Enjoy the holiday, I'll be back next year ;)
Friday, December 18, 2020
Keeping with the recent theme, I compiled a list of median home prices in America's largest cities. I figured I would start with a market update locally. Sales continue to be brisk and well priced properties are quickly snatched up often with multiple offers. I say "well priced" because home owners that price above the typical values for like properties and the neighborhood will see lagging performance in the market. That said everything else is 'flying off the shelves'
The median home price in Vancouver USA runs just shy of $390k so take a look at the list of our nations largest cities and see how we compared on home prices. If someone is living in one of these large cities and are moving here we might be a "bargain" or we might be "super expensive." Eleven of the twenty cities are less expensive than Vancouver.
Just like the capital city list, these are just the city proper not the metro area and I used Zillow's median mid priced values. On a local note, Portland is the 26th largest city in America so it fails to make this list. The list is ordered by largest population to smallest.
Friday, December 11, 2020
Last week I wrote about Sacramento, CA median home values being below that of Vancouver, WA. That got me thinking about median prices around the country and in state capitals, like Sacramento. So here is a ranked list of Capital Cities in the USA by median home price arranged highest to cheapest (Zillow mid tier median used for all cities):
You might be tempted to think that Jackson, MS is a typo. It is not. In fact, I found this 1248 SF, light fixer online featuring 4 bedrooms and 1.5 baths on a 10,000 foot lot for $29,000. That house is a 1960s ranch with a very dated interior and in need of TLC. But it appears to be livable. This guy is priced about the same as a typical mid priced new car. Wow! I have no idea what kind of neighborhood this is so that $29k might be misleading, but you could rent this thing for $220 a month and still have a 7% cap rate.
For those wondering what the high end neighborhoods offer, take a look at this brick beauty with 3900 SF, 4 beds and 3.5 baths on a rather lovely one acre lot. Price? $276,000. This is easily a million bucks here in America's Vancouver. Jeez, that's a nice house. Looks good inside too, this is a really solid house.
Life is good here in Clark County, WA. Our housing is expensive, but not outrageous, and do you really want to live in Central Mississippi? Seriously, summers are like a steam bath... all day and your dressed.
Friday, December 4, 2020
According to real estate giant, Zillow, the Median home price for Sacramento, CA was $378k as of December 1, 2020. They show Vancouver, WA at $385k. Sacramento County, CA stands at $417k compared to Clark County, WA at $412k.
It should be noted that Sacramento is well under the California statewide median which is $599k. But Vancouver is also lower than the Washington statewide median of $451k. Clark County has been a great opportunity for homeowners with median prices climbing faster than most of California which may be why cities like Sacramento are now less expensive for homes than we are.
There are a number of reasons this has happened and median pricing is not always directly translated across states or even large regions. But Sacramento used to be notably more expensive than Vancouver and now they are a tad less. All of this shows that demand for real estate in SW Washington continues to be strong and people will continue to seek an opportunity to own rather than rent. It also could mean fewer Californians will move here. Most of the people living in the Central Valley areas in California can't afford to move here.
This is why I worked so hard to help people buy homes back in 2010-2012. Many buyers were nervous, having just witnessed a severe market downturn. Prices were depressed from the rotten economy and everyone of the dozens of people I sold homes to, made a fortune when things turned around. Even in the last couple of years with higher prices the market has provided equity gains for home buyers.
Real estate continues to be a very important part of the American dream.
Friday, November 27, 2020
The real estate market is pretty hot right now. I know I have been writing about this for some time. But I still run into buyers looking for a "deal." But the real estate market will not tolerate a "deal." For every listing under $450,000 in our local market, their are multiple buyers interested and willing to offer. This means a house valued at $475k but listed at $450k will get multiple offers and likely sell for well over asking.
Our local market set a record for October sales and year over year performance and trends are pushing values up at nearly 1% per month. Buyers hesitant to offer over asking today, will only find higher prices on the next house they find after being outbid now. This can be a hard pill to swallow but the house a buyer gets today will likely grow in value over the next several months.
The "fear" buyers have is the fear of a market correction. This is actually in some ways an irrational fear but yet also rational. It is rational to be leery of buying an investment at or near the "top" of the market. But too many buyers focus on the investment angle rather than the utilitarian use angle.
Every single day thousands of people buy a brand new car. Some commit tens of thousands of dollars to the effort knowing full well the value of that car will be HALF in just a couple of years. Why do they make this HORRIBLE investment? It's simple: they don't view it as an investment. They get the reliability of the brand new car, a warranty from the factory, and most important, the practical utility of ownership. They get to drive that car where ever they need to go. There is VALUE in that premise that far exceeds the "loss" of resale value over a short amount of time.
Buyers looking for a home to LIVE in should hold the investment potential as SECONDARY to the utility value. The home is a shelter that is required to live a happy and healthy life. Shelter is one of the primary needs to survive, along with food and water. Worrying about how much profit you might make on this is silly and highly irrational. You make no profit on food or water that you consume, the benefit is: you don't die. Shelter falls into this category. You make ZERO profit when you rent your shelter from a landlord. In fact you will not recover ANY of the rent money. Rent is a total loss from an investment perspective. If a renter pays $2000 a month for a house, they are "losing" $24,000 a year. That is likely more than the down payment on a house of similar value. The down payment is what represents the buyers actual "risk" in the purchase of a home.
Even if a buyer pays $400,000 for a house and the market crashes a year later, leaving the value of that house at $300,000 they still have the utility value of shelter and if they used a loan to purchase it, the bank is carrying most of the risk anyway. Therefore buyers need to decide if the house they intend to buy is property they are willing to live in for several years. Buyers looking for a short term living situation are advised to rent unless they intend to hold the house for an investment after they move out. It really is that simple and the people willing to bid up a house over asking are doing so not because they are foolish, but because they want the utility that property offers and they are willing to pay more to have it.
It can be further noted that the 'great crash' of 2009-2011 led to a high rate of rental increases as landlords capitalized on increased rental demand due to a lack of competition from otherwise would be home buyers. My house lost roughly one third of its value right after the crash and I was even upside down in my loan. But my monthly payment was still about the same as a two bedroom apartment. But I wasn't living in a two bedroom house, I had a 2500 SF 5 bedroom house. I didn't worry about the short term 'investment' loss, this is my home, my shelter and it continued to provide that essential value despite its temporary loss of market value. The only downside was that I really could not sell it until the market recovered, in that sense I was a bit "stuck." But I certainly could have rented it out for more than my payment if I had needed to move away for some reason.
Buyers that are worried about 'losing' money and not making strong enough offers today are, wait for it...
