Don’t Let the Interest Rates Stop You

Don’t Let the Interest Rates Stop You

Interest rates jumped up again. Is it time for us to just wait until spring and hope they start to come back down? 

If you are a buyer, the real estate market offers you a great opportunity right now! Don’t be fooled by the higher interest rates – this is an awesome market for you to buy in! Why? Because all of the people who you would have been competing with are afraid of the interest rates and sitting by the sidelines.  This allows you to have a competition – free opportunity to buy a home!  Just six months ago, buyers would have been overjoyed to have an opportunity to buy a home without competition, to have had an opportunity to have had an offer accepted on the first home they offered on instead of their seventh, to have been able to purchase a home at asking price rather than asking price plus 10 percent!  Do not miss this golden opportunity – there are some very nice homes available right now. You can refinance later with a convenient no cost refinance loan – get the house now! Once rates start to come back down, the buyers (who have all been sitting by the sidelines with you) will come racing back into the market, and bidding wars will be back. Make the smart move – buy now.

And as a side note, I do not feel we will see a “crash” in prices.  Inventory remains at record lows and those homes that are selling continue to increase in their sales prices to new record highs, despite the increasing rates.  This is not 2008 – I am not anticipating any “deals” to be had this spring – if anything the natural increase in the buyer pool we see every spring will boost prices because of the extreme lack of inventory.  Feel free to reach out to me and we can strategize on how you can take the most advantage of the current real estate market while you still can!

A home’s value is set by the market.  Value is always determined by what a buyer is willing to pay for your home.  Many factors come into play in setting that value.  Market value reflects quantitative factors such as:  # bedrooms, # bathrooms, # garages, placement of garages (attached or integral), lot configuration (large and functional back yard?  Cliff lot?), location of the home generally, age of roof, age of mechanicals.  Market value also reflects more qualitative items:  how updated is your home, and is it all new, or just refreshed?  What is the floorplan (open concept?) What are your wall colors?  There is always a range that value will land in, which we call the range of reasonable.  There is no ONE price at which a home will sell.  If there are many buyers seeking a home like yours, it will sell at the top of the range of reasonable.  If there are not, it will take longer to sell and may sell a bit lower in the range.  What the market does not consider in setting a value of a home is what you need from the home.  In 2008, many homeowners had used their homes as ATMs and withdrawn large sums of money for educations, vacations and cars.  When the market softened, there was not enough equity for them to be able to sell their homes and not be in a short sale situation. This fact, that a homeowner over-extended themselves on mortgages, is not the least bit relevant to market value.  The market is also not going to consider what you plan to do next.  If you plan to move to Los Angeles to be closer to family and are finding that the Pittsburgh market is not going to yield you enough to be able to buy in L.A., you will need to turn to other investments to make up any difference.

We are in a very robust market – your home is far more likely to garner more now – whatever that may be – than it could have in the past.   Forecasters are also suggesting that values will soften by year end.  My crystal ball is out for service, but what I can tell you is that every hot market eventually softens.  Waiting out the market so that you can get a price that the market is unprepared to deliver at this time may have you waiting many, many years, and during that time you may need to invest even more in your home in order to deliver to the market what it needs in order to deliver an acceptable sale to you. 

QUICK SEARCH

    I’m ready to answer any questions you have regarding your real estate needs.
     
     
    Kathe Barge, CRS, ABR, CNE, SRES
    Associate Broker
    HOWARD HANNA
    REAL ESTATE SERVICES
    401 Broad Street
    Sewickley, PA 15143
    Cell: 412-779-6060
    Office: 412-741-2200 x238
    kbarge@howardhanna.com

    Understanding the High-End Market

    It seems that high end home sales continue to lag as compared to the rest of the market.  Thoughts? 

