and the policy and decisions from the Federal Reserve (The Fed) are all influencing mortgage rates and a widening spread.

Why Does This Matter for You?

This may feel overly technical and granular, but here’s why homebuyers like you should understand the spread. It means, based on the normal historical gap between the two, there’s room for mortgage rates to improve today.

And, experts think that’s what lies ahead as long as inflation continues to cool. As Odeta Kushi, Deputy Chief Economist at First American, explains:

“It’s reasonable to assume that the spread and, therefore, mortgage rates will retreat in the second half of the year if the Fed takes its foot off the monetary tightening pedal . . . However, it’s unlikely that the spread will return to its historical average of 170 basis points, as some risks are here to stay.”

Similarly, an article from Forbes says:

“Though housing market watchers expect mortgage rates to remain elevated amid ongoing economic uncertainty and the Federal Reserve’s rate-hiking war on inflation, they believe rates peaked last fall and will decline—to some degree—later this year, barring any unforeseen surprises.”

Bottom Line

If you’re either a first-time home buyer or a current homeowner thinking of moving into a home that better fits your current needs, keep on top of what’s happening with mortgage rates and what experts think will happen in the coming months.

Real Estate News • July 12, 2023

Momentum Is Building for New Home Construction

by Drew Jones

If you’re in the process of looking for a home today, you know the supply of homes for sale is low because you’re feeling the impact of having a limited pool of options. And, if your biggest hurdle right now is that you’re having trouble finding something you like, don’t forget that a newly built home is a great option.

As a recent article from the National Association of Realtors (NAR) says:

“Home buyers continue to be met with limited housing options during what’s typically the real estate market’s busiest season. . . . The current supply of existing homes is about half the level it was in 2019 . . . Meanwhile, the market for new construction is a bright spot.”

Here’s a look at a key metric that shows just how much new home construction is ramping up nationwide. It’s called new residential completions. Basically, completions are newly built homes that are finished and ready to move into.

The graph below uses data from the Census to show the trend of new-home completions over time, including the long-term average for the number of finished housing units (shown in black on the graph):

As you can see on the left (shown in orange), leading up to the housing crash, builders exceeded that average. The result was an oversupply of homes on the market, so home values declined. That was one of the factors that led to the housing crash back in 2008.

Since then, the level of new home construction has fallen off, and builders haven’t built enough homes to meet the historical average (shown in red). That underbuilding left the housing market with a multi-year inventory deficit. And, that deficit is part of what makes inventory so low right now.

But, here’s the good news. The green on the right shows that according to the latest report from the Census, builders are matching the long-term average right now. And that means they’re bringing more newly built homes to the market than they have in recent memory.

And residential starts and permits are also gaining momentum. Starts are homes where the construction has officially kicked off. Permits are homes where builders are planning to break ground soon. Since both are up, it’s a sign there are even more newly built homes coming soon.

What This Means for You

More newly built homes in various stages of the construction process means your pool of options just got bigger. If you’re looking to move right now and timing is important to you, reach out to a local real estate professional to explore the homes that were recently completed in your area. If construction is done on those homes, you should be able to move in quickly.

But, if you can wait a bit and the idea of customizing a home from the ground up appeals to you, ask that same agent about the homes in your area that are in the process of being built. If you buy a home that’s still in the works, you can help pick the features and finishings along the way. And when none of the homes you’ve looked at so far are to your liking, being able to tailor one to your taste may be your best option.

Either way, a trusted real estate agent is a crucial part of the process. They’ll know exactly what’s available in your area and can base their recommendations on your unique needs, desired neighborhoods, and more.

Bottom Line

So, if you’re having trouble finding a home you like while inventory is so low, it may be time to consider looking into new-home construction. If you’d like to start that conversation, let’s connect so you’re working with an expert on what’s available in our area.

Selling Your House • July 10, 2023

3 (Easy to Fix!) Reasons Your Home May Not Be Selling

by Drew Jones

When it comes to selling your house, you want three things: to sell it for the most money you can, to do it in a certain amount of time, and to do all of that with the fewest hassles. And, while the current housing market is generally favorable to sellers due to today’s limited housing supply, there are still factors that can cause delays or even prevent a house from selling.

If you’re having trouble getting your house to sell in today’s sellers’ market, here are a few things to think about.