Friday, November 20, 2020
October set a sales record this year and that bodes well for out local market especially if you are selling. We have moved from a neutral market a year ago to a strong sellers market. This in spite of a pandemic that has left a sizable swath of the population claiming unemployment benefits.
Buyers are finding multiple offer scenarios on nearly any house they offer on under $450k. It has been a while since I've seen this kind of volume in the autumn. The real estate outlook for 2021 remains mostly positive from the experts that follow the trends.
Buyers are bit vulnerable right now as prices are rising and rates are about as low as ever. So if rates creep up and prices creep up then buyers quickly become eliminated from qualifying. Typically this is what leads to the real estate a slow down, prices rise fast enough to eliminate demand. The one thing that has helped sustain the growth is the significant rise in incomes over the last few years.
Lately the trends have been rather amazing but 2020 saw a disproportionate spike in median home prices versus the income, however rates dipped enough to offset the housing spike bringing down the actual percentage of median household income required to make the payment on the median priced home. The chart below uses national data, not local data, our figures are similar but higher on housing and income. The yellow line represents the percentage of income required to make the payment which is a general measure of affordability.
Friday, November 13, 2020
All indicators are that Joe Biden will be elected President and take office on January 20th, 2021. regardless of whether one voted for the new President or not, people may wonder how the top down change will effect our real estate market, both locally and across the USA.
In reality it won't likely have an immediate effect. It will take time for the new administration to get its agenda out to the public and ultimately passed through Congress. If that agenda results in an economic slowdown, of course that could have a derogatory effect on real estate.
I have found that real estate can do well even in a down economy because people still have to live somewhere and owning your home still appeals to a large number of people. In fact this very year is a testament to that as the pandemic swept through the economy but real estate ran counter to the decline. Sometimes if the stock market crashes or goes into a slide a large chunk of capital gets moved to real estate as a "safe haven." This can lead to lower rates on mortgages, large capital investment in multifamily properties and commercial real estate.
The most important thing to remember is that we should all pay close attention to the policy decisions the next President makes and if you like them vote for that party in the mid-terms, if you don't, then vote for the opposition party in 2022.
In the mean time we can still enjoy the low interest rates we have right now and a solid and healthy real estate market as we move into the final weeks of 2020.
Friday, November 6, 2020
It is never a happy time when a transaction falls apart at the finish line, but in roughly 5% of real estate deals that is exactly what happens. In the overwhelming majority of those late inning failed sales it was neither fault of the seller or buyer. The bulk of issues comes up with loans. There are a lot of moving parts in the loan and sometimes things can pop up as the loan works its way through multiple stages of the underwriting process.
I hate it when this happens whether I am the listing agent or the buyer's agent. It just sucks. A few tips to minimize the pain in these scenarios.
- Buyers should not give up their current housing until the deal is done unless they have safe and reliable alternative living arrangements.
- Both parties should allow enough time for potential delays and setbacks.
- Sellers should also recognize the inherent risk of a sale fail. Although 5% is slim it is basically 1 in 20 so it isn't as rare as one might think.
- A lender pre-approval even from the best lending institutions does not guarantee success as things can and do happen. Buyers can lose their job, become sick, death in the family, car wrecks, a crazy collections pops up on final title... all kinds of hidden and unforeseen issues are lurking in the ether.
Friday, October 30, 2020
Spooky because inventory under $500k is tight and competitive offers are lurking around every corner waiting to outbid the unsuspecting buyer. Boo! Buyers should relax however as the holiday season is ahead and that tends to soften things up a bit. Not that pricing is likely to soften but many buyers stop looking and that can take the edge off a bit allowing buyers and opportunity to get their offer accepted more readily.
Locally the median price of a home in Clark County has breeched the the $400k mark pushing up towards $410k. Analysts are suggested a fairly robust 6-8% growth over the next 12 months. Despite the crazy conditions for buyers real estate is still a strong proposition in Clark County so be patient buyers, your time will come :)
Friday, October 23, 2020
Now let's be clear, Vancouver USA will not replace Portland as the center of the metro area anytime soon and probably not ever. But that city has really set itself up to attract a specific type of resident. Basically those looking for the walk, bike, and transit only lifestyle. Vancouver can appeal to some of those people but also to those that still want to at least own a vehicle and travel independently when they want to. Portland's lackluster effort on the city highways and freeways is a clear indicator that travel by car will not improve anytime soon.
Vancouver finds itself in a prime spot to attract both residents and employers looking for tax savings and a more traditional lifestyle for their workers should those workers choose. But they won't have to alienate the employees that want that sustainable walkable neighborhood. Vancouver has a downtown and waterfront area that still has usable land, and a council that is considered to be one of the easiest for developers to work with. A pro-business environment without sacrificing the common sense approach to a sustainable community.
Our city needs to go get em' so to speak. Developers and business leaders are sometimes operating in a bubble and if Vancouver USA is outside the bubble our local leaders may need to penetrate their market with advertising and committees designed to get the word out.
COVID-19 will pass and we will get back to a more normal pattern and our city needs to take advantage of our amazing setup to grab both residents and employers which help all of us enjoy a better lifestyle with a stronger economy and higher wages.
For Portland they love having a workforce based in Vancouver, it helps pad their taxes with non-resident income. It is literally free money for them. But more and more Vancouver residents are seeking jobs on OUR side of the river as they grow weary of Oregon's egregious taxation without representation scheme. Furthermore Portland's tolling scheme is clearly aimed at Clark County commuters. Vancouver needs to hyper focus on employers, large employers that want their employees to have a great community to live in, with an easy commute, and low taxes. Vancouver is that community and we have the commercial, industrial and residential base to support whatever an employer needs.
Here's to a great 2021 and beyond.
Friday, October 16, 2020
These projects like other large scale developments produce hundreds of jobs and transform property values leading to more property tax revenue for the local government with out raising taxes on the whole.
The City of Vancouver purchased the four city blocks formally occupied by the Lucky Lager Brewery Complex. The buildings were demolished and the blocks sat bare. No tax revenue was coming in because the city owned them. Now the first block became Heritage Place East and another adjacent block that had a few older single family homes became Heritage Place West. Lets say the value of that two block property went from roughly a million dollars in 1996 to around $25 million in 2000 when the project completed. The state and local government are now collecting property taxes on a fully developed area that is 25 times more valuable. Next was the Vancouver Center on the two blocks flanking the east side of the park. A much larger scale multi tower project went in there created and even larger tax boost. Now the final block the so called Block Ten has been sold for roughly $3 million to Holland Partner Group to be built out as a two tower mid-rise office and housing complex. The city will go from net zero to property taxes based on values that will almost certain exceed $50 million when complete.
