For the Week Ending August 2, 2019
- The Fed meeting ended on Wednesday with a 0.25% cut to its policy rate for the first time since 2008. Mortgage rates were stable on the news.
- Stocks declined after the Fed announcement as many traders were expecting a drop of 0.50%. Falling stock prices can be good for mortgage rates.
- Comments from the Fed Chairman make future rate cuts less certain. Prior expectations were for continued cuts through the end of the year.
- A Realtor.com survey found 42% of spring home shoppers were first-time buyers. Those who hadn’t yet purchased most commonly cited affordability as an issue.
- Pending home sales rose in June, compared both to the previous month and last year. Economists credit favorable economic conditions and low rates.
- According to Case-Shiller, May’s national home prices realized a 3.4% monthly increase. Rising prices and low rates should continue to motivate buyers.
“Another day, a whole ‘nother set of possibilities.” – MacGyver
Last month’s Fed meeting minutes show officials are in no hurry to move interest rates up or down, though investors are looking for a rate cut by year’s end.
Recent escalation in the trade war with China has helped keep rates low and could cause more slowdown in the global economy, also helpful for low rates.
Consumers seem bullish on the economy, as sentiment reached a 15-year high. However, the reading was taken before recent trade tensions with China.
Existing home sales fell in April, likely due to high prices and tight supply at the low end of the market. Recent rate drops should counter high prices moving forward.
New single-family home size increased roughly 8% at the start of 2019, now an average of 2,551 square feet. Median home size also increased 11% to 2,335.
More baby boomers are choosing to age in place, contributing to low inventory across the country. Almost 52% of boomers say they’ll never move.
“There’s nothing I know for sure because I know for sure that things change.”
1. Find a home you like – work with your Realtor to find a home that fits your specific needs and desires.
2. Run comps – Your realtor will run comparables to make sure the price is justified based on other homes in the area. A good Realtor knows how appraisers evaluate value which is critical to getting a great deal.
3. Make an offer – you will need a pre-approval letter from a lender to make an offer (I have referrals if you need!) AND you will need to put earnest money down as collateral which is typically 3% of the home’s offer price. This shows you have “skin in the game,” and allows the seller to feel comfortable taking it of the market for you to continue your investigation. Once your offer is accepted, you have 2 days (excluding weekends) to get your money to escrow.
Most offers, unless it’s a competitive situation, have 3 ways to protect your earnest money. You can get your earnest money back…
- If you are dissatisfied with the inspection OR even get cold feet before the inspection timeline is over.
- If the property doesn’t appraise at or above value.
- If the seller can’t pass on clear title – they have liens.
4. Do an inspection – most of the time I have a 4 day inspection window (real estate doesn’t count weekends if the timeline is 5 days or less).
The inspection contingency allows you to…
- walk away entirely for any reason at all and get your earnest money back
- accept the home as-is
- negotiate based on findings
Inspections run about $600 for the home itself, and if there is a sewer line, you should get that inspected also which is about $285.
5. Lender orders appraisal – the lender orders your appraisal to ensure the home is worth what you are paying so if you default and the home goes back to the bank, they are holding something of value. If it doesn’t appraise you have 3 options.
- The seller can lower the price to the appraised value
- You – the buyer – can make up the difference between the offer price and the low appraised value in cash
- You both can’t agree and you get your earnest money back and walk away
I’m also including a title contingency which means, if they have liens on the property, you can walk away if they can’t clear the liens.
6. Work with title and escrow and lender to get all your docs they need.
7. Close and get keys! This typically happens about 30 days after you get under mutual acceptance. THIS IS A BIG CONGRATULATORY MOMENT!
As many of you have heard, mortgage rates are back down to 4.5% – 4.625% or better (4.25% at a buy down). This is about 0.5% less than the high rates that we had in the beginning of November and that were a big factor on the slowdown of home purchases in December.
Mortgage applications for both purchases and refinances are up and I have heard the percentage of title openings are up by 40%, so with lots more inventory and mortgage rates down, we should have a great Spring! Oh, wouldn’t it be wonderful to not have to write 10-20 offers for your buyers this year!
However, one source I have looked at is predicting that the 30 year fixed rates will to go up to 5.1% this year and 5.6% in 2020, but total home sales will increase slightly while appreciation decreases to a modest (yet normal) 2.9% by 2020. This leads me to believe that buyers will absorb the increase in rates with less “buyer fatigue” due to less of a competitive market. See Forecasted Snapshot below.
But, when we see rates go up .375% to 5%, this feels like home prices going up another 10% to a buyer. So, bottom line right now is, that buyers should be out looking now and sellers should be listing sooner rather than later. What are your thoughts? I would love to hear from you, the front line!
Dry weekend expected: Seattle to get a break from rain, maybe for 5 days
The Cascade Mountain range loom in front of Thursday morning’s sunrise in this view from SeaTac, Washington. The weather forecast calls for decreasing chances of rain with highs in the mid 50s on Friday and partly sunny skies returning over the weekend. (Mike Siegel / The Seattle Times)
Time to emerge from your soggy cocoon. The Seattle area is expected to get its first stretch of dry weather in more than a month.
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