If there is one thing I keep telling my friends, it is that 2013 is your year. Some of you may already be feeling that positive energy. We have inaugurated our president, the fiscal cliff seems to be no longer looming and we are back in our routine of work and play. Now is the time to restart our engines and hit the ground running.
For those of you who have thought about buying or selling your home, but thought you would “wait out the economy,” your time has come. In Washington, D.C. we are blessed with a stable housing market. Some of you may have been reading the recent buzz about homes in D.C. receiving multiple offers with some of those offers being above asking price. This is primarily due to the combination of the lack of inventory in the market and the surplus of buyers in the area.
If your thoughts recently have been of downsizing, moving to a new area or purchasing a larger home, 2013 is the year to do it. In preparation for the spring market it will be critical to begin having conversations with a licensed Realtor now.
I often meet with clients who believe their home is market ready, but as we peel back the layers of furniture and décor we find that fresh paint, new hardware or hardwood refinishing are tasks that will really benefit the home sale. Make sure you leave enough time before the spring market for the possibility of needing some updates done to your home.
As a buyer, don’t be intimidated by the bustling D.C. market. Interest rates on mortgage rates are at an all-time low so be sure to take advantage. There are two key strategies for entering the homebuyer market this year. First, be sure to hire a Realtor who has the experience, negotiation skills and time to show you prospective properties, draft decisive offers and suggest creative tactics for securing the ratified contract.
The second strategy is to speak with your lender prior to your home search. Know what you can and cannot afford and especially know how high you can go. We have seen many of our clients use escalation clauses in recent offers so it is critical to know your upper limits.
Just as I have said to my friends, I will say to you. This year can be your year. Buckle down, do your homework and start your journey toward making your dream a reality.
Consider buying a beach house with a group of friends
A lawyer can ensure everyone’s rights are protected
A trend that we are seeing across the boards (get it…like boardwalk) as we head into summer, aside from the swimsuits getting smaller and smaller, is friends buying homes together. Buying a property with another individual is not only an option for those in a relationship, marriage, domestic partnership, business etc. but also friendships.
With the pandemic and the increase of people wanting to move out of their small spaces in the city and leave for the more bucolic settings, the trend has been to ask your roomie, kiki partner or other friend to go halfsies on your primary residence. Why pay rent when you can have an investment and build equity in your home, right? Well why not take that approach for a second home at the beach? You will likely have the beach house to entertain and have friends over for weekends or weeks during the summer so let’s get them on the hook for more than just a few bottles of vodka or boxed wine. Let’s get their names on that mortgage.
With the rising market prices your borrowing power is stronger as a collective. Think of your group that you head to the beach with. How many of those folks would love to have a space at the beach? Likely all of them. If you can only afford $200k but three of your best friends can also only afford $200k then collectively you can afford $800k. Using simple terms and numbers here, but I trust you are tracking.
Now that you have found those select few that you implicitly, or mostly implicitly trust and are financially stable let’s now consider the actual items that matter in practice such as (1) how you will split up days, weeks etc., (2) how and who handles/coordinates repairs to the property, (3) what happens if you no longer enjoy this person or someone wants out of the house and they’re on the mortgage? This is where a lawyer comes into place and can advise on creating an operating agreement similar to what a business or corporation would have in place to ensure that all parties in the home are protected and each has their own rights as well as common rights for the home.
I know what you’re thinking, this sounds a little dicey, but I know if you’re reading this, that you have likely been in dicier situations, and for those who really want a beach house to enjoy but might not have the capital to do so, this is a great option. Instead of renting a beach house for the season and paying high season beaucoup bucks, why not get a few friends together to buy a beach house together?
Justin Noble is a Realtor with Sotheby’s international Realty licensed in D.C., Maryland, and Delaware for your DMV and Delaware Beach needs. Specializing in first-time homebuyers, development and new construction as well as estate sales, Justin is a well-versed agent, highly regarded, and provides white glove service at every price point. Reach him at 202-503-4243, [email protected] or BurnsandNoble.com.
How do Federal Reserve decisions impact mortgage rates?
Don’t panic, recent increases not as dire as some fear
Recently, the real estate market has been incredibly active. In many neighborhoods, it seems that a for sale sign is scarcely placed in the front yard before multiple offers, even some above asking price, roll in. In many cases, this was made possible by relatively low mortgage rates, which enticed buyers to get into the market and make those offers. Recently, however, there have been concerns about the state of the economy and increased inflation – furthered by the recent news that the Federal Reserve has raised interest rates.
This increase has understandably left many potential homebuyers wondering – what does this mean for mortgage rates, and my ability to obtain the loan I need to purchase a home? It has also left sellers asking – will the increased rates mean fewer buyers? Will it be harder to sell? These are important questions to ask. While no one has a crystal ball, many remain hopeful that the real estate market will continue to thrive. Let’s take a closer look at why together.
