Why the fed rate hike is important for home owners and home buyers

Why the fed rate hike
is important for home owners and home buyers 

Photo Credit CNN Money

I talk about rates in my monthly newsletter because it's a piece of the economic puzzle that has a real impact on my clients. I've found there are two main types of consumers when it comes to information like this - those who can't get enough data, and those who want me to sum it up. So here's the short version and some resources for further learning. 

What's going on?

The Federal Funds Rate is a benchmark number in financial markets. It pertains to how much it costs banks to lend and borrow money. The rate is determined by the central banking system of the US, the Federal Reserve System (aka "The Fed").  For the first time since lowering it nearly 10 years ago during the recession The Fed has increased that rate.  It is a small change that was expected, and is seen by many as a vote of confidence in the US economy. 

All this explained via Rube Goldberg Machine 

US historic interest rates explained via sound effects 

Home Owners: 

If you have an adjustable rate mortgage or a home equity line of credit with an adjustable rate, it will likely have a higher rate at your next adjustment. 

Home Buyers: 

Mortgage rates are not predicted to shoot up, but they are almost certain to start increasing now. An increase of half a percentage point for 30 year fixed mortgages is anticipated by the end of 2016.
 
To demonstrate how even a small change can effect your bottom line take the example given by Michael Fratantoni, chief economist of the Mortgage Bankers Association, consider a $200,000 home with a 4% fixed interest rate. Change the rate to 4.25% and your payments go up by $30 a month, potentially adding another $11,000 over the life of the loan. This can also effect the debt to income ratio for a potential home buyer. A recent analysis by the National Association of Realtors found that an increase of half a percentage point to the 30 year fixed rate mortgage (as some economists are predicting will take place by the end of 2016) could result in as many as 7% of potential borrowers not being approved simply because of the rate hike.

Everyone: 

Credit cards have variable rates which are directly impacted by the rate set by the Fed. This 0.25 increase is relatively small so you shouldn't see this impact your budget much, but as the rate climbs so will your credit card bill.   

Savings accounts can look forward to increased returns in the near future. Though some major banks including JP Morgan Chase, Bank of America and Wells Fargo have already increased their prime rate on the money they lend in accordance with this news, they have not yet made any adjustments to their rates for savers. That change is widely expected to come. 

Bottom line: things are changing - they are changing slowly - and all of these rates are still at historic lows. If you carry credit card debt that is now getting more expensive, and if you were waiting for rates to fall lower before making a home purchase than you should probably start evaluating that strategy :) 

US Economy Statistics
News Round Up: Economist, Reuters, NY Times, CNN Money, Washington Post, Market Watch, Marketplace's In-depth Coverage

Northern Virginia Real Estate Market Update

November 2015

Regional Market Update: The DC regional housing market continues to see strong sales activity with year over year increases in activity for the past 12 months. November sales volume across the region was slightly below $1.7 Billion, up 14.3% compared to last year. If you had any doubt that our market has recovered from the recession, check out the below chart. 

NOVA Market Update: Northern VA home prices remain stable. Year to date median prices in most jurisdictions are up. The only one lagging behind is Falls Church City (down 3.8% YoY). Fairfax County median sales price year to date was $475,000 for November.

Rate Update: On 12/16/15 the Fed announced a rate hike for the first time in nearly a decade. I will be posting about this soon. 

What to do when you find mice in your house

I recently got to spend some time with my favorite pest guy who not only knows his stuff (like he's an entomologist y'all) but likes to explain things to me in terms I can understand. It's fun, and it can take the edge off of some gross stuff.

At a routine termite inspection recently he was telling me about the last job he'd done - a routine mouse treatment.