Some people get upset when local government issue deferments on property taxes over a 8-10 year period, but the local government is playing the long game. Yes they will get less taxes early on, but still MORE taxes than they were getting prior to the development, then a HUGE boost when the incentives expire. That $3 million empty lot is about to become a $50+ million urban complex.
city, our economy. With the bludgeoning blows of COVID 19, we need all the investment we can get.
Friday, October 9, 2020
Sometimes surprises can really ruin your day. You never know when a rogue judgment will pop up outta nowhere to slow down a closing. Sellers need to be sure to vet this out early and preferably before an offer is accepted. In the case of a death in the family it can be challenging to get this done, especially if it is the final settlement of an estate.
Judgements are something that can lurk in the shadows only to emerge on a preliminary title report. Judgements do not just follow the person named in the court documents but often are recorded against real property owned or co-owned by the defendant.
Judgments tend to stay around for 10 years or so and they can be difficult to remove even if the person is deceased or has settled the judgment in a bankruptcy.
Buyers should be prepared for potential delays when buying a home that is being sold on behalf of an estate. In the end the attorneys and title company will likely work it all out, but it might take a week or two longer and that can be challenging for buyers.
I have seen a few crazy deal in my day and judgements and lack of probate on estates are among the most troublesome. Buyers should not be discouraged when bidding on an estate sale, but just give your self enough time to compensate for any slowdowns during the closing process.
Friday, October 2, 2020
I have found myself working with some buyers in that aggressively pro-seller price range right around $400-500k and even in the $350k range. The market dynamics are very different in the higher ranges leaning slightly in favor of sellers but the market will not tolerate an overpriced listing in the $500k plus price range. Once buyers start peering though the windows of homes under half a million dollars sellers are demanding the sky and yielding little on terms and price.
Let there be no doubt record low interest rates are driving buyers to the market, especially those at or near the bottom price ranges. This is it, if rates pop up a bit or prices continue to soar the entry level buyers will be left holding an empty bag.
Schools continue to be a major market driver, but buyers with school age children should do more than casual research on schools before plunging into a hyper inflated locale based solely on local reputation. Great Schools an Niche Schools both offer fairly in depth looks at district wide ratings as well as individual school performance.
One thing to consider when looking at an area such as Camas, WA which has a local median home price of roughly $525k. Camas Schools are well regarded on most if not all school monitoring sites, and well regarded in the local community as well. However there are two important things a home buyer may want to consider. First, there are two other school districts nearby that may be rated slightly lower but it is in some cases the difference between an "A" and an "A-" or "B+". Second Camas happens to have the highest property taxes in the area and that is an additional homeowner burden.
Comparing 98607, Camas to say 98683 which is the Cascade Park and Fishers Landing area of East Vancouver you will find that each area is served by excellent schools. 98607 is A rated by Niche Schools and 98683 is B+. The median home price in 98683 runs about $415k a full $110,000 less and the property tax millage rate is about 30 basis points lower in 98683 as well. The savings on the home could pay for two kids to spend 5 years each in a private school.
I bring this up only because I have watched people frankly overpay for a property in a specific school zone when other much better values existed in areas with near equal school performance and in some cases BETTER ratings. Buyers should do serious research into schools before spending tens of thousands of dollars extra for a house because it is in the school district everyone around the water cooler says is best. This is of particular importance when the budget is tight.
I have written about schools many times, and one thing that Washington State can hang its hat on, is our strong and powerful constitutional language protecting schools. Even the "worst" schools in Washington are often better than the best schools in many other states.
One final note about schools. When looking at school ratings one should use a few tips to regulate the emotion. Remember that many apps use at least some local reviews and that the "yelp" effect can skew the results. A few angry people venting over a nothing burger should carry little weight. Also individual test scores at a specific campus are not as big a factor in the overall quality of education as looking district wide. If the same school district has two elementary schools one is rated a "2" and the other a "9" there is much more to that story than one is crappy the other is great. School districts tend to employ district wide curriculum and teacher standards including student teacher ratios. There are apps that rate entire districts and that is just as important and maybe even more important than the specific campus results.
How could the same district have such different outcomes? Well this does in fact happen and it is often due to the demographics in the local area. Some areas may serve a lot of professionals others may serve a large factory with high paying vocational jobs. Different demographic groups have different views on education. Also the schools will ebb and tide as the local family population moves through various cycles and campus populations fluctuate accordingly. Today's overcrowded high school could be just right in a few years as the neighborhood evolves.
The district ultimately provides an opportunity for all students to succeed be they college bound, vocational students, or athletes. The policies and quality of the district are at the very least equal weight to individual campus performance.
Friday, September 25, 2020
The crazy rush to snatch up every house has now extended up into the half million dollar price range. These super low rates and a tight inventory continue to push values higher. There is some kind of perfect real estate storm brewing round these parts as buyers are crawling out of the proverbial woodwork to snatch up anything under $500k. There are literal traffic jams leading into neighborhoods with sub-$400k homes as agents scramble to get offers in.
Low rates, tight inventory, and at least a little California and Oregon exodus appear to be more than enough to counteract any COVID-19 related economic slowdown. It has been a while since I saw a mad rush to buy like this, we had a similar run up in 2016-17. It's nuts out there for buyers with budgets under half a million dollars. Those of you qualified to spend a bit more will find a more relaxed experience as the supply of high end properties are more in line with demand at the moment.
Even fixers are starting to show robust activity after a couple of years of buyers snubbing them. This is a smokin' hot market right now and so long as rates stay low a sellers remain in the minority, buyers will have to fight for every deal.
Friday, September 11, 2020
Pricing is a thing in this market. The sub $450,000 market is pretty hot right now and it is hard to miss the mark. But as you move into that middle range between $450k and $700k pricing is very important. Now, to be clear, pricing is important in all price ranges, but the market is hot enough right now at the entry point that a seller can get away with a price too low or too high. The starter market will gobble up a deal with multiple offers over asking if it is priced too low and over priced homes will see slightly under asking offers. But the middle range can be a bit dangerous. Price it too low and it will sell but multiple offers may not happen, and that means the seller is leaving money behind. Over price it and it will sit. Many buyer's are reluctant to offer substantially under asking even when the KNOW the house is too high.
Getting the price just right is a very big deal right now in that middle range $450-$700k. Buyers should not be afraid to offer less if the home is overpriced. Low-balling is not a thing right now and buyers should be aware that sellers are often emotional enough to not even counter you should your offer be insulting. That said, a seller should counter any low ball offer because generally, a person that takes the time to write the offer has enough interest to potentially come to terms that are mutually acceptable. All parties in a real estate deal should try to stay logical about the price and terms, buyers should save the emotion for choosing part of the equation. Once a choice is made switch to logical thinking.
