By Jason O’Neil
Sit tight. Last week mortgage interest rates jumped drastically. Some say without warning, but then again, most have been preaching for months, if not years, that rates can’t stay this low. Can they?
Why did they rise? Is Wall Street fed up? Was the Federal Reserve testing the market’s tolerance with some well thought out comments? “The downside risks to the outlook for the economy and the labor market have diminished,” said Federal Reserve Board Chairman Ben Bernanke on June 19. Will the Fed begin to unwind its efforts? Time will tell the answer to all of these questions. But I do assure you that the ride is not over. As we’ve seen in years past, there is always a secondary action to the immediate (usually over-reaction) reaction.
Rates will likely dip again and level off in a somewhat upward trajectory. We have likely seen the record low rates come and go.
This happens. It is the cycle. It is not doom and gloom. Rates are still low and people are still interested in buying houses. In fact, I typically see an uptick in home sales immediately after an interest rate rise as homebuyers fear further increases.
As real estate professionals, we don’t have all the answers when it comes to the future of interest rates, but we owe it to our clients to partner with mortgage professionals who are pro-active and knowledgeable about their industry. Rates will be what they will be, and while they have an impact, they certainly are not the largest reason that someone should or should not buy a home.
Jason O’Neil is an associate broker with Encore Sotheby’s International Realty in Indianapolis. Connect with him at jasononeilrealtor.com.
By Sam DeBord
When talking to associates and the public about real estate topics, it’s important to be educated on the issues that we value most as REALTORS®. Government fiscal and tax policy can be confusing issues that many REALTORS® don’t feel they have time for. Still, anyone working in the industry is bound to strike up a conversation that leads to the current budget shortfall and potential ways to fix it. Reducing or eliminating the Mortgage Interest Deduction is often suggested.
REALTOR® advocates need to know a few quick facts to show our clients and our communities why this deduction is so important to homeowners, families, and the country as a whole. This infographic makes the major points that every REALTOR® should be able to recount, without getting mired in the muck of too much tax policy:
The statistics make it plainly clear how valuable the Mortgage Interest Deduction is to Americans. Roughly three out of every four homeowners with a mortgage claims the deduction.
With an average tax deduction of $2,713, the MID is a major savings for home buyers who are investing in their futures. Without that deduction, we’d see some significant increases in taxes for middle-class Americans.
The typical taxpayer who claims the MID is under 45 years old, married, and has children. Their household income is under $200,000. This is the quintessential working family that is in the process of building a nest egg for their children’s future and long-term for retirement. Saving those tax dollars each year is encouraging them to make investments in their community.
One of the biggest concerns with proposals to change the MID would be the effect on home prices. Values of real estate across the country would be projected to fall 15 percent if the MID were eliminated altogether. After finally beginning to recover from the previous downturn, real estate markets would be devastated by another such a drastic drop in prices.
Real estate is one of the biggest components of the national GDP, comprising about 15 percent of the total. Consumer spending creates jobs and economic growth, and real estate has always been a leading driver for consumer spending. Our national economic well being is, and always has been, tied to a healthy real estate market.
As REALTORS®, we’re obligated to speak up when real estate issues are on the table. We know better than anyone the importance that the real estate market plays in every American’s financial well-being, whether or not they own a home. Political arguments may espouse some lofty theories, but the real-world facts support our position.
By G. M. Filisko, contributing writer, HouseLogic
Fixed- or adjustable-rate mortgage? How do you answer that perennial buyer question?
Get the 411 on finding the right home loan—including eight questions buyers should ask themselves before choosing an adjustable-rate mortgage—from the free August “Financing Your Home Purchase” article package now at the REALTOR® Content Resource. Here’s just some of the information on adjustable-rate mortgages you’ll find there:
- An ARM does just what its name implies: Its interest rate adjusts at a future date. It moves up and down according to a particular financial market index, such as Treasury bills. Typically, ARMs include a cap on how much the interest rate can increase, such as 3 percent at each adjustment, or 5 percent over the life of the loan.
- ARMs can be a good choice if you expect your income to grow significantly in the coming years. ARMs also often offer a lower interest rate than fixed-rate mortgages during the first few years of the mortgage, which means big savings for you—even if there’s only a half-point difference. But if rates go up, your ARM payment will jump dramatically. Continue reading »