"So what should you do if there's a mouse in your house?" I asked

1. Do something. Ignoring them will just invite more. Mice are social creatures and when they find a place that's comfy they invite friends - and they invite their friends- and they invite their friends... Before you know it you've got rodent Burning Man in your laundry room. 
2. Clean until you find the nest. As good little party hosts, chances are good that they have been nesting somewhere. Do you have a place in your house where things are "stored" (see: forgotten) and you can't get to it easily, or often. That's a very likely candidate. If they've been partying in there for a while you may smell them too. They pee around the nest to help their friends find them. They also sometimes die nearby (especially if you maybe put out some poison) and that will make a smell too. 
3. Call a professional. Like so many things in home ownership, if you want it done right you really should get someone in with the expertice and experience and tools to help you make the problem go away. Most of the things you will think to do (put out traps/ poison / etc.) if not done correctly for the particulars of your situation will just drag out the process. You'll be calling them in a few months anyway. A pro will also be able to more easily assess if you've got a full on party, or just a few scouts and treat accordingly. They will be able to tailor the treatment for your family (dogs/ kids) and help keep everyone safe... everyone but the mice. 

Northern Virginia Real Estate Market Update

October 2015 

Regional Market Update: The DC regional housing market continues to see strong sales activity. The median prices for all home types in the region continue along a slow and steady rise. 

NOVA Market Update: Northern VA home prices remain stable and activity rising over the same time last year. Falls Church saw a 8.1% increase in medial sales price over last October. Fairfax County median sales price year to date is $475,000.

Rate Update: Interest rates on home loans have risen slightly in light of the recent good jobs numbers. Speculation about the Fed raising the prime rate this year continues. Freddie Mac announced that for the week ending November 12, 30-year fixed rates rose to 3.98% (up from 3.87% the week before). 

Home Owner Tips: The value of big home improvements

 

What should you spend your money on?

If you want to know what big ticket projects will be of the most value to you (and increase the sales price of your house), the answer is that it really depends on what you'd enjoy, when you think you may sell, and how out of step your home's finishing/repair is with the others in your neighborhood. Please know I'm happy to stop by and chat about this anytime. 703-303-2889

To start your research online, I recommend this article from HouseLogic which is based on data from Remodeling Magazine's 2015 Cost to Value Report (which is very data and add laden, but I have it if you'd like to see it). The short version is you'll get the best ROI from: a steel front door, things that add living space, things that increase curb appeal (like new siding, garage door), energy efficient windows, and kitchen remodeling. It's not cheap, but great kitchens really do sell houses.   

Northern Virginia Real Estate Market Update

Regional Market Update: The DC regional housing market continues to see strong sales activity.  The median prices for all home types in the region continue along a slow and steady rise. 

NOVA Market Update: Northern VA home prices remain stable and activity rising over the same time last year, with the exception of Falls Church which saw a 15% decrease in sales activity over last September. Fairfax County median sales price year to date is $478,000.

Rate Update: After a small increase this summer interest rates are holding steady for the time being. Experts are not forecasting any major change in the Federal Interest Rate this fall, possibly this year. Consensus is the global economy remains too volatile for the Fed to be comfortable at the present time. 

Home Owner Tips: Fall Maintenance

A few items to take care of before the winter hits.
 

Check your gutters and roof
Since it's not at eye level you may not have thought about your roof lately. Take a few minutes next time you're outside to look carefully at what you can see of your roof and gutters (use binoculars if you have them). Is the flashing in tact? Any damage from debris? Gutters should be cleaned twice a year (usually in the fall and spring). 

Feel a draft? 
Homes can loose a lot of heat in the winter from small leaks around doors and windows. Use the back of your hand (or even your face) to feel around these areas for any air movement, and stop up the gaps with weatherstripping. 

Inspect your walkways
Make a special stroll down your homes exterior walkways looking for cracks or loose stones. Repair those now to help prevent falling accidents when things get slippery this winter. 

Prepare your fireplace 
Now is a good time to have your chimney cleaned if you've been putting it off. As far as I know there is not a good rule to follow regarding how often one should have a chimney cleaned, but if you have even 1/8 of an inch of build up you need to have it done soon. When in doubt please er on the side of caution when dealing with fire. 

