FOR LAS VEGAS GOOGLERS SOME BAFFLING MORTGAGE RATE NEWS
If you were one of those homeowners in Las Vegas who happened to consult Google for “mortgage rate news” over the weekend, you might have been puzzled by the top two results. Fortune got the top spot, with an article headlined, “Your 30-Year Mortgage Rate Should Be Lower Than It Is Now.” That might have rightfully ruffled your feathers. After all, if the mortgage rate news is that your rates are higher than they should be, just what kind of chicanery is going on—and who is behind it? This sounds like a greed-inspired ploy of some kind—and details that you’d better read at once! But, had your eye fallen on the second headline before you clicked on that first, you would have seen the Mortgage Reports blog top line, which was not even slightly conspiratorial-sounding: “Average US 30-year mortgage rate falls to new 2016 lows.” Taken together, mortgage rate “news” like this could save you the trip from Las Vegas to Disneyland. Why stand in line for the spinning Mad Tea Party ride, when all you have to do is ask Google for “mortgage rate news” to get dizzy? What’s really going on??? Googling further would have helped explain. Bankrate told “home-shoppers” that they should “be cheerful: Job growth in June was surprisingly high”—but since that news hadn’t affected mortgage rates “much,” there was a confluence of good fortune: an economy that was perking up but not enough to raise interest rates. The most encouraging mortgage rate news was actually sounded by The Wall Street Journal, which claimed to explain “Why banks aren’t giving you a 3%, 30-year mortgage…yet.” “Yet”??? The WSJ went on to explain how current “super low” rates could head even further south—but it called for a super robust reader attention span. If they stuck with it long enough, though, Las Vegas readers discovered that bank profit margins (the “spreads”) were rising while mortgage rates fell because government bond yields had fallen even faster. You might recall that at one point, Disney put a limit on how fast riders are allowed to spin the Mad Hatter’s tea cups—but apparently nothing of the kind is planned for the financial world. So the first two Google finds for “mortgage rate news” are correct: the rates are even lower than before (per Freddie Mac, 3.41% last Thursday) and it’s reasonable to suggest they could be lower. All in all, it looks like there is, even more, reason than ever to take advantage of this particularly rewarding era for Las Vegas’s real estate offerings. Getting started is easy: just give me a call!
FOR LAS VEGAS RESIDENTS RENT OR BUY IS A MYTHBUSTING QUESTION
The rent or buy? The question sometimes answers itself—especially when the requisite down payment amount isn’t available. Other Las Vegas residents have to wrestle with a very important decision that simply doesn’t have a one-size-fits-all solution, any more than does a what car is best? question. Factors that make it complicated have to do with how predictable many other facets of their future are: how long do they know they will be living in Las Vegas; how reliable is their income stream; how stable is the size of their family, and—an associated issue—how important will the quality of neighborhood grade, middle, and/or public high school be…and when? Once you are convinced that there is no simple answer to the rent or buy question, it becomes much easier to dismiss some of the mythology that passes as common sense when it comes to the decision. Chief among the myths is the one that has renting being more economical because of the associated costs that go with homeownership— Taxes! Maintenance! Insurance! Put them all together, pile them on top of the monthly mortgage payment, and there’s no way it isn’t cheaper to rent! That idea is sometimes bolstered by taking pencil to paper. If the immediate monthly expense does come out in favor of renting, it’s probably why the myth endures (even though some other “common sense” has it that owning your Las Vegas home is the smart way to go). What’s the unbiased bottom line when it comes to dollars and sense? Is the answer to rent or buy dependent on speculation—that Las Vegas real estate values need to continually grow? If everything else is equal—if the emotional and prestige aspects of homeownership are set aside—why isn’t it financially more prudent to risk nothing, and just rent? The answer that’s most comprehensive was recently cited by media financial guru Dave Ramsey, who is most well-known for counseling against debt. With that as his philosophical touchstone, you’d expect that the last thing he’d recommend would be signing on to a debt the size of a typical Las Vegas mortgage. Yet the opposite is true. Among other reasons, the asset value of the underlying property soon balances out against the liability of the debt, so it’s not troubling. But that’s not the real answer to his coming down on the side of owning over renting. Ramsey’s reasoning is simple enough: the key lies in inflation. When you measure this month’s cost of homeownership versus the monthly rental for a comparable Las Vegas home, the two might be almost equal—or even cheaper for the rental. But that’s only this month. Thinking ahead a year or two…or more realistically, seven, or 10, or 15 years, inflation can be counted on to add significantly to what the renter will pay. The homeowner’s costs are much more stable. Ramsey says that a renter would pay 38% more over the next seven years than would someone who buys today. He quotes Zillow’s finding that between the years 2000-2014, the cost of renting grew twice as quickly as did household incomes. Currently, rent costs nearly 30% of a typical renter’s income. The financial part of the rent or buy decision is another area where my clients benefit from up-to-the-moment market knowledge…and why a call to my office always results in valuable information!
FOR LAS VEGAS REAL ESTATE AN EVENT FILLED WEEK
Last week brought June (and the first half of the year) to an end with a lot of happenings—any one of which could have a significant impact on Las Vegas real estate in the months ahead. The biggest event was another unpredicted swoon in mortgage interest rates. On Wednesday, the first event came when the National Association of Home Builders released their quarterly Eye on the Economy commentary, which projected “little risk” of a financial crisis from the events in Europe. And in fact, global markets did a good job of rebounding from the previous week’s dips, ending the week pretty much in the pre-Brexit territory. NAHB’s view of the stateside situation retained its optimistic tone, noting that “housing remains a bright spot for an economy overcoming yet another soft first quarter…” That was borne out statistically, with housing’s share of the economy on the increase. CoreLogic’s MarketPulse for June supported that view, showing a home price index that rose 6.2% year-over-year, and completed foreclosures down nearly 16%—which put foreclosures at pre-Recession levels. They noted another interesting fact: cash sales as a share of the market fell to 33% of all sales, a level that matched what it was before the housing crisis. That’s the first time that has happened and could well signify a final end to real estate’s recovery phase. The National Association of Realtors® reported on home resales for the previous month, and it was more good news for sellers. Resales rose to a more than nine-year high, with median house prices soaring 4.7% from the same period in 2015. The annual rate was projected at more than 5 ½ million units, “the highest level since February 2007.” Next, Harvard University released a State of the Nation’s Housing report, with findings that sounded similar. One standout item might be of special interest to Las Vegas real estate investors with an eye on the rental market. Nationally, the rental market continued to grow in 2015, comprising “the largest one-year increase in renter household” ever. But the main news had to do with mortgage interest rates and the hangover from the previous week’s vote on Britain’s exit from the European Union. Trulia’s Chief Economist wrote about what Brexit means for the U.S. housing market: “The answer is no one really knows…” That view was countered at CBS’ Moneywatch with its bold headline, “Brexit will keep U.S. mortgage rates in the basement.” The opinion was grounded on a “powerful though indirect” correlation between the two factors. Citing Bankrate’s Chief Financial Analyst’s complex reasoning, CBS followed by spotlighting Friday’s market verification: “Mortgage rates are tumbling…to rates not seen since 2013.” If CBS is right, Las Vegas home buyers could benefit. “Mortgage shoppers are often beneficiaries of market volatility and uncertainty,” according to CBS. Of course, that only comes to pass when the right home at the right price has been found…which is where a timely call to my office enters the picture!
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