    Our high-end market in the Quaker Valley School District is moving more slowly than the rest of the market, and this is particularly apparent when homes under $1 million are selling fast and at premium prices.  Speculation abounds as to why that is the case.  Many attribute that to the fact that our tax system was restructured several years ago to allow for a larger standard deduction and lower marginal rates but at the cost of limiting the deduction for property and income taxes to a combined total of $10,000.  Our property taxes are high in Western PA as compared to many parts of the country and that will impact expensive homes, with the possibility of the highest taxes, the most.

    Buyers may need a general mindset adjustment. As a whole, our income taxes in PA are lower than the majority of states.  Our earned income tax here in Sewickley is only 1%, compared to 3% in the city of Pittsburgh. We do not have sales tax on clothes or food as many states do.  So while our property taxes may be on the high side, we are in a far better position overall than many residents of metropolitan areas with similar advantages to Pittsburgh.  Property taxes are just a cost of living, and if your bucket list includes the amenities of a higher-end home, the taxes are what they are.  The sooner our marketplace accepts this reality, the sooner our higher end homes will start selling again!

    However, other high-end Pittsburgh markets are selling more readily than ours and while this article is not a political commentary, the reason most often cited by high-end buyers choosing against Quaker Valley is the school situation.  No one likes controversy – why move into it if you don’t have to?  If we can make unified forward progress, that may buoy our high-end market.

    In the meantime, our middle and lower end market segments are moving fast and often with many offers.  Homes in these segments that are priced appropriately for condition and amenities are often selling with multiple offers, and in a very short amount of time.  These market segments are accelerating quickly in their pricing.  Waiting for the home to show up on your Zillow search is likely going to be too late.  If a move is something you’ve been considering, give me a call and we can strategize on how you can best meet your needs in this complex market we find ourselves in! 412.779.6060

    QUICK SEARCH

      I’m ready to answer any questions you have regarding your real estate needs.
       
       
      Kathe Barge, CRS, ABR, CNE, SRES
      Associate Broker
      HOWARD HANNA
      REAL ESTATE SERVICES
      401 Broad Street
      Sewickley, PA 15143
      Cell: 412-779-6060
      Office: 412-741-2200 x238
      kbarge@howardhanna.com

      Impact of Interest Rates

      How are rising interest rates impacting home sales? 

      Rising interest rates are definitely impacting buyers.  Many buyers are having to step down their affordability levels and focus on homes that are less expensive homes than those they might have considered three months ago.  If you are a buyer and have been looking for more than a month, it’s a good idea to check in with your lender and request a new pre-approval and cost estimate so that you can be comfortable with what your payments will look like at the higher rates. 

      For most sellers, however, the rising interest rates are not impacting home prices. We continue to sell homes astonishingly quickly and at record prices.  The pool of buyers considering a home may be different, but their number is not less.  At the present time, it does not appear that the notable increase in interest rates has impacted our market in the “affordable” ranges at all. 

      However, the high-end market (over $1.5M) has always been much more susceptible to broader market factors such as interest rate increases.  There has been a notable (and hopefully temporary) decrease in high-end activity in recent months and rising interest rates may be playing a key role in that decline (along with the volatile stock market and other concerning world events). If your home falls into our high-end market, you may need to exercise patience with our market as your time on the market will likely be more in line with historic norms as compared to the current “flash sale” market we are experiencing in the $1.3M market and below.

      QUICK SEARCH

        I’m ready to answer any questions you have regarding your real estate needs.
         
         
        Kathe Barge, CRS, ABR, CNE, SRES
        Associate Broker
        HOWARD HANNA
        REAL ESTATE SERVICES
        401 Broad Street
        Sewickley, PA 15143
        Cell: 412-779-6060
        Office: 412-741-2200 x238
        kbarge@howardhanna.com

        The Effects of Rising Interest Rates

         

        What impact do you think rising interest rates will have on the real estate market? 

        I can’t tell you how many years the Fed has been warning us that they are going to raise the interest rates, and then nothing happened. But now, it looks like it is finally happening. Less than one year ago, conforming loans with good credit could be procured at rates below 3% fixed. Now they have inched up to 3.75% for conforming loans. While these are still historically great rates, the days of mortgage interest rates in the 3% range appear to be gone and we are slowly inching upward.