And after all that, if you're looking for ideas for actual FUN activities this the fall check out http://fall.virginia.org/ for a ton of ideas from the VA tourism authority! 

Northern Virginia Real Estate Market Update

Regional Market Update: The DC Regional housing market continued to see strong sales activity in August. An increase in inventory resulted in a slight decrease in median sales price for the region, and increased median days on market. 

NOVA market Update: The median sales price in Northern VA declined slightly in August, but remains healthy (and higher than the 5 year average). Fairfax Co. median sale price was $476,500, down 0.3% from  August 2014.

Rate Update: Interest rates are still holding steady, though analysts continue to point to the trouble in China's stock market as a possible reason the fed may hold off a bit longer before raising them significantly. 
 

Home Owner Tips: Staging your home to sell

A few simple things can make a big impact with potential buyers.
 

I get asked about staging pretty frequently. With the caveat that each property is unique, there are some good basic rules of staging you need to consider when getting ready to sell your house. 

Getting rid of your stuff.

Put away personal photos, religious or political images/posters. Anything that makes your house yours should be put away when you're not home. You want the buyer to imprint their own idea of what their life will be like in the home, and that's hard to do when looking at Mr & Mrs Seller's beautiful and distracting wedding photos. 

Clutter Kills. Take away everything you can so that the space feels bigger (renting a storage unit can help if you're selling b/c you need more space) organize what must stay, including the pantry and your closets. The buyer will open every door in the house and if the closets are packed tight and unkempt they will assume the house does not have enough storage space

Take good advice regarding color choices.

Neutral is always best.

From paint, to flooring, to counters, to furniture (yes the brightly colored side chair is distracting) have an outside opinion from someone you trust, someone who does not look at the house every day. Someone like your Realtor :)

The way we live in a home is not the way we sell it for top dollar. 

Most home sellers expect to clean the house and make it neat for the photos. To truly stage a house to sell you must keep the property in that condition every day.

All clothes off the floor, beds made, dishes put away, mail neatly stacked etc. This is hard to do, even harder with small children, but it makes a huge difference to the potential buyer when their first impression of the property is a positive one with it in A+ condition. 

Northern Virginia Real Estate Market Update

Regional Market Update: The DC regional housing market continues to see strong sales activity. The median prices for all types of homes in most sectors of the region continue along a slow and steady rise.

NOVA Market Update: Northern VA home prices remain stable. Arlington and Fairfax City saw the biggest gains at 10.6% and 13.0 % median price increases from this time last year. Fairfax County saw an increase as well 3.6%. Fairfax County median sales price year to date is $479,945.

Rate Update: After a small increase this summer interest rates are holding steady for the time being. Sean Becketti, chief economist for Freddie Mac is on record that we may still be looking at a potential rate hike in September.

Home Owner Tips: Keeping Cool in the Summertime

A few simple things can make a big impact on the feel of your home.
 

• It's probably time to change your air filter again. Help your AC function it's best, if you don't have pets, don't spend the extra money on fancy filters. The basic store brand ones will do the trick, and are easier for your unit to pump air through. 
• Ceiling fans have a Summer setting. Your fans have a switch on them that changes the direction the blades spin. One direction will push air down (for use in the Summer) and the other direction will push air up (use this in Winter). It's easy to forget to change the direction for the proper season. 
• Give your vents a taste of freedom! None of the vents in your home should be covered or blocked by anything – doing that makes your heating and cooling work overtime. 
• Invest in a smart or programmable thermostat. Automating the temperature changes in your home can make sure you have it at the appropriate level - to save you time and money. Research shows that a smart thermostat may be the way to go here. 

Northern Virginia Real Estate Market Update

Regional Market Update: The DC regional housing market continues to see strong sales activity.  Regional sales activity is at it's highest level in nine years, and the median prices for all types of homes in most sectors of the region continue along a slow and steady rise. 

