Tag Archives: interest rate

What to do with this SQUIRREL-LY Market…

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I talked with a lender today who called the market “squirrel-ly” and I thought that was a perfect analogy.  You’ve seen these little guys trying to decide whether or not to cross the road, darting around looking terrified.  Well, that’s kind of us these days, and justifiably so.  HOWEVER.  You know there’s always an ‘HOWEVER’  if you talk to me.  Here it is:  Real estate is local.  That’s 1001 times I’ve written that.  But it’s true and it’s important.   So the however leads to: It’s not time to run and hide in a cave.

Yes the rates have gone up, but you can be sure that lenders are working on ways to make it so that you can get into that home you want.  Are some folks going to fall out of the running temporarily?  Yes, but they should not give up.  There will be ways.  

Meanwhile, remember that here in our market in the Raleigh NC area (the Triangle), we were the last ones to fall when the market crashed back in 08.  And we were the first ones to start lifting off of the bottom as well. Why?  Because of demand.  Supply and demand is a huge factor in real estate and here, demand is crushing.  So…why is the market feeling slow right now?  I call it the holiday doldrums.  If you’ve ever been sailing and struck by the doldrums on a hot summer day, you know it’s excruciating.  You sit there, bobbing in the middle of the river or waterway or ocean, praying for just a little breeze.  But you get crickets.  Well we’re having the ‘between Memorial Day and July Fourth’ doldrums.  Think about it.  This happens every year.  People are thinking about vacation, graduation, vacation, vacation, vacation.

So what do we do when it happens while rates are climbing the ladder in ADDITION to vacation?  Well, we pay attention!  We most DEFINITELY have some of that hitting out market right now, because a little bit of rate hike can equate to enough increase in house payment that some buyers have to tap out for a little while.  Buyers are scared right now, because of the unpredictability they face.  So caution is the order of the day.  What do you do?  TALK TO YOUR LENDER.  Your lender is going to be your financial guide all the way.  And if you’re close to the edge, maybe waiting is the way to go.  Or ask about some other loan program that might work better for you.

But for sellers?  Don’t panic.  Bob around in the river or ocean and ride out the doldrums.  I promise after the 4th things will pick up.  Look, we’ve had vacation, graduations, more vacations coming…people are distracted from home buying.  Yeah, if it makes you feel better, lower your price and test the results.  Chances are, you won’t see a difference.  I am telling you, it’s this way every year.

What is GOOD that’s happening now is that buyers have a bit of breathing room from the race to multiple offers, and they have a break from excessively high due diligence fees, in some cases.  No way that’s a bad thing.  And IF the market continues to stand still or slide, then we’re going to see the needle swing away from a strong seller market to something favoring buyers more.  And remember ideally, the needle stands straight up between buyer advantage and seller advantage, to something more reasonable for everyone.  I guess whether or not you agree with that statement depends on whether you’re a buyer or seller, or neither.  But a fair market is better; trust me on that one.

For now, there’s a change in the weather with regard to real estate and it’s way too soon to jump ship (unless you need to cool off).  We will surely see some buyers fall out of the race for now and we will see some homes sitting on the market longer…for now.  We still have the huge corporations either here, or coming here, and people need housing.  And we have the aircraft manufacturer coming to Wake Forest too.  So demand is still crushing our supply.  The market may ‘fall’, but remember we’ve been in an abnormal market for a long time.  What we might be seeing is a normal market coming into view.

Just remember that this is a time for creative problem solving and a time to reestablish patience in the real estate process.  Homes will still sell; buyers will still find a house, people will still be able to live. 

Interest Rates on the Rise, BUT…

It should come as no surprise that interest rates are on the rise.  This means that a house payment you could afford six months ago might be out of your range now.  It’s still a great time to buy a home, though, because rates are still at record lows.  I’ve had some conversations lately that made me remember that the interest rate when I bought my first home was around 17%.  I know.

My professional advice is to visit your preferred lender IN PERSON, and have a conversation about the different kinds of loans out there, and get several estimates, based on increasing rates.  Understand that there are MANY different types of loans, including, yes, adjustable rate ones.  My first mortgage was an adjustable rate loan, but my rate was frozen for four years, and could only adjust upward one percent per adjustment period afterward.  Good.  At that time rates were SURE to go down anyway, but before the adjustment, I refinanced to a conventional loan with a fixed rate.  And just so you know, there were a plethora of adjustable rate choices at that time.  I’ve used a balloon loan too.  Low fixed rate up front for a period, after which the entire amount comes due.  But you just FINANCE that amount, and the risk, of course, is what the rates will be at that time.  In my cases, they always went down, which was a calculate risk on my part.

If you’re not comfortable with risk, then these adjustable rates or balloon loans are not for you.  But the point is that there are other ways to calculate your payment than just a straight, 30 year, conventional loan.  So take a couple of hours and visit a loan officer.  You’ll be amazed at what’s out there.

Adjustable rate mortgages got a bad reputation in the aftermath of the real estate market crash…which should be called the Wall Street Greed crash…because lenders were writing loans that never should have seen the light of day and would land somebody in jail today.  Note that they did that, often, at the behest of Wall Street brokers who needed sub-prime loans to fill tranches blah blah blah.   HOWEVER…not all adjustables are bad.  If you are responsible and do your homework, an adjustable rate mortgage can be a way to beat the rising rates for the short term.  But you will need to be in a good financial position to refinance when the time comes.

Bottom line is this:  In our market here in the Triangle, every seller expects a loan approval letter (some a pre qualification letter) to accompany your offer to purchase, otherwise your offer might be rejected immediately.  So you’ve had to have at least one conversation with a lender in order to get that.  Make it a meaningful conversation, a deep dive into your options…all of them…so that you get the most bang for your hard earned bucks.  In other words, don’t let rising rates put you out your dream of buying a home.  There are GOOD ways for responsible buyers to nab a low rate.