Limited Access – If You Can’t Show It, You Can’t Sell It.

One of the biggest mistakes you can make as a seller is limiting the days and times when buyers can view your home. In any market, if you want to maximize the sale of your house, you can’t limit potential buyers’ ability to view it. Remember, minimal access equals minimal exposure.

In some cases, some of the most motivated buyers may come from outside of your local area. Because they’re traveling, they might not have the luxury to adjust their schedules when faced with limited options to tour your house, so make it available as much as possible.

Priced Too High – Price It To Sell, Not To Sit.

Pricing is a critical factor that can significantly impact your home sale. While it’s tempting to push the price higher to try to maximize your profit, overpricing can deter potential buyers and lead to your home sitting on the market longer.

Jeff Tucker, Senior Economist at Zillow, notes:

“. . . sellers who price and market their home competitively shouldn’t have a problem finding a buyer.”

Not to mention, buyers today have access to a number of tools and resources to view available homes in your area. If your house is priced unreasonably high compared to similar homes, it may drive potential buyers away. Listen to the feedback your agent is getting at open houses and showings. If the feedback is consistent, it may be time to re-evaluate and potentially lower the price.

Not Freshened Up Before Listing – If It Looks Good, It’ll Make a Good Impression.

When selling your house, the old saying “you never get a second chance to make a first impression” matters. Putting in the work on the exterior of your home is just as important as what you stage inside. Freshen up your landscaping to improve your home’s curb appeal so you can make an impact upfront. As an article from Investopedia says:

“Curb-appeal projects make the property look good as soon as prospective buyers arrive. While these projects may not add a considerable amount of monetary value, they will help your home sell faster—and you can do a lot of the work yourself to save money and time.”

But don’t let that stop at the front door. By removing personal items and reducing clutter inside, you give buyers more freedom to picture themselves in the home. Additionally, a new coat of paint or cleaning the floors can go a long way to freshening up a room.

For all of these things, lean on your real estate agent for expert advice based on your unique situation and feedback you get from buyers throughout the process.

Bottom Line

If your house isn’t getting the attention you feel it deserves and isn’t selling in the timeframe you wanted, it’s time to ask your trusted real estate agent for advice on what you may need to revisit or change in your approach. To get those expert insights, let’s connect.

Home Financing • January 31, 2023

4 Important Home Financing Questions in Today’s Market

by Drew Jones

The mortgage process can be complex, and higher interest rates have raised many questions.

To give you the best information, I asked economics expert and mortgage consultant, Adam Boss, from Penrith Home Loans about interest rates and opportunities in today’s market.

Before I jump into my Q & A with Adam, I’ll cover just a couple basics:

A mortgage is a loan that helps you finance the purchase of a home. When you take out a mortgage, you agree to repay the loan, plus interest, over a set period of time, usually 15-30 years.

Interest Rates play a crucial role in the cost of your mortgage. The higher the interest rate, the more you’ll pay in interest charges. Higher rates can make it much more challenging to afford a home, especially for first-time buyers.

So, if you’re in the market to buy, knowing all your options is key.

Adam Boss is here to help navigate some of the options. He’s our local economic whiz with a boatload of experience in home financing. For the past 20 years, Adam has collaborated with clients like you and me on all things mortgage-related. So, let’s get right into it:

Question: Can I buy down my mortgage rate with points?

Adam: A borrower can often secure a lower interest rate by paying a fee.

This fee is based on a percentage of the loan amount (points). This fee can be paid by the buyer or paid through a credit from the seller (often in exchange for a higher purchase price).

This strategy can lower your monthly payment and increase your buying power.

Q: Would an ARM (Adjustable Rate Mortgage) be a good fit for me?

Adam: An ARM may be a good fit for some buyers. In general, ARMs offer a lower rate than a traditional 30-year fixed mortgage.

This can be for the first 3, 5, or 10 years before the rate will adjust. This savings may be a good fit for some clients, but it is important to understand the risks once the initial period has passed.

The rate could adjust up or down depending on the market environment at that time.

Q: When can I lock in my interest rate, and how long will the lock last?

Adam: Most of the time you would lock in your interest rate once you have an agreement to purchase a home. The lock should extend to the closing date or beyond. The most common lock period is for 30 days.

You might also be able to lock in your rate during the preapproval phase. If your closing is delayed, you can usually pay a fee to secure more time.