NOVA Market Update: Northern VA home prices remain stable. Arlington and Alexandria saw 3.9% and 3.0 % increases from this time last year. Fairfax County saw a slight decrease (0.3%) in median sales price but a significant increase in sales (19.3%).  

Rate Update: Interest rates are rising. Good news in our economy has been steady for long enough that we are starting to see the rates increase as predicted. For example: 30-year fixed rates recently rose to 4.09% from 4.04%. While they are going up, do keep in mind that rates are still historically low making this a good time to buy.

Home Owner Tip: Summer Vacation Home Safety

When you are out and about on your summer holiday keep these things in mind to make sure you return to your home just as you left it. 

Take action to make your home look lived in while you are gone  - don't let an opportunistic thief know you're not home.  

• House sitter If you have someone who can stay at your place while you're gone, not only can they water your plants, but they can keep an eye on things.
• Flyer collector If you don't have someone house sitting, ask a friend or neighbor to check out your front door periodically to make sure flyers or other marketing materials aren't showing off that you're not home. Some criminals will use fake service flyers to help determine who is away on vacation. 
• Cut the grass Do you cut your grass every week? Ask a friend or hire a lawn service to come in the weekend you're gone to make sure it gets done. 
• Use a timer Putting some lamps on an automatic timer is a very effective and inexpensive way to make your home appear occupied. Simple ones do the trick too! Timers are great for exterior lighting as well! 
• Hold the mail Reach out to your local post office and ask them to hold your mail. The service is free and can last for up to 30 days. Along these lines you also want to stop all automatic deliveries - newspapers sitting on your front stoop (or other packages) are a huge give away that you are out of town. Put a hold on your Loot Crate or Birch Box or whatever things you have sent to you automatically. 
• Free parking Ask a neighbor to park in your driveway/spot to give the impression that someone is home. 
• Unplug any electronics that won't be used. This will save electricity and remind you that you did NOT leave the coffee pot on... you unplugged it. 
• Be careful with social media If you are not sure about every single person on your friends list, or if you have any doubts about your privacy settings, err on the side of safety and don't tell the world you're away. 

Northern Virginia Real Estate Market Update

The DC regional housing market continues to see strong sales activity.  Regional sales prices for May were the highest they have been (for May) in a decade. Increased listing activity has been met with enough buyers that days on market remain relatively low (regional median days on market for May was 12 days).

Northern VA home prices continue to increase as the median home price in Fairfax County was $497,000 for May 2015, up 4.6% from May 2014.

Interest rates are holding steady.  Last month we saw them creeping up, and this week they are slightly down. Fortunately for buyers they are still lower than they were this time last year and remain at historic lows. With some good job numbers reported for April, experts are predicting that rate will rise throughout 2015 as we feel more stable about the national economy.

Northern Virginia Real Estate Market Update

The DC regional housing market is strong. Closed sales and new pending sales were up 10% versus last April and half of April's homes sold were on market for only two weeks or less! This is the highest number of pending sales we've seen since July 2005. 

Northern VA home prices continue to increase as the median home price in Fairfax County was $479,700 for April 2015, up 3.2% from April 2014.

Interest rates are rising. For the past 3 weeks interest rates have been creeping up, however they are still lower than they were this time last year and remain at historic lows. Experts are predicting they will continue to rise throughout 2015.

Overall activity is up this Spring, with lots of both buyers and sellers entering the market. This balanced activity has lead to a slowing of regional price growth. My opinion is that this month is a healthy balancing out of last months spring fever.  

Home Owner Tip: Spring cleaning helps your home maintain it's value!

If you're like me then winter helped you rack up a few too many to-do items around the house. Here are some tips and reminders to help you motivate and make the most of your spring cleaning.

