Thursday, February 27, 2014

Mortgage Interest Rates Update

Since 1971 when Congress created it, our beloved Freddie Mac has not only offered a wonderful secondary mortgage market for banks and other lenders, but has also kept the statistics on how much we as consumers pay for mortgages.

Every Thursday morning, the weekly averages from around the country are released, so that we can see the trends.

Today is Thursday, so here are the numbers.

Over the past week, the interest rate on the average Freddie Mac approved  30-year mortgage loan was 4.37%.  For that loan, the average cost paid to the lender was 0.7% of the amount borrowed.

Let's make that easier to understand.  The average 30-year loan requires the average borrower to pay a principal and interest payment of $498.99 every month for every $100,000 borrowed.  For that loan, the consumer paid $700 for every $100,000.

15-year mortgages are less risky for the lenders, so don't cost as much.  This week, the average borrower was able to buy an interest rate of 3.39%.  That means monthly principal and interest payments of $709.49 for fifteen years for every $100,000 borrowed.  Consumers paid the same $700 for every $100,000 borrowed as a closing fee.

Comparing that to what you could have found one year ago, we get a little nostalgic.  30-year loans showed interest rates at 3.51%, while 15-year mortgages were at 2.76%.  For either loan, 0.8% fees -- a little higher -- meant that closing fees cost an average of $800 for every $100,000 borrowed.

What's the difference between the monthly payments then as opposed to now?  Monthly payments on 30-year loans last year, on average over the week, were $49.39 less.  15-year borrowers would have saved $30.39 on their monthly payments.  Take those savings over 15 or 30 years, and you have some real whoop-out money.

The following chart from Freddie Mac shows you how we've trended over the past year.

Call me as you need.  I'm always here for you.

Enjoy the day,
303.541.1920 office
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Tuesday, February 25, 2014

Is the Market Improving for Sellers?

I get this question all the time from Sellers.  "If I put my home on the market, will it sell without my giving it away?"

The answer for today in the Boulder geography is simple.  Yes.  Assuming you allow it to be shown to Buyers in the market, and you price it right (meaning Fair Market Value), Yes.

One of the indicators we use to check up on the market is the number of days it's taking for the ones that sell to actually sell and close.  Let's look at Year 2013 over Year 2012 in an average neighborhood in Boulder.

Take a look at the numbers.  The chart below shows all the sales in one neighborhood in Old Town Boulder over the entire year in 2012.

Average Days on the Market was 144, more than four months.

Now let's look at Year 2013.

We're down to 91 days on average.  In that we're seeing closings 30-45 days after we sign an acceptable contract offer, that means we're going under contract in less than two months from the day the home entered the market.

The Capital Hill neighborhood isn't unique.  The average home sale in all of the City of Boulder that happened in January 2014 (this past month) closed 98 days after the listing was taken.  January is traditionally the highest number of the year, as sales dip significantly over the December holiday and weather seasons.  That 91 days above was the average over all of 2013.

But Sellers' and Buyers' markets are absolutely defined by Absorption Rates.  How many homes are selling over a specific period of time (usually one month) as compared with how many homes are available on the market.  In other words, if no new Sellers entered the market in the coming months, how long would it take us to sell  everything that's out there?

Let's take the same neighborhood in Boulder.  The following shows all of the activity in the market in that neighborhood over all of Year 2013 and up until this week.

Note that, in the last 12 months, this neighborhood has seen 36 Sellers sell their homes.  Another 20 tried, but did not find the perfect Buyer.  Nine homes are currently on the market, and three more are under contract and moving to close.

Conventional statistical wisdom in real estate (thanks to the National Association of REALTORS® keeping the numbers for us for generations) says that 5-6 months of inventory (available homes) is good.  In that scenario, neither the Seller nor Buyer has the upper hand.  

Statistically, this neighborhood has 4.0 months supply of homes available to prospective Buyers.  By a nose, Sellers have the edge over Buyers.  Until more homes enter the market, the existing Sellers are in a good position at the negotiating table.

The numbers all over Boulder right now are showing us the same trends.  Sellers are selling their homes to a ready population of reasonable Buyers, and are closing those sales in less time than we're seen in the recent past.  

In short, Sellers, Yes, you can sell your homes at Fair Market Value.  In fact, it's a good time to sell.  

And Buyers, be ready to make decisions.  You've got competition out there.

Call me as you need.  I'm always here for you.

Enjoy the day,
303.541.1920 office
303.859.4467 mobile