Matt Sundermier's Memos on Real Estate & on Life
Part Professional, Part Personal, ALWAYS INSIGHTFUL
Let’s GET REAL about…Buying New Homes! Never forget that the builder’s sales office and in-house lender work for the builder, not you!
My latest client learned the hard way of the many pitfalls of buying a brand new home. I was glad to come into the transactions late to get him a great rate and restore some trust back into the transaction.
Before looking at model homes, reach out to me and learn why you should have your own REALTOR and mortgage professional on your side when buying a new home.
Lets GET REAL about…Paperwork! Most of us hate it, but managing it, presenting it, and explaining it are crucial to a successful real estate transaction. Contract mastery may not be a skill emphasized on your favorite reality real estate TV show, but don’t hire a REALTOR that can’t effectively explain the paperwork you’re being asked to sign.
Total US household debt continues to climb even as borrowing costs rise with higher interest rates, particularly on credit cards. The total debt level recently hit a NEW record amount of $17.29 trillion…with a T!!!
$1.08 TRILLION is attributed to credit card debt! Many of us are facing harder times with the on-going economic slow down, lingering inflation, and the resumption of federal student loan repayments. With credit card balances & their interest rates at all-time highs, it may be time to consider a cash-out refinance to consolidate high-rate loans.
Home values remain reasonably resilient & most homeowners have record levels of home equity. Even with elevated mortgage rates, it may be better to roll higher rate credit card debt into a new mortgage balance.
Has the economic slowdown forced you to borrow more against credit cards, cars, and education? Borrowing from your equity at a low rate to pay off higher rate debt will lower your overall monthly payments and lower your interest costs over the long-run. I can help you determine the “blended rate” of your various debts, the effective interest rate you’re paying across all of your loans (including your mortgage). If your blended rate is over 7%, then its time to consider a cash-out refinance.
Consider the following graph…according to CreditCards.com the national average credit card interest rate is over 20%!. With The Fed suggesting they don’t plan to reduce the Federal Funds Rate any time soon, this will lead to high credit card rates for some time.
Let us help alleviate the financial stress of carrying high credit card balances at astronomically high interest rates by refinancing them into a lower fixed rate mortgage.
Let’s GET REAL! Being a REALTOR is not about rolling up to a mansion in a Maserati and walking billionaires through homes that sell themselves. It’s about helping everyday clients build their wealth and futures, and that often means you roll up your sleeves to help a first-timer buy a fixer.
Let’s GET REAL! A good Realtor is not the one that GETS your ATTENTION, but rather the one who GIVES you VALUE! This week, I am launching a campaign called “Get Real in Real Estate”…short reels that share real stories that make real impact in real estate transactions. Join me in valuing sincere substance over fake flash.
Mortgage rates have officially shot up to their highest levels of the 21st century (that sounds a tad sensational, but its true). Some 30-yr fixed rates are flirting with 8%, over five-percent higher than the all-time lows seen two short years ago. You have to go back to the late 70s & early 80s to see a steeper increase in mortgage rates. Yikes!
These higher rates are making homeownership unaffordable for many. For others, the sticker shock of the monthly payment is too painful to look at, so they continue to rent instead of buy. We covered how this is a poor decision for building long-term wealth at our home-buying seminar last month, but no time to hash that out again in this post.
For the brave buyers who can persevere in this market, they may be facing very favorable conditions in the short months ahead and wonderful appreciation opportunities in the long run. As others turn and run, buyers in today’s market are experiencing much less competition from other buyers, and negotiating with sellers who are beginning to panic as we approach the slower winter months. While no one loves to pay truckloads of interest to the bank, it is worth noting that these higher rates are currently creating a more mellow, favorable market for buyers.
During the 2020-2021 market craze, it was common to have 5-10 competing offers on a listing. In Folsom, for example, the typical listing fetched a price 5% OVER the asking price. Buying a home in that sort of market is frustrating & disappointing, as you have very little control over the outcome of any offer you may write on a home. I believe that type of market craze will return when interest rates drop, but for the moment persistent buyers have the competitive advantage over motivated sellers. Buyers are in the driver’s seat for the next few months!
While its obvious to say higher rates are everyone’s enemy, for some home buyers they should consider them a friend…or at the very least a frenemy!