• Serious top-to-bottom, take-no-dust-bunny-prisoners, company is coming style cleaning, helps you turn back the clock on the look and feel of your home. It also helps it maintain value!
• Tackle the every once in a while items that aren't on your regular cleaning schedule: washing/vacuuming the drapes, de-bugging light fixtures, polishing hardware (door hinges, cabinet knobs etc.), replacing grungy switch plates,replacing or repairing peeling or sagging weather stripping, and changing out old stove-top drip pans. 
• Change the direction of ceiling fan blades to help cool warmer rooms and reduce your summer energy bills. 
• De-clutter if you want to. If the items in your home make you happy and you don't feel overwhelmed by them, then clutter is not an issue! If they are driving you up the wall, or making you feel sad then it's time to tackle your stuff.  

Home Owner Tip: Save money by paying your mortgage off early

Buying a home is often the biggest financial choice most Americans will make in their lifetime. In addition to providing a stable secure place to live for years to come, your home is also a wealth building tool, as the equity in your home grows over the years. While your monthly mortgage payment is something you may "set and forget", taking steps to pay down your home loan faster can save you a lot of money in the long term. What it boils down to: make a habit of sending your lender more than the minimum amount. Finance Guru Dave Ramsey recommends a few simple ways to think about how you can pay down your mortgage more quickly in this blog post.

Northern Virginia Real Estate Market Update

The Northern VA market continues to improve as the median home price in Fairfax County was $461,00 for March 2015, up 2.8% from March 2014. The DC regional housing market is strong. The median sales price in March in the DC Metro Area was up to $400,000 - the highest March level we've seen since 2007. Interest rates remain stable and under 4% - helping buyers enter the market, and saving money for home owners who are ready to refinance. Personally, I’ve been seeing multiple offers in the past couple of weeks on properties that are priced right for their condition! Things are moving quickly this spring, as buyers and sellers have both turned out in force. Everyone’s been busy.

Home Owner Tip TLC for your HVAC

Now that the weather is getting nicer it's a good time to inspect the outdoor part of your unit and clear away any debris that may have rested there in our recent storms. Remember: Experts recommend that you have your HVAC system professionally inspected every fall and spring. 

You should also be replacing your air filter every 90 days. So if you've not replaced yet this year, you should add that to your to-do list for the first week of April. Not sure what size filter you need? Check your home inspection report, or do what I do: sneak a peak at the one currently in the unit and snap a quick photo of the size with your phone so you have it handy when you get to the hardware store.  
 

Northern Virginia Housing Market Update

The Northern VA market remains strong as the median home price in Fairfax County was $447,450 for February 2015, up 6.9% from February 2014.  

Townhouses on the rise: The percentage of sales in our region that that are townhomes is increasing, as are townhome prices. This may be a sign of a foretasted wave of first time home-buyers expected to enter the market this year.

Interest rates remain under 4% - helping buyers enter the market, and saving money for home owners who are ready to refinance. 

Will 2015 be the year of the first time home buyer?

There is a lot of talk about 2015 being the year that many millennials will choose to purchase their first home. The shock of the great recession and rising student loan debt has pushed back home ownership for many, but the effects of time and some policy changes are putting first time home buyers on better footing to finally have a home of their own.

Here are a few reasons why 2015 my be the year of the first time home buyer: 

Job growth is up. Many people who were without the steady income needed to purchase a home are finding themselves in full time employment. Making the choice of where to settle easier.

Securing a loan is getting easier. In addition to countless loan options for first time buyers, mortgage rates are still at historic lows and new programs from FMH and VHDA are providing more flexible down payment options that were available even a year ago. State legislatures are also trying to help as well with programs like Virginia's First Time Home Buyer's Savings Plan.

Rent rates continue to increase. Rent keeps going up at the fastest rate seen in years, making the decision to buy even more appealing to long time renters.

Interests rates are predicted to rise. Interest rates have been low for long enough that it's widely predicted that they will begin to creep back up starting mid 2