Rates up a FULL point over last year.

The all time record low rates of this past spring are now in the history books. We have seen them creep up by a full point over the last few months. But it is important to understand that historically speaking any rate under 6% is a good rate. That said 4.5% is a GREAT rate. If this upward trend continues however, this extended period of extra buying opportunity will finally come to a close.

Higher rates will eliminate some people from the dream of owning a home. For others it will limit the size, type or neighborhood of their next home. Yet there are still buyers out there waiting. Waiting for what? Even higher rates, bigger payments or worse another decade of renting?

Over the last thirty years rates have averaged much higher than today's rates in the mid 4s. The chart below shows the average mortgage rate on a 30 year fixed loan since 1975. Our current rates are still the best in over forty years.

The last three years have truly been a golden era for buyers in the American home market. Prices have been low as we recover from the "crash" of 2008-2009. Rates have been at or very near ALL TIME record lows for the last two years. This golden era has already lasted twice as long as I expected it to and something will have to give. Either rates will spike, prices will spike or a little of both. The bottom line remains that this is a great opportunity to take advantage of a rare combination of low rates and low prices. First time home buyers can get into a well priced home with payments lower than rent.

If an entry level homeowner has some equity, they can sell their small house and move up to a big house while prices are still low and rates are low. I think many home owners sitting on a house they bought in 2005-2007 are waiting for values to rise. Some have to, because they need equity. Others are sitting on equity and are waiting for a better price. The problem with the latter is that it may be seriously flawed logic. If prices rise 10% over the next year they will get an extra $15,000 for their current $150k home. But that move up larger house currently listed at $250k will likely rise $25,000. So in essence they are stepping over the proverbial quarter to pick up that proverbial dime. And as they wait, they run the risk of also having a higher interest rate next year on that new larger and more expensive home. If that happens they could spend tens of thousands of dollars in additional interest over the life of the new loan. 

The empty nester looking to downsize can still take advantage of these low rates now. Even if they get a little less cash out of their larger home now, they may save tens of thousands in interest on that final home for retirement with our current low rates. I cannot over estimate this old saying, "You will feel the sting of high interest long after the joy of a low price has faded away." Conversely, you will enjoy the benefit of low interest, long after the sting of a high price has faded away. Price is fleeting, interest is forever, well at my age it is forever anyway. 

Based on the chart above, some of us may not even be alive next time we have rates in the threes. These current mortgage rates are being suppressed by the federal government's willingness to buy the mortgages at the low rate. They are doing this to prop up the real estate market while the economy recovers. Once the fed backs away from that policy, and they will, rates will likely return to a more "normal" 6-7%.

This is a pivotal moment in the real estate for anyone considering a purchase, a sale or both. How many times have you looked back in life and said, "If I only had done this, or that..." You know, like buying Apple stock when it was five bucks a share in the mid 90s. Now is one of those times in real estate but the bottom has been revealed and things appear to be moving up. As I said in my book, 'Don't Panic', "Buy low and sell high, and that is right now, my friends."

  

Got 300 Grand? If so, this market will treat you well.

This is a somewhat anecdotal post but I can back it up with some sound data so here I go. It seems that this market has gotten quite hot at or near the bottom of the price range. $150k-200k homes are selling fast and often with multiple offers. For those of you fortunate enough to have a little larger budget the buyer's market has not died just yet. There is a more inventory and fewer buyers and that seems to have created a more buyer-seller neutrality based market. Right about $275,000 things begin to loosen up. Buyers can kick a few tires and be patient as the try to find the perfect home at the best price. Let there be no mistake a well priced home at $300k will sell fast, but a home that is pushing the price ceiling may sit around for a while.

If you are a buyer, you have to try and balance the price and threat of higher interest rates as you decide your path. As a seller you have the same potential problem. If a seller chooses to hold out for a higher price, they may get it, or they may lose out all together if interest rates are uncooperative.

The primary idea is that those of you looking at spending $275k or more can probably find a great house at a pretty good value. This is good news.

According to local MLS data, the last 90 days in Clark County, Washington had 447 active units between $275k and $375k and only 189 active units in the bread and butter $150k-$200k price range. Inventory is very tight at 1.9 months for entry level but a more healthy and neutral 4 months for the high price range. This is an opportunity for people sitting on a three bedroom 1300 foot ranch to get top dollar and then step up to the dream 2200 foot, four bedroom house that is still priced relatively cheap.

interest rates are still very low. We had a spike over the last six weeks but favorable news coming from the fed yesterday has settled things down. The Freddie Mac Washington State average rate is currently 4.21%. Most people looking for a low cost loan are going to pay closer to 4.75%. any rate under 6% is historically a good rate so we remain well below that.

get out there and kick some tires. you might find your dream house and it might be cheaper than you think.

Online Auction Sites becoming the Rage with Banks

Many banks are starting to use online auctions for the sales of REO (Real Estate Owned) This is the term commonly used to describe real estate that is owned by a bank, obtained in foreclosure. HUD has been doing auctions for years on its FHA inventory but their auctions are not run live. HUD auctions use sealed bids. REO managers have a different idea. They want to market the house in a classic Ebay style environment. They want to drive the price up as high as possible with a bidding frenzy. This can be a great way for REO sellers to sell, but can have pitfalls for buyers which I will discuss a bit later.