Q: What’s the difference between a prime interest rate and my interest rate?

Adam: A “Prime Rate” is established banks to lend money to their customers for things like credit cards, equity lines, and other consumer loans. The prime rate is established by the rate that banks borrow from the Federal Reserve.

The bank will then lend out money with a margin added to the Federal Funds rate to make a profit. The current policy of the Federal Reserve is to raise the Fed Funds rate to fight inflation.

Mortgage rates, however, are set for the most part by the bond market. Since homeowners tend to stay in their homes for longer periods of time, the 10-year Treasury (or 10-year Bond ) sets the market for mortgage rates. This is an important difference to understand if you are considering buying a home.

Thanks for all the info, Adam!

If you’re interested in working with Adam, he’s a great guy and super knowledgeable. Click here for Adam’s contact info.

And at any rate, I’d love to hear from you. Please call or email me anytime for real estate advice or questions.

Email me at drew@windermere.com or call me at 206-619-2739.

Stay informed and up-to-date with my weekly newsletter, Drew’s News. Email me at drew@windermere.com to subscribe!

Market Update • January 13, 2023

5 Things To Know About Seattle Real Estate Today

by Drew Jones

Hey there! We’re fully into 2023 and it’s exciting to see what the Seattle real estate market has in store for us. I’m sure you’re as curious as I am about what this new year will bring.

I’m getting tons of questions about things like rising interest rates, the (soul-crushingly expensive) affordability of Seattle homes, and opportunities in the market.

While we can’t be sure how things will unfold, I’d love to give you a quick snapshot of the current market and what experts predict for 2023.

Whether you’re just keeping an eye on things or ready to jump into buying or selling, here are 5 important things to know about today’s real estate market.

1. Interest Rates are Expected to Drop

High-interest rates are stretching Seattle’s affordability to the max. Monthly mortgage payments have skyrocketed because of the rising rates, but economists predict interest rates will start to drop (fingers crossed) during the course of 2023.

Chief Windermere Economist Matthew Gardner says, “I expect the Fed to start pulling back from their aggressive policy stance, and this will allow rates to begin slowly stabilizing.”

2. Real Estate in Seattle is Cooling Down…

Lately, we’ve seen the Seattle real estate market cool down a bit, which can be attributed to factors like tech layoffs (creating feelings of economic and job uncertainty) and high-interest rates. So, some people are choosing to hold off on buying or selling for now.

As we head deeper into 2023 and move closer to spring, not only can our sump pumps look forward to a breather, but experts forecast a pick-up in real estate activity too. While inventory is still low, we’re starting to see more homes come on the market. This uptick in inventory is likely to continue into the new year.

3. Seattle Real Estate Finds Balance in 2023

We’re headed into a more balanced real estate market in 2023. Matthew Gardner says, “while a buyer’s market in 2023 is unlikely, I do expect a return to a far more balanced one.”

So, if you’re in the market to buy or sell, you’ll most likely experience a slower, friendlier, and more reciprocal transaction. Buyers may feel less pressure to give things up like inspection and financing contingencies to win offers. On the other hand, sellers may still find that the high home prices and strong demand in Seattle work in their favor.

4. The Seattle Trend is To Be Different (Of Course!)

Real estate trends in Seattle and the surrounding areas vary, dramatically in some cases, from city to city. For example, Issaquah’s median sale price jumped 18.8% from October 2021 to October 2022, whereas Kirkland’s median sale price decreased 4.5% over the same period of time.

Seattle and the Greater Seattle areas have an interesting mix of statistics, and it’s helpful to be aware of the different trends when buying or selling this year. If you’re interested, I found this article from Forbes super helpful.

5. When Will Seattle’s House Prices Go Down?

When it comes to house prices, experts predict that they will decrease somewhat in 2023, but not enough to make housing significantly more affordable due to high mortgage rates.

As always, it’s worth exploring financing options and opportunities if you’re planning to buy or sell in 2023.

And that’s where I come in! I want to help you find the best opportunities and choices tailored to your specific real estate needs and wants. You can email me at drew@windermere.com or call me at 206-619-2739. I look forward to connecting with you.

Stay informed and up-to-date with my weekly newsletter, Drew’s News. Email me at drew@windermere.com to subscribe!