        What impact will this have on the market? Typically, when rates increase the market slows. Buying power decreases – a buyer will qualify for a smaller mortgage amount when rates are higher. Even if a buyer qualifies for a loan amount, they may not want to pay the added amount each month attributable to the higher rate. Many buyers are cognizant of how much they don’t have available to spend on quality of life purchases, such as dinners out, when they have larger mortgage payments. This boils down to the fact that they may be unwilling or unable to buy at a price they could have last year, and this could depress housing prices.

        However, this is counterbalanced by the fact that we are in a market with record low levels of inventory, so it is highly unlikely that interest rates will have any effect on housing prices in the short run. If anything, rising rates should cause buyers to move quickly and lock in homes and mortgages before rates continue to climb. And this would be the most sensible short-term response to rising rates. Buyers – rates are actually going up! The time to act is now!

        QUICK SEARCH

          I’m ready to answer any questions you have regarding your real estate needs.
           
           
          Kathe Barge, CRS, ABR, CNE, SRES
          Associate Broker
          HOWARD HANNA
          REAL ESTATE SERVICES
          401 Broad Street
          Sewickley, PA 15143
          Cell: 412-779-6060
          Office: 412-741-2200 x238
          kbarge@howardhanna.com

          Investment Properties

          We are interested in diversifying our portfolio and purchasing rental properties – any thoughts?

           The first thing to keep in mind when considering a rental property is how you intend to pay for it. Rental properties are investment properties and subject to different lending rules than the home that you live in. Therefore, a lender will expect that you put more down as a down payment on a rental property and you will pay a higher rate of interest. Typically, lenders are looking for no less than 20% down on your purchase.  And of course until you establish yourself as a successful landlord, your income is going to need to be sufficient to support the mortgage on your primary residence as well as any debt on your rental investments.

          The second thing you need to think about is what kind of tenant you are interested in renting to. If you are hoping to rent to a family who might be in town for a couple of years with a temporary job assignment, then purchasing an apartment building with one and two bedroom apartments is unlikely to attract the type of tenant you hope to find. In that scenario, you would be looking for a single-family home in all likelihood (or possibly a townhome) in a good school district such as Quaker Valley. If you are hoping to find young professionals, you might look for something closer to downtown that has a trendier vibe to it.

          You also need to take a look at the return on investment that you are seeking from the property. You will need to consider how much you are putting down on the property, how much you were paying in interest on any mortgage that you take out, your property taxes, maintenance of the building, any homeowners association fees, and any utilities that might be the responsibility of the landlord (these are typically utilities that are not separately divided in the particular structure, such as water).  Putting together a spreadsheet with all of the expenses and your expected income will help you to determine whether or not the anticipated net income is worth the risk of investment to you.  Be sure to build in some vacancy months – most properties are not leased 100% of the time.

          Finally, you need to give some thought to how you will manage the property. Are you going to hire a property management company to handle that for you, or will you be more hands-on? Who is going to handle maintenance requests when something goes wrong? The beauty of being a tenant is that if something breaks, it’s not your responsibility to get it fixed. But as the landlord, are you going to be taking care of the repairs and if not, do you have a reliable handyman on-call that is willing to handle those items for you. If you are planning for others to manage the property on your behalf, you will need to build those costs into your financial projections as well.  If investment properties are something you would like to consider, feel free to reach out to me and we can discuss these opportunities further.

          QUICK SEARCH

            I’m ready to answer any questions you have regarding your real estate needs.
             
             
            Kathe Barge, CRS, ABR, CNE, SRES
            Associate Broker
            HOWARD HANNA
            REAL ESTATE SERVICES
            401 Broad Street
            Sewickley, PA 15143
            Cell: 412-779-6060
            Office: 412-741-2200 x238
            kbarge@howardhanna.com