That can be difficult, but I have had clients wish they had been logical in the negotiating phase after losing a house they later wished they had bought. Another issue is the time on market. This is often misunderstood by buyers and even agents sometimes. When a property has been on the market a long time there are a variety of reasons why, sometimes the house was overpriced for few months and the seller just lowered the price recently to place it more in line with the market. Some buyers may think they can low-ball the seller here, but they may find a solid wall. Often another buyer steps in and snipes the property from them while they wasted their time offering too low.
There are 2.6 million people in the Portland-Vancouver metro area and some 7000 agents working it. The MLS is interconnected with the world wide web and few deals go undiscovered. If a price looks too good to be true, it probably isn't true :) Buyer's looking for a "deal" should look at fixers. They should be prepared to put 10% or preferably 20% down. This market has not been too cozy to fixers and that means potential value opportunities. Also homes that need enough work to be ineligible for FHA or VA financing are less competitive because at least half the buyers are using government backed loan products. Thinning the competition is a good way to get ahead. Of course buyers that are not predisposed to make repairs may find the local market prices for such work to be very expensive and thus that "deal" may turn out to be not such a great value after all.
Sellers and buyers can both do well in the current market climate. Buyers should be less concerned about price and buy the house that will make them happiest. Loan rates are super low right now and getting the house you want will pay off in the future as the mortgage rate is locked in at historic lows. Every month you get your "deal" when you make that payment.
Friday, September 4, 2020
This real estate market is gobbling up everything it sees under $400,000. Homes that seem to have high-ish prices are snapped up in a matter of days. I wrote "-ish" because this market still tends to ignore truly overpriced homes, but under $400,000 seems to be like under $300,000 was just two years ago.
These low interest rates are bringing new buyers to the market and that is no doubt applying maximum pressure at the entry point to home ownership.Sellers seem to be sitting tight as inventory in this high demand sector of the market remains tight. Any seller sitting on a sub $400k property ought to consider listing and making a move up as the middle of the market is not as hot as the bottom. We continue to see bottom pressure creating an opportunity to sell high and buy low-ish. Again with the "ish" that low is relatively speaking, this market will ignore an overpriced listing but it will swallow whole a "value" priced listing.
If you are sitting on a 3 bed 2 bath home in that coveted $300-$400k price range call me or call your go-to Realtor® today, you may be shocked to see what the market might pay for you little house :)
Friday, August 28, 2020
Vancouver's Heights has been around for decades and it has remained a solid place to live. The Heights is actually a broad coalition of neighborhoods from the vintage upscale Dubois Park and South Cliff to the more modest areas such as Harney Heights and Northcrest. This area is also the focus of the next great redevelopment zone for the city, simply and aptly named "The Heights District."
This new district will include the entire Tower Mall area where MacArthur meets Mill Plain east ro Andresan. This will be a new urban center designed to create an effective center of town feel while maintaining the mostly suburban feel of the existing neighborhoods.
I wouldn't underestimate Vancouver's resolve on this. From the complete renovation of Esther Short, the bold Columbia Shores and the the shiny new Waterfront, Vancouver has been bring its 'A' game to the development of older areas. The existing neighborhoods offer a wide variety of opportunities from multi-million dollar mansions overlooking the Columbia to some classic Kaiser cottages from WWII.
Friday, August 21, 2020
How's that for click bait? All too often I find buyers and sellers trying to line everything up for the perfect close and move. real estate transactions have lots of moving parts, seriously, internal combustion engine levels of moving parts! Trying to time everything perfectly with a train of buyers and sellers all lined up like the proverbial dominoes, is like herding cats.
I have mentioned this before and it is worth mentioning again. Buyers do not try to time your closing with your move out date for perfect alignment. That is a recipe for drama. You have a seller who is moving and often waiting on another seller at the other end who is waiting on a seller, etc. Pay a few bucks extra rent and give yourself a two week cushion. It's the best money you ever spend because now you are moving slowly rather than in a rush. Even in the best case scenario with the "perfect timing" approach you end up damaging your current apartment/house and or breaking your valuables because you are in a hurry. The worst case scenario is that you have movers show up but your seller can get out! Save yourself the heartache buy giving yourself a two week cushion. You'll thank me later :)
Interest rates remain low and buyers continue to enter the market where as sellers seem to be scarce. This has created a bit of a seller's market despite economic conditions that suggest otherwise. Buyers need to be prepared for multiple offers on well priced homes near or below the median price which is just shy of $400k locally.
Friday, August 14, 2020
Vancouver, USA is a place that has one of the most diverse residential real estate markets in the entire region. The city proper lies on the shores of the mighty Columbia River where nearly 200,000 people reside within the incorporated boundary. But Vancouver also has another 140,000 or so people living in urban and suburban neighborhoods just outside the official "city."
This can make for some interesting transitions between various neighborhoods that have developed over the decades at different paces and under different county guidelines for development. When venturing outside the incorporated boundaries of the city, neighborhoods will take on a variety of different characteristics ranging from near rural to urban densities. Outside of the incorporated city one may find neighborhoods with streets that transition from fully developed suburbia to rural open culvert and back again. This is very rare inside the incorporated city but somewhat common in unincorporated neighborhoods. This is not a problem per se but for those that like a conforming neighborhood the incorporated city is the best bet.
It is mostly in the unincorporated neighborhoods that one can find a suburban home on a large 1/2 acre or even 1 acre lot with a bit of a country feel yet still "in town" with close proximity to suburban amenities like schools and shopping. But these are also neighborhoods where one might notice some quasi rural effects such as livestock, roosters, and other traditional rural and farming type ambiance for better or worse.
Most cities have a variety of transitional areas but Vancouver has 140,000 people living in these unincorporated neighborhoods. Vancouver has more people living in the neighborhoods outside the city than live in any of Portland's suburban cities including Gresham, Beaverton, and Hillsboro.
At some point over the next decade or so, the city will annex most of these areas and when that happens some conformity changes will occur which in general helps the overall aesthetic, but may cripple some of the charm.
|Rural 5 acres, in close to "town"|
For those that want a house on five acres with horses and such, Vancouver even has a fair bit of that to the east in the Proebstel area. Like the title says, it's an eclectic mix with something for everyone :)
Friday, August 7, 2020
Buyers trying to find a house under $400k are going to meet a lot of other buyers doing the same thing. Down around $300k it is a zoo with multiple offers over asking the norm rather than the exception. With the Clark County Median home price right near $400k that is the new "sub-median" line.