Here’s a bold game plan to consider if you are a would-be homebuyer…buy now to lock in your home price and then hope to refinance to a better interest rate once rates come down. When rates do eventually settle down, it will likely push home prices up again as more buyers return to the market. Get in front of that wave if you can afford today’s rates & monthly payment!
If you have considered buying a home, then you should read some of my recent posts. There’s one about the benefits of buying a home in the Fall. Another speaks to how mortgage rates will likely drop in the near future. Again, the masses are waiting to buy until rates drop. Consider going against the herd by buying now and refinancing later. Doing so will have far greater long-term benefits, even if the sting of today’s higher rates hurts for the moment.
In my last post I shared that I see a recession brewing, leading to lower mortgage rates. Well, I think the stage is being set for our next recession right now. Here are 5 big story lines that just came out this week that will lead to slower economic growth (& thus lower mortgage rates!):
#1) Ongoing union strikes – the auto industry strikes are intensifying according to reports from earlier today, so this will slow down a cornerstone of our economy to the tune of $500 million a day in lost productivity.
#2) Government shutdowns – Congress avoided a shut down on Oct 1 by kicking the can down the road with a 45-day budget. But the unprecedented ousting of Speaker Kevin McCarthy could have a greater tumultuous impact on our government operations than a run-of-the-mill budget standoff. Regardless, a prolonged shutdown or inefficiencies within Congress in the coming weeks will impact economic output and further deteriorate the world’s faith in US fiscal responsibility.
#3) Inflation is cooling – the latest core Personal Consumption Expenditure index came in at a .1% monthly increase, below expectations and heading in the right direction. This is a sign The Fed’s policies are working at slowing the economy and tipping things into recessionary territory.
#4) Student loan payments resume soon – nearly $1.6 trillion dollars in student loans will resume repayment status on Sunday (Oct 1st). After a 3.5 year reprieve, over 40 million Americans will now be tightening their purse strings as more of their monthly budget will go to paying their student loans.
#5) surging oil prices – gas prices are rising at an odd time of year (after Labor Day). Other than during the initial outbreak of the war in Ukraine, gas prices have never been higher. This will crimp consumers spending habits as we enter the important holiday season.
Many economists believe consumer spending has been what’s propped up our economy in recent months despite rising interest rates. Well, I believe that comes to an end this coming quarter, and a lousy holiday shopping season will be the beginning of a recession and interest rates will recede in early 2024.
I’ll be keeping my eye on these developing stories in the coming months, as they not only impact the direction of mortgage rates but they will also set the landscape for the 2024 election season. Buckle up! It should be a wild 12 months ahead. Thanks as always for watching, reading and tuning into my content. Have a great weekend!
If you’ve been following me, then you’ve heard me harping all summer long on how the interest rate markets are out of whack. With each passing month, more signals pop up to remind us that we are not in normal economic times.
Earlier this month, The Fed held their Federal Funds Rate steady at 5.5%. This is the highest level since 2001, but how high it is RELATIVE TO other interest rates is what makes things so odd.
Below is a line showing the “spread” (simply known as the difference) between the rate on a 10-yr US Treasury Bond and the Federal Funds Rate. Typically, the 10-yr bond rate is higher than the Federal Funds Rate, making the spread a positive number. In fact, from 2002-2022, the spread has been negative for only 20 months during those 20 years.
But occasionally the Federal Funds Rate increases to unusually high levels, and this spread becomes a negative number. I’ve color-coded those extended negative territories in red, and you can see that a recession has shortly followed every time (illustrated by the gray vertical bands on the timeline). We have escaped a recession despite a negative spread a few times (shown in green), but those were for very brief periods before the spread quickly jumped back into positive terrirory.
Presently, we have witnessed a negative spread between the 10-yr bond rate and the Federal Funds Rate for nearly a year (yellow area on the chart). This is foreshadowing another upcoming recession, but the silver lining is that mortgage rates ALWAYS drop during recessionary times.
When will the recession hit? When will mortgage rates fall? I have some thoughts on that, but will save them for my next post. Thanks for reading, and stay tuned for more.
Today is the Autumnal Equinox! What’s the big deal?
Astronomically, it means the sun is exactly above the equator (any other astronomy lovers in the house??!!).
Practically, it signifies the first day of fall as we begin to experience more nighttime hours than daytime hours.