One of the real areas of concern I have is short sales. I see this movement towards online auctions with short sales. Many banks are having their debtors sign an auction agreement along with the other short sale documents. The house is then placed up for auction terms and often the auctioneer does not even notify the listing agent. It seems that banks are going to continue to push ethical boundaries on short sales and in some cases take advantage of the American people while cashing in on federal programs like HAFA (Home Affordable Foreclosure Alternatives).

I have had some positive experiences with one loan short sales under auction terms. It seems the first lien holder often pre-negotiates the deal with the auction house and the short sale can move ahead with efficiency. The problem is that there is sometimes a second lien and the auction house either fails to disclose to the buyer or discloses in a fashion that is difficult to find. This can cause allot of grief for the buyer and the home owner.

People that are bidding on these auction homes should have a real estate professional aid them in the process. Typically the homes are listed on the local MLS and your real estate agent will get paid by the listing broker under the terms of the listing agreement. By all means a buyer should always have representation in a transaction involving large amounts of money.

In general the auction houses appear to be decent business operators. The problem is that another party to the transaction is now involved. The more parties in a real estate transaction the more likely it is to fail. Buyers and sellers can be taken for a long and uncomfortable ride when there is two banks and auction house involved in the deal.

If a buyer decides to bid on an online real estate auction, they should consult their trusted local real estate professional. That agent can do some quick research to help the buyer decide whether or not the home is viable. The agent can also help determine a good bidding range. It is paramount to remember that auction terms are designed to get an emotional response by the bidders. The emotion that screams, "I want to win" so as to drive up the price. Some auctions even have disclosures that suggest overbidding will result in mandated payment even if the property does not appraise. This could be a problem for a buyer using a loan to purchase.

In my experience dealing with the short sale departments at most banks is akin to getting a root canal without Novocaine. So adding the auction element on these sales is surfing in dangerous seas. Caution is heavily advised.  

Finally, there are some banks now taking their REO inventory directly to auction without listing on the local MLS. They hire a local licensed agent to make the sale legal under state law, but offer no representation for the buyer. I believe that American banks are already about as ethical as your average mugger, now they are trying to engage the direct home buying public in a "dark alley deal" that will almost certainly take advantage of the buyer. If the auction house is listing a property that is not listed on the local MLS, I would tell most buyers to run away. Seasoned investors may feel compelled to bid, but inexperienced buyers really should not take the risk of engaging in a transaction without a buyers agent involved.  

Local Dentist offers Mouth Guards for Student Athletes

Here is a community service announcement. One of my followers has created this press release which could be valuable for our local student athletes and their parents. As a local Realtor I enjoy be able to pass on valuable information to our community. Thanks to Tim for the information.

With the start of the new school year, Vancouver dentist Dr. Bowyer is giving away free mouth guards to student-athletes.  “Every year, I treat children with chipped or breaking teeth from their student activities, which can easily be prevented with consistent use of a mouth guard,” says Dr. Bowyer.

The National Youth Sports Safety Foundation estimates that more than three million teeth and over would be knocked out each year without the use of mouth guards.  This includes preventing over 200,000 serious dental injuries.  Student athletes are over 60 times more likely to suffer a dental injury when not using a mouth guard.  The most common injuries are flying elbows to the mouths, and impact from sports equipment.  Traditional contact sports, such as football, boxing, and martial arts require mouth guards.  Mouth guards should also be used in non-contact sports, including basketball, baseball, soccer, and wrestling.

Likewise, mouth guards help protect athletes from concussions.  Upon impact, a mouth guard helps an athlete clench the jaw muscles, thereby helping to stabilize the skull and neck.  Mouth guards distribute and dissipate the force of an impact, minimizing the severity of traumatic injury to the head and soft tissue.

Finally, a common mistake students make with mouth guards is infrequent replacement and sanitization.  Unsanitary mouth guards increase the intensity of mouth cuts and abrasions, increasing chances of infection from bacteria, yeast, and fungi that mouth guards routinely collect.  Also, mouth guards should be replaced regularly, or when edges become sharp or jagged, or if the mouth guard no long fits and promotes oral irritation.

“I can not stress enough the importance of athletes wearing a mouth guard, especially for those wearing braces” says Dr. Bowyer.  “Parents should consider a mouth guard as mandatory safety equipment.”

From Sept. 4th to Sept 30^th (M-TH), Dr. Boywer is providing these free mouth guards to anyone who stops by his office – children and adults alike.  Dr. Bowyer’s office is located at 300 SE 120^th Ave, Suite 700, Vancouver, WA  98683, 360-253-2640.

About Dr. Bowyer: Dr.  Bowyer is a Vancouver native.  He earned his undergraduate degree from the University of Washington, and a dentistry degree from the Columbia University School of Dental and Oral Surgery.  After completing his second year, Dr. Bowyer was one of two students selected  to participate in an honors program at the 5^th Avenue Manhattan Dental Clinic.    Dr. Bowyer has taught at Clark College School of Hygiene, and has taught as an assistant to 1-3 year dental students.  Dr. Bowyer has been awarded from the Academy of General Dentistry and honored by Columbia University as the Best General Practitioner in his class.  Dr. Bowyer is a member of the American Dental Association, Washington State Dental Society, American Academy of General Dentistry, AAOI (Academy of Osseointegration) and the American Academy of Cosmetic Dentistry.