Although COVID 19 has claimed many jobs the real estate market continues to be hot. Lenders are looking closely at buyers but when things align the loan rates are very low and that mean more buyers can afford a house despite the rising prices. This puts pressure on that entry level market.
But for the first time in a fair while, new homes are available in the sub-median price range. A brand new home for under $400k? Yes, not a lot of options, but they are out there. Before you run off to that shiny new subdivision be mindful that new home sin the sub median price range will be attached housing or at best a very small house on a tiny lot. The resale market can still deliver a small house on a big lot, and for many who seek some stretching room, that is the perfect ticket.
Did you ever think you'd see the day that a 800 SF 'Kaiser Cottage' would be fetching $300k? Well that day is here some of then are and they are getting snatched right up at those lofty prices. 2.5% interest rates on 30 year fixed loans will make a market out of thin air!
Friday, July 31, 2020
Friday, July 24, 2020
A $300k mortgage at 3.5% will have a principle and interest payment of $1347 per month. That same loan at 3.0% has a PI payment of just $1265. A buyer is qualified based mostly on the amount of the payment relative to income and other payments. At 3.0% interest that $1347 payment gets a loan of $319,500. That is nearly $20,000 MORE buying power. It's like you just got a big fat raise from your boss.
I have many buyers that are looking about, and now is the time to pull the trigger on these crazy low rates. I have seen well qualified borrowers getting rates on 30 year fixed mortgages in the middle twos!
Buyer's this is your moment. Go out and lock down that dream house with a historic low mortgage.
Friday, July 17, 2020
|Finance able fixer home sold last year|
Not all fixers are problems. Buyers using a conventional style loan can by a cosmetically rough house for tens of thousands less than the future market value when fixed up. A little do it yourself action can go a long ways.
FHA and VA buyers are in a little tougher spot when looking at fixers. These are government backed loans and as such the property is scrutinized by the lender a bit more. That doesn't mean a light cosmetic fixer won't fly, it very well may be fine. I have helped buyers on a budget using VA and FHA loans to get into a light to medium fixer. Choosing an experienced local agent that understands the nuances of the various loan programs can go a long way towards getting a home under market that needs a little TLC.
The combination of a cosmetic discount and the ridiculously low rates for a mortgage right now, could lead a savvy buyer to a huge equity gain in the short term. Buyers seeking that perfect move in house may have to fight off some competitors but with loan rates dipping into the 2's for well qualified borrowers, now is definitely a good time to buy a house.
Sellers with a home to sell that is tidy and ready for the market, you are in the proverbial 'catbird seat' with swarms of eager buyers waiting to snatch up you home.
Friday, July 10, 2020
Locally we are on the cusp of entering Phase 3. The local government applied for it two weeks ago but a recent mini-spike of cases has them in a holding pattern at Phase 2. What ever the reason be it cabin fever, low interest rates, or optimism about the future end of this pandemic, buyers are out in force writing offers and buying houses. If seller don't start listing more houses we could see a return to rising values. Right now it seems that prices are basically steady.
The local MLS is showing a tightening inventory but prices year over year for June in the Portland-Vancouver Metro Area were up a a few ticks at 2.7%.
As crazy as this year has been, real estate has weathered the storm pretty well, I am certainly thankful for that.
Friday, July 3, 2020
Friday, June 26, 2020
Real estate sales in Clark County are down but not because of a lack of demand, but rather a lack of inventory. Pricing is steady and buyers are still facing a multiple offer environment on homes priced well or nearly anything under the local median price.
This economic slowdown may go down in history as the weirdest recession ever. Buyers seem to think the slowdown has made their bargaining position stronger, but they are finding out the market is still rather tough on buyers in the sub $350,000 price range. Buyers need to be willing to lead with a strong offer when bidding for sub-median priced homes.
Meanwhile up at the other end of the pricing spectrum, buyers with more than $600,000 to spend are seeing more malleable sellers. A well priced high-end home will still attract multiple offers, but most pricing at the top of the range seems to be neutral or high and buyers can expect some room for negotiation on these types of listings.
Overall we are fortunate to have a warm market during an otherwise cool economy.
Saturday, June 20, 2020
originally published 11/30/2018, by Rod Sager
Gentrification has become a 'dirty' word in some circles. For those unaware of this term, it is used to describe the redevelopment of older run-down areas into more vibrant and affluent neighborhoods. There are always going to be growing pains when this type of real estate turnover happens.
The funny thing about it is this: when neighborhoods are run down they tend to produce less income and thus less taxes for local governments. They also typically have a higher drain on local services funded by those taxes. People are often complaining about all the issues associated with these types of neighborhoods, increased crime, vagrancy, drugs, etc.
After the neighborhoods start to get redeveloped the local area often becomes more expensive and sometimes people that live there can no longer afford the rents / prices. This creates a whole new layer of complaints from constituents.
When old industrial areas are converted to residential, this is less of a problem since no one "lived" in the abandoned industrial areas. One might think of Portland's South Waterfront or Vancouver's new waterfront. But ultimately these areas create a sphere of affluence around them putting upward pressure on rents and property values in nearby neighborhoods.
It can become the classic scenario of pleasing one group by pissing off another. For local governments chasing tax revenue the choice is easy, gentrification benefits the community at large so long as the local elected officials use the new found tax wealth to benefit the community at large. Sometimes that happens other times not so much.
In general Vancouver USA will benefit from the gentrification of Downtown and surrounding areas. What is most important for those who feel they may be on the pricing bubble is to buy while you can. As values push upward, those who bought will benefit greatly where as those who continue to rent will find themselves on increasingly thin ice. Soon they who choose to rent will become the voices against gentrification. Yet often they were the voices against the run down, crime infested neighborhoods that are being fixed.
The moral of this tale is that if you want to be able to stay in an area that is rising up, you better buy while you can. In these rising value scenarios, renters have to move, owners choose to move. That is a big difference.
Friday, June 12, 2020
Real Estate however is a commodity. Whether one rents or owns we all need a place to live. Real estate can weather the storms of health pandemics and even civil unrest. So long as our financial institutions are solvent and prepared to provide funding for development and loans for purchases the industry should be OK.
The inventory levels locally are still about as tight as they were right before the pandemic hit. As I have written several times over the last couple of months, listings are down and buyers are down in near equal numbers and that has left the market slower but steady on values. So long as the balance between buyers and sellers does not slip to far in favor of buyers the market should continue to be healthy. Economic conditions are not ideal, but they are still solvent and that means that buyers can buy with some confidence. Even if prices take a dip, which they could, owning real estate is still better than paying rent for the vast majority of people.