The Federal Reserve – Why it Matters
The Federal Reserve is the central bank of the United States, and among its many functions, it essentially guides the national economy. Part of that mission is keeping inflation under control. Recently, in an attempt to slow ever-increasing inflation, the Federal Reserve raised short-term interest rates by half a percentage point. Short-term interest rates are essentially the interest rates that banks charge one another for short-term loans.
It’s been some time since the Federal Reserve has made a move of that nature – slightly more than 20 years in fact, with the last such increase occurring in 2000. The Fed also indicated that more adjustments may be planned before the end of the year. Certainly, this raises the question – what does this mean for mortgage rates?
Federal Interest Rates Vs. Mortgage Rates
It’s important to understand that the Federal Reserve does not actually set mortgage rates – there is in fact no such thing as a “federal mortgage rate.” Ultimately, the decisions of the Federal Reserve don’t directly impact mortgage rates in the same manner as with other products, like savings accounts or CDs, for example. Mortgage rates generally respond both to the actions of the Federal Reserve, as well as to the general movement of both the United States and global economies, so there are many factors to consider.
Nevertheless, those in the mortgage industry do closely monitor the actions of the Federal Reserve, and certainly, how much buyers pay for a home loan is influenced by those decisions. As a very rough rule of thumb, for every one point increase by the Fed, your buying power goes down by $100,000.
When the Federal Reserve makes it more expensive for banks to borrow by setting a higher federal funds rate, the banks typically pass on those higher costs to their customers. This ultimately means that interest rates on consumer borrowing, which includes mortgage rates, tend to go up.
Keeping it in Perspective
While any increase in mortgage rates may not be welcome news for buyers, it’s important to keep these increases in perspective. Historically, the current interest rate, which is around 5 to 6%, depending on whether you have a 15 or 30-year mortgage, is still very low and very favorable for buyers. At the end of the 1970s, for example, interest rates were hovering near 10%, only to ultimately reach an all-time high of about 16.5% in 1981 before eventually decreasing. Throughout the 1980s, however, mortgage interest rates remained near 10% – nearly twice what they are today.
Another potential silver lining is that increased rates may also mean increased inventory – which is certainly good news for buyers. While rates are still historically very low, the increase may nevertheless mean that there are more available homes to choose from, as the number of buyers in the market decreases overall. This could be a refreshing change of pace for those buyers who felt that they had minimal choices in a highly competitive market.
While this may not be the most welcome news for sellers, it’s not necessarily bad news either. As rates are still relatively low, there will still likely be plenty of potential buyers out there. When the present market is compared to the course of the real estate market over the last several decades, now is still an excellent time to sell.
At GayRealEstate.com, we are passionate about helping LGBTQ home buyers and sellers through every aspect of the real estate process – and that includes more than just buying and selling. It also includes addressing the important issues in the real estate market that matter to you the most. We believe in the importance of connecting LGBTQ buyers and sellers with talented and dedicated agents who can help. We also believe in ensuring that our clients feel informed, prepared, and knowledgeable about all aspects of the real estate process. You deserve nothing less. Whatever your real estate needs, we’re here to help.
Jeff Hammerberg is founding CEO of Hammerberg & Associates, Inc. Reach him at 303-378-5526 or [email protected].
Rain. On. Me? Flooding a common concern among buyers
Always ask your insurance agent if you have the coverage you need
One of the many concerns buyers of homes and condos have are moisture intrusion and how well the building is prepared for floods, heavy rains, burst pipes and if they have installed sump pumps and other things to help with moisture intrusion.
To find out how to handle these situations I had a call with a local insurance agent and asked her to give me her advice about being able to make sure you are covered if there is any type of water event that costs you money as a home owner.
In a condo, you will have the master insurance policy that will help if something outside of the walls of your home causes a moisture intrusion. You will also have your own homeowner’s insurance. The agent that I spoke to said to always make sure you SPEAK to your insurance agent and ask specifically about what is covered and what is not. Just getting an internet quote is not the same. There are also third-party companies that can help cover conditions that are considered “exceptions” by the insurance company so you are going to want be educated on that.
There is a difference between being in a flood plain, having a pipe burst, water leaking in around windows, having water back up into a home and having a sump pump fail. There is also a difference in the types of coverage you can get for these situations.
They are all filed under different types of claims, and you will want your insurance agent to walk you through the various types of protections you can purchase and if you need additional protection from a third-party company. A recent inquiry by a client of mine resulted in him being told that his property was not in a flood zone so the basement (which is finished) would not be brought back to its current condition. Only drywall would be replaced.
Always ask your insurance agent if you have the coverage you need and please shop around. Water issues seem to happen more frequently, so you want to be prepared. I am always available to discuss homeownership and how to make that happen – feel free to reach out.
Joseph Hudson is a Realtor with The Rutstein Group at Compass. Reach him at 703-587-0597 or [email protected].
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