MORTGAGE RATE NEWS PROMPTS BIRD IN THE HAND THOUGHTS
If you’ve ever had the kind of neighbor who is apt to borrow something (like your hedge trimmer), only to later complain about how it performed, you know how much patience it takes to hold your tongue. The Mortgage Bankers Association would be justified if they felt that way about me: I read their website, and sometimes quote it in posts about current town mortgage rates—but it sure makes for dull reading! Anyway, with apologies to their (undoubtedly hard-working) writing staff, last week’s blog about national mortgage rates was as numbers-heavy as usual, yet still held a contradiction…but one that makes perfect sense. It also flags what could be seen as a bellwether that Las Vegas home buyers and sellers would be hard-pressed to ignore. The apparent contradiction was that mortgage rates were on the increase: national mortgage rates for 30-year fixed loans rose to 4.17%, which is the highest they’ve been since November. This is for conforming loans; the jumbos (greater than $417,000) went north as well, up to 4.15%. As everyone knows, low mortgage interest rates are terrific for our Las Vegas residential home sales. The low monthly payments that they create make homeownership more affordable for a greater number of buyers. So when rates increase and monthly payments go up, it should create a drag on the market. The apparent contradiction in the MBA release was that the increase in rates was accompanied by an increase in mortgage applications. And it was a big one: up 8.4% from the week before. Most commentators were united about the phenomenon, and it’s hard to disagree. Also to the natural surge that comes with the season (spring and summer are always expected to be quite active), consumers are seeing the uptick in mortgage rates and suspecting that rates will head higher. That’s nudging them to action, causing them to jump in now while rates are still attractive—especially compared with historical averages. CNBC’s Diana Olick agreed that such sharp increases help the home-buying market. She quotes one lender’s take about the buyers: “They understand that ‘wait a minute, rates are at an all-time low, let’s react now, let’s react before they go higher.’” It’s far from a certainty that rates will continue to take off. Lots of us remember last year when almost all the experts predicted a rise, yet mortgage interest rates headed in the opposite direction…and stayed there! But you can hardly blame area buyers if they go with the national trend and decide that locking in today’s rates is a prudent move: it’s a bird in the hand. If you have been thinking along the same lines, I hope you will give me a call!
LAS VEGAS LISTING PRICES REFLECT THE MARKET OR WISHFUL THINKING
A Las Vegas listing can be a smash hit when the pictures show a property that’s cosmetically appealing, the copy rings true, and the details hit the sweet spot where features and value are a match for the best the area has to offer. But it still might not be as effective as it should be if one other detail is a little bit off. It’s a detail that can cause qualified buyers—the ones who should be a home’s most interested prospects— to miss the whole show. I suppose that calling that part of a local listing a “detail” is like calling the end score of the NBA’s final playoff a detail—or calling the final vote count in an election a “factor.” It may be just one element of many, but it is uniquely important. In a Las Vegas listing, it’s often the first element that shoppers specify when they’re picking which area homes they will consider. If it’s not thoughtfully calibrated to fall within the parameters they name, the results may suffer considerably. Of course, the “detail” we’re talking about is the price on the listing, and choosing the “right” one is the object. We’re looking for a number that will help a home sell quickly at the highest price possible. If the neighborhood comps—the prices paid and asked for nearby area homes with similar features—were all that mattered, coming up with the most suitable listing price would be a cut-and-dried affair. But there are other factors that need to be taken into account. Some are easy to determine, some…not so much. • the Las Vegas residential market is a moving target, sometimes building from a lower level, sometimes echoing the latest transactions, sometimes losing momentum. • competitive local listing prices reflect either other sellers’ best estimates of that market for their properties, or else their personal opinions of what they think the market should be–but there’s no way to verify which! • the final selling price of any home is determined not only by the seller’s situation, but by the buyer’s, also, which is a factor that cannot be determined in advance. That’s why there are no universally agreed-upon formulas to rely upon, and since there is no way to determine what outcome would have resulted if a different price had been chosen, there’s also no way to verify after the fact if the absolute “best” one was chosen—even if everyone considers the sale a great success! Web titan Zillow says, “if the home sells within a few days of listing, chances are you listed too low” yet if a higher price had been chosen, causing that home to linger for months on the market, it wouldn’t have been listed too low. On the other hand, if the listing price were set to court multiple offers, a quick sale could mean a higher selling price was achieved. There’s simply no way to know for sure. Put it all together and you have to figure that arriving at the right listing price is more of an art than a science. I help clients by pooling my extensive Las Vegas experience, up-to-the-minute market knowledge, and detailed examination of the property’s unique attributes to suggest the range of listing prices I judge most likely to achieve the Holy Grail—a quick sale at top dollar! If you’d like, we can get together for a no-obligation discussion of your own property’s listing prospects. It’s a great reason to give me a call!
15YEAR MORTGAGE INITIATIVE UPDATE ON THE EXPERIMENT
Las Vegas home buying activity may be going great guns, but for some would-be buyers, credit score woes are still a stubborn obstacle. That’s why we have been keeping an eye on the new pilot project that was announced late last year. This was the one called the “Wealth Building Home Loan.” It’s an experiment aimed at opening up home ownership options, particularly for first-time home buyers. Bank of America and Citibank were first to sign up for the program, said to “take a fresh approach to affordable mortgage lending.” It sounds like a pretty good idea! How It Works The Wealth Building Home Loan is a mortgage that runs for 15 years at a fixed interest rate. Because the term is so short, equity builds rapidly. The payments are more manageable than any reality-grounded Las Vegas mortgage watcher would think because discount points can be used to buy the interest rate down to…well, “zero”! Since no down payment is required, home buyers can apply their available cash to purchasing those points. Since that sounds almost too good to be true, we’ve been keeping an eye open for progress reports. Extra Help for Buyers with Modest Income Qualifying for the mortgages would emphasize home buyer income rather than the credit score. This would be a real godsend to the many people still rebuilding their credit after the economic downturn. Furthermore, interest would be set at three-fourths of a percent lower than the 30-year FHA rate—which makes sense, since shorter terms mean lower lender risk—with additional points to be offered at special bargain prices. A Game-Changing Approach The loan program is piloted through The Neighborhood Assistance Corporation of America, which secured underwriting from BofA and Citibank. It’s intended to be “a game changer,” because equity ownership takes place rapidly. Already in the first three years of a WBHL, 77% of the monthly payments pay off the principal, rather than the 68% that goes to interest under a standard 30-year mortgage. The effect is to accumulate a significant ownership stake almost from the word ‘go’—and more ownership equates to better loan performance. When last checked, the program was in “pilot project” status (still in the initial shakedown phase) while the innovators who came up with the idea figure out how to make the loans widely available. So far, so good, apparently—we’ll keep an eye on developments to see if the program is greenlighted by the two underwriters. In the meantime, Las Vegas mortgage-seekers have a wide variety of currently available options for taking advantage of the great buys viewable on this morning’s Las Vegas listings. Give me a call for a no-obligation discussion of how you can take advantage of today’s opportunities!
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