Buyers should bear in mind that during the last real estate crisis in 2009-2011, housing prices were low but rents skyrocketed. Once a buyer buys a house the "rent" ie. mortgage payment is fixed. No landlord to raise the rent. Should a buyer encounter difficulty with income, it is generally easier for a landlord to evict a tenant than it is a bank to foreclose. The decision to buy a house should not be put off due to fear of job loss or income reduction because that fear applies to renters and buyers alike.
The real estate market remains sound and the trend does not seem likely to change dramatically one way or the other in the short term.
Friday, June 5, 2020
When rates dip low that reveals a wonderful opportunity for buyers to get a lower payment or to afford a larger or nicer home without paying more money for it. Generally low rates lead to an uptick in activity for buyers and thus a rising price condition. However, COVID-19 has managed to keep a lid on prices. The recent civil unrest may also help keep prices in check. For buyers this is good news a combination of low rates and stable pricing is always a good thing.
Buyers thinking about a home should get started now because rates will only remain low while investors are leery of equities. Furthermore as COVID-19 response restrictions are eased more buyers are likely to emerge and the market could potentially see a return to upward pricing.
Mortgage lenders seem to be handling the COVID-19 well in underwriting. The tendency in a downward job market is for lenders to become more tight with buyers. So far it seems only marginal. Other lending lines like credit cards and car loans are getting real stingy.
This is a strange set of conditions we see now so buckle up and enjoy the ride.
Friday, May 29, 2020
The census 2020 should show the City proper at close to 200,000 people and in the 14 zip-codes that make up the whole of the 'Couv' the count should roll in around 335,000. Just completing the pending Orchards annexation alone will put Vancouver well into the top 100 cities in America ahead of Buffalo NY and they have an NFL team!
Vancouver is living up to the challenge with a robust commitment to urban development from high density projects in suburbia right to the core of the city with the new waterfront and increased density in the downtown area. Our skyline is transforming before our eyes with a sweeping panorama from the Interstate bridge to the midway point of the waterfront. But the waterfront has just begun to grow and over the next several years our urban skyline will feature a contiguous row of high rise buildings from downtown all the way to the port.
Real estate opportunities abound for commercial, residential and even industrial applications. This town is tearing away from the tether to Portland and although our symbiotic relationship will not likely ever go away, we are out of the nest and starting to soar.
Business opportunities continue to provide excellent jobs and the desire for employees to avoid commuting to Portland ensures Washington employers the best pick of local talent. Living and working in Clark County is the dream scenario as employees avoid Oregon's brutal, soul crushing income tax, lousy highway system, and Portland's aggressive homeless population. Meanwhile employees over here enjoy superior schools, less busy highways, and overall better quality of life.
Vancouver has an opportunity when this COVID crisis is over to make serious plays for employers in Portland fed up with the excessive regulation, constant protests disrupting business, homeless camps destroying the environment with litter and human waste, and unhappy employees eager to leave for greener pastures elsewhere... like Vancouver.
Hopefully the Mayor is up to the challenge and we can continue this amazing urban transformation. For residential real estate the options in Vancouver are across the full spectrum from 10,000 square foot mansions on the water to multi-million dollar riverfront condos and everything else right down to a bargain value on one of those darling 'Kaiser Cottages' one can still find under $300,000.
Things are still looking up in America's Vancouver and all across Clark County.
Friday, May 22, 2020
Governor Inslee is up for re-election and I can only imagine he intends to win. Pissing off 75% of the voters is not an ideal way to win an election that is but five months away. The governor has to balance public safety with the will of that public to comply and compliance is starting to run thin on patience.
Phase II will allow for a partial reopening of restaurants with strict guidelines to keep with the notion of social distancing and general safety. This move into Phase II will definitely help economic conditions and that of course will help keep real estate stable through the summer.
Our market continues to be stable despite a massive overall slowdown in activity. I have been on about this since the dawn of this pandemic. Real estate is not unlike most economic models in that it is largely driven by supply and demand. In a typical economic cycle demand is the driving side that moves the market up or down. A slow economy tends to slow the demand for housing by reducing the number of qualified buyers. But this pandemic has actually led to a reduction in both willing sellers as well as qualified buyers. When both the supply and demand drop simultaneously then the market tends to be flat rather than drop. Real estate agents are feeling it because there are less sellers and less buyers which in turn reduces the number of transactions taking place in a given month. But buyers should not expect to strut around like a rooster in the hen house because sellers are holding their ground. Well priced homes are still seeing multiple offers.
So long as this remains the case we have a very good chance of seeing a nice recovery in real estate because the the end of COVID-19 will likely lead to a rise on both sides of the supply/demand chain.
I really hope that this Corona virus settles down so we can all get back to work and back to being productive and in a healthy environment.
Friday, May 15, 2020
There is an opportunity for sellers and buyers in that the overall market is slower than normal, there are fewer homes being listed and fewer buyers bidding. So pricing is steady but the atmosphere is a bit more relaxed. It's a good time to be a buyer or seller because your agent should have a little extra time since volume is down.
There is always opportunity in real estate when you keep your eyes peeled for it. One part of the market that seems to be softening up is the fixers. Most buyers right now are looking for something turn key, move in ready. So looking for something that needs a little TLC could produce an opportunity to get a bargain. Don't expect a crazy bargain though, this market is too large to let a good deal go unnoticed.
Stay safe and let's hope the Governor's phase 2 plan gives us a little more room to stretch out.
Friday, May 1, 2020
Before I make comments on the upcoming information from the Governor's office, real estate is still chugging along at a slow but measured pace. The slow down is seems to be equally distributed between buyers and sellers keeping the market in balance and prices steady. This is good news for real estate at a time that many industries are seeing hard times in the face of this pandemic.
Sometime today Governor Inslee is expected to make an announcement regarding the May 4th revision to his COVID-19 response plan. Although the governor's office has suggested some loosening may come, it is highly unlikely that any changes will be that significant. This is where the governor will make or break his entire career.
This virus is a genuine threat and measures were needed and still are needed to protect the health and safety of Washington residents. Finding the balance is not easy but as they say, that's why he gets paid the big bucks. It is times like this that truly test the leadership of government executive officers. I do not envy the position Governor Inslee is facing. This could go so very wrong that voters anger lingers all the way to the 2022 election or worse yet, a recall of the Governor.