Economically, it means its the start of the best home buying season in Sacramento!
Don’t believe me? Hear me out…in researching market statistics from the last decade, I’ve debunked the notion that spring & summer are the ideal “buying seasons.” While more people do indeed buy homes during those seasons than any other time of year, the conditions are not as favorable for buyers when compared to fall.
For buyers to have a competitive advantage when buying any product, they need three things:
1.) more buying options relative to the number of competing buyers;
2.) time to consider their options;
3.) stable prices to avoid a market frenzy or buyer’s remorse.
Below are three graphical illustrations that reveal how these factors evolve with the changing seasons, and how fall has consistently been the best season for Sacramento home buyers.
The first compares homes for sale (representing the number of sellers) to the homes that actually sold (representing the number of buyers). From these two figures, our industry calculates a metric known as “months of inventory.” In other words, how many sellers do we have compared to buyers? As a buyer, you want this number to be as high as possible, because it signifies more options for you and less competition against you.
I plotted the last 10 years of Sacramento County home stats, and you can see how in every year (except 2020 when Covid turned everything on its head) the fall season (represented by the dark orange line) has been higher than all of the other seasons. Every. Single Year. And 2023 is shaping up to be the same; as of the time of this post the months of inventory stands at 1.7 months, higher than any other season so far this year.
The next factor to favor buyers is time on the market. It is frustrating as a buyer to have homes sell at a feverish pace. Again, fall has shown to be the slowest season in nearly every year, as the average number of days a home sits on the market before selling is the most in fall.
Lastly, prices have remained stable in fall compared to other times of year. In the winter and spring, Sacramento home prices have been significant seasonal price increases nearly every year. Oddly, summer typically sees price decreases of nearly $10,000. Fall, however, has generally experienced stable home prices, illustrated by the dark orange line hovering right around the 0 line in the chart below (except for the odd fall we had last year).
If my graphs above aren’t convincing enough, consider this…REALTOR.com conducted market research and is predicting that the first week in October will be the most favorable week of the year for home buyers to get a great deal on a home!
While its important to understand market trends, buyers and sellers of real estate should avoid the tempting game of attempting to “time the market.” Rather, if you presently find yourself at a point in your life where buying a home makes sense for financial or familial reasons, then don’t wait until spring; act now. Give me a call to help you first secure your financing options, and then let’s get out there and find you a deal on a home this fall!
Our team has been making a ton of preparations to deliver loads of value in our upcoming seminar aimed at helping folks buy their first home.
As a REALTOR people always ask me, “Matt, when is the best time to buy a home?” The answer in real estate is always, “30 years ago!”
But a more helpful answer I can give is “right now!” Yes, as in Fall. Fall is for more than pumpkins, football and flannel. Statistically fall is also the best season for buyers to have the upper hand in the real estate market. Which is why we are hosting a FREE first-time home buying seminar at our Folsom office on Wednesday September 20th.
Below is a visual that shows how fall is the friendliest season for buyers. When comparing homes for sale (representing the number of sellers) to the homes that actually sold (representing the number of buyers), our industry calculates a metric known as “months of inventory.” In other words, how many sellers do we have compared to buyers. As a buyer, you want this number to be as high as possible, because it signifies more options for you and less competition against you. I plotted the last 10 years of Sacramento County home stats, and you can see how in every year (except 2020 when Covid turned everything on its head) the fall season (represented by the dark orange line) has been higher than all of the other seasons. Every. Single Year. And 2023 is shaping up to be the same; as of the time of this post the monthly of inventory stands at 1.7 months, higher than any other season so far this year.
Even if you’re not quite ready to buy right now but hope to buy a home in the future, you should still come and learn about down payment assistance programs, improving your credit score, and generally knowing what to expect when buying a home. You’ll also learn a bit about our firm and why we’re perfectly suited to help you both find and finance your first home.
There’s no cost or commitment to attend the seminar, but space is limited so register here before space fills up. Sign up, grab a pumpkin spice latte on the way and we’ll see you at our office on the eve of autumn & home buying season on Sept 20th!
This will be our final seminar in what has been a very successful Summer Seminar Series. We thank everyone for their attendance, enthusiasm and interest in these important topics we’ve brought to our clients and community this summer.
Matt Sundermier's Memos on Real Estate & on Life 