Washington residents have been fairly patient these last 6 weeks under a fairly heavy handed approach to containing this virus outbreak. Now with news circulating out of New York that this virus is not quite as deadly as originally thought, the governor best tread carefully. If he goes too strict he may face a challenge for recall or maybe worse. But if he goes too soft and there is a relapse of the virus he could face equal scrutiny. The governor needs to show an understanding of the health risks measured against known risks of economic collapse on the health and well being of the state at large. Trading a million or more Washington residents livelyhood and or lives, though economic loss of job, health care, housing, and other fundamental life necessities in exchange for "potentially" saving a few thousand lives to COVID-19 may not sit well with voters of either party.
I hope the governor sees fit to allow the bulk of the workforce to return to work with some COVID-19 safety conditions. I do not think any kind of close quarters events should be allowed yet, but there is no reason restaurants and other establishments should not be able to at least operate at partial capacity allowing for social distancing and with proper staff precautions to minimize potential spreading. Factories and the like need to get back to work ASAP.
The amazing economy we had rolling in Q1 was able to absorb this 4-6 week shut down, but the government does not have the resources to continue floating aid for much longer. Let's all hope Governor Inslee and other leaders around the nation can get this call right. If we crash this economy so hard we enter an actual depression, people will wish they died from virus rather than ride out what there ancestors had to endure from 1929 to 1941. There is no sugar coating a depression. It will make the "great recession" of 2009-2011 seem like a economic boom. This is not a place we ever want to go and certainly we should not trust a government that would deliberately take us there. The people who are suffering under this lock down are the poor and the middle class, the rich are doing just fine so keep that in mind.
Things are still fundamentally sound and smart planning from our leaders can help us recover by the end of the year. For real estate, things are still solid, slow, but steady. Putting people back to work will do wonders for the morale of the nation, will energize the economy, and most likely save lives.
That's my two cents, anyway.
Friday, April 24, 2020
I have noticed that both buyers and sellers have slowed down of decided to wait out the pandemic. That may be fine and well but I believe that buyers and sellers should only do that if they want to do that and not because they think the Governor said they can't. Governor Inslee has provided a pathway for real estate to continue to operate under the pandemic control measures he has in place.
I have seen a roughly equal loss of buyers and sellers so the market conditions remain neutral and pricing is stable. This is a still a good time to buy or sell your home. Banks are still lending money and closings are still happening. I just closed a transaction for a seller that has greatly enhanced their retirement plans as they got an opportunity to get into a senior retirement place they have been waiting for. Don't let COVID-19 disrupt your retirement, moving or any real estate plans, we can still help people with all their real estate needs.
Stay healthy, follow that social distancing, and soon we will all be able to move towards a more normal lifestyle.
Friday, April 17, 2020
Home buyers and home owners looking to sell will be happy to see at least a slight softening on the COVID-19 response and I think Governor Inslee may be feeling the same. I guess we will just have to see in the coming weeks.
I am not seeing a slide in prices or any kind of real estate adjustment and I still believe that is largely due to the fact that both the supply side and the demand side are slower so the overall market seems steady.
Locally as Realtors® we can still show homes but have to follow strict guidelines including limiting people in the house and using sanitation and distancing guidelines. i take that part very seriously and understand we must try and keep this thing from having a relapse.
Buyers can and should make an offer on any house they like as the seller will likely try to accommodate them. Everyone is a bit edgy about the future. People are thinking how long is this going on? will I keep my job? These types of thing and seller are worried about that too. Will this buyer still have a job when the loan is done?
Hopefully we can start getting a large chunk of the workforce back on the job and some of this can subside. We will likely have a quasi-normal at best summer as this thing will lurk in the background as we prepare for a possible resurgence in the fall.
Get ready the pent up demand for real estate might be unleashed tsunami style if things start to improve heading into May.
Friday, April 10, 2020
Prices are holding steady and the market will survive this providing we can get back to work in May. I am holding out hope that the Governor here in Washington State will hold the line at the current "stay home" mandate till May 4th and then relax things so people can return to some sense of normality as well as normal income flow.
Everything set on the shoulders of america's governors and the Feds as they decide whether to extend the "crisis" or put us back to work. Stay tuned America, this is big.
Friday, April 3, 2020
I appreciate the governor giving some latitude to real estate but I think some of that latitude should be extended to the construction trades as well. I am familiar with construction activities and most construction projects have workers space at 6 feet or further 90% of the time and the systems in place could be modified by project managers to gain 100% compliance.
I do not envy the position of the president or any of our state governors as they have to make important decisions that can be a matter of life and death as well as the cause economic calamities. I still believe the governor is a bit heavy handed here with the COVID-19 response. Now this is an important and dangerous situation so I am not of the mind to suggest the governor should not have taken decisive action, in fact to the contrary, I think he had to. But the economy is also import as it is the lifeblood for healthcare, well being, and ultimately funds the government's operations.
Governor Inslee needs to keep as many people employed as possible in any position that can honor the 6 foot distancing. Where the governor can be heavy handed is in the enforcement of that 6 foot rule and any other COVID-19 mandates. Project managers do not want to face heavy fines or a shutdown over workers failing to comply, so site supers would be more than willing to crack down and keep everyone safe.
Factories and other operations where stations are close, could be modified to run half ops with half the stations closed and other modifications to the systems to keep workers employed should be considered. Even restaurants could have been open with 1/3 to 1/2 cap restrictions but I know that is unlikely to be approved.
The bottom line is that buyers and sellers can still execute their transactions and the governor is to be commended for seeing that real estate procedures can be modified to comply with the government safety mandate for COVID-19. Irregardless of one's personal political views, we should all support the governors of every state as they try and deal with this difficult situation. This is not the time for petty politics.
Friday, March 27, 2020
However the buying and selling process is going to be slowed down for all active listings in the area until such time the government returns to a more "normal" status. If we can get this thing under control soon, say in the next 30-45 days, we should be right back on track for a reasonable real estate market. I believe that at least some negative fallout in the form of some layoffs and such will result. For buyers in the entry-level price ranges this could be a blessing in disguise as that potential "fallout" would soften the number of qualified buyers seeking homes and make life a little easier in the hunt once it resumes hopefully before May.
Whatever the outcome economically there are going to be some winners and losers. The losers are those that unfortunately lost jobs or opportunities due to this government lock-down. They will get their chance to return after things perk up. The winners need to be ready to strike when the lock-down is lifted.
Friday, March 20, 2020
I believe that investors are genuinely spooked by this virus and are waiting for the cases to start declining rather than continuing upwards. Once the dust settles they will likely move that cash back into equities, bonds, gold or where ever they think the best opportunity is. Until that happens mortgage interest rates will continue to climb, the stock market will remain flat or possibly dip lower. We really have to wait to see what the "big financial fish" do before we can get a handle on the long term market effects for real estate and other sectors.
Locally our housing market hasn't reacted that much to this condition. There does seem to be a tad less buyers out and about house hunting, but well priced homes seem to be getting traction despite the doom and gloom. Hopefully Washington's governor will not go too far with the draconian wand like they have in California, Oregon, and New York. Yes, we need to keep people safe, but there are also practical limits to this thing and I believe the aforementioned states have already tread into those murky waters of over reaction.
That said, we should all be mindful of the call for some social distancing and limit excursions to solo activities and necessary outings. Looking at houses is necessary :)
Friday, March 13, 2020
In contrast to the so called "Great Recession" that began at the end of 2008, this event is not being "triggered" by an underlying financial crisis like we had in 2008. Leading up to the last recession, back in '08 there were several real and identifiable problems including a fair bit of corrupt behavior in the mortgage lending business as well as a few government fails on SEC regulations and banking. The 2008 crisis was real. This crisis is simply an excuse for super rich billionaires to take massive profits on what was largely considered to be a puffed up stock market.
The core economic indicators are still much stronger than they were in 2008. That said, this could potentially become something to worry about if the actual job market starts to soften as a result. I still think that isn't going to happen just because of this Corona scare and the recent Wall Street sell-off. A broad economic downtown will require other issues than an overblown virus. Make no mistake, the Corona virus is being exploited. As of this writing less than 5,000 people have died from this COVID-19 virus, on a planet populated by 7.6 BILLION. This year's influenza season (flu) is expected to take the lives of some 700,000 people worldwide.
Although Corona virus is more aggressive in its spread and in certain risk categories it is more deadly, it however is not a big enough problem to warrant the market response we see here. It has become political in nature and that has created as much a problem as the actual virus itself.
It is important to remember that the rich billionaires that sold early in the market slide are sitting on massive piles of cash. These guys sold off $6.5 trillion last week, this week all of the small investors were in a panic and sold off their positions making matters even worse for them and BETTER for the rich guys. The billionaires will come back into the market after the dust settles and buy back their positions for 60 to 70 cents on the dollar. They will make all the money back again plus a tidy bit extra. Right now about $10 TRILLION in stock market cash has exited the Wall Street equities market and now is circulating in other markets.
What is important is that there is idle cash in the marketplace right now. The billionaires don't like idle cash. Even if the super rich start buying back stocks soon, they will ultimately have surplus cash and some of that cash will likely find its way into the economy via lending, capital investment, and venture capital. Much of this will drive real estate projects that often need large chunks of up front cash to get started.
Treasuries are not yielding much at the moment so investors will look to bonds, mortgages, and other real estate funding for better returns over the long haul. Again the investors will come back to the stock market after the panic subsides and when that happens some of this potential cash for real estate development will go away. Developers should be jumping on this opportunity for financing NOW!
In the current marketplace we still see strong employment, rising wages, low mortgage interest rates, and healthy investment in real estate. The housing market still looks pretty rosy for the rest of our spring season. I am seeing a tightening in inventory and more aggressive offers from buyers and that is also an indicator at least for the short term that conditions in housing are solid.
Friday, March 6, 2020
I am not saying that a refinance is "bad" but rather a refinance should be carefully thought out, especially if the homeowner is taking out cash. I have done many mortgage refinances over the decades with numerous properties. I have done them wrong and I have done them right. One should be cautious of what they use the money for when doing a refi. I absolutely DO NOT recommend taking cash out of a primary residence to fund things like cars, boats, or vacations. This is always a bad idea.
I am also very cautious about taking cash out of a primary residence to consolidate short term debts. If the debts are manageable the homeowner may be better off just whacking those debts down with heavy payments. The only thing that hurts a consumer more than a high rate of interest is a long term of payment. So a car payment at 7% interest with 3 years to go is better left alone than refinancing that debt over 30 years and taking valuable and secure equity from your home. Lets say the car was 0 down, $40,000 originally financed at 7% for 6 years. If the car is halfway through the loan cycle, the bulk of the interest is already paid. The balance is down to $16,408 after three years. There is only $1,100 remaining in interest on the loan. Refinancing that $16,408 over 30 years even at 4% will cost the debtor TEN TIMES as much interest! $11,792 in interest over 30 years. If money is tight and the car payment has gotten difficult to manage, it is often possible to refinance the car.
I am a strong proponent of using mortgage cash to improve the property. That doesn't mean buying furniture by the way. Remodel the kitchen, put in new landscaping, new siding and paint, etc. This improves the value of the house and thus helps to maintain the homeowners equity position despite increasing the balance owed. If the homeowner uses credit cards to purchase the home improvements, then refinances to pay that short term debt off, that works fine. Doing the improvements up front will at least result in a better property appraisal and possibly a lower rate on the new mortgage due to a potentially lower LTV.
Typically a cash out refinance will cost the homeowner either up front fees or a higher interest rate. Often that rate can be 1/4 to 1/2 percent which adds up to thousands of dollars over the life of the loan.
Ultimately if a homeowner intends to stay in the house for more than 5 years and can improve the rate of interest by a full percentage point, a refinance makes good sense particularly if doing a rate and term loan with no cash out.
Remember that every situation is unique and I am only suggesting that careful thought and study goes into the refinance decision. Furthermore find a local loan professional you can sit down with and go over the facts and figures. Don't do something as important as a mortgage with some shady online firm that teases you with a seemingly low rate. Mortgage rates are simply not that far apart in the real world. Mortgages are traded on wall street and investors are not paying a very big spread so when one bank shows a rate that is 1/2 percent lower than most others, you WILL be paying for that somewhere in the fee tree! There is absolutely NO FREE LUNCH in the lending business, no matter what the sleazy spokesperson says. Mortgages are highly complex devices and as such it is easy to "pull the wool over the eyes" of even the most brilliant people.
When I refinance a house, especially my primary residence, I look at more than just the rate. I look at what my current principal payment is each month at the time of refi, what the new principal payment will be, how much total interest did I add to the end of loan. Why am I concerned about principal reduction? Because home equity is the VERY reason buying is better than renting. When a home owner erodes the equity in the home, they erode the value of ownership, it should not be taken lightly.
Remember that when someone refinances a house they are in a loan already and they have paid that loan down to some extent. If someone is 5 years into a mortgage and they refi at 30 years they are postponing the eventual payoff by another 5 years. That adds total interest to the mix. When I do a rate and term refi, I also calculate the amount of time the new lower payment takes to cover the expense of doing the loan. If the loan fees are $3000 and I am saving $100 per month then I recover those fees after 30 months. If I refi the house again or sell it in less than 30 months I lost money on the refi! A good loan officer will go over these types of details with every prospect and that is worth far more than any slight difference in rate one might pay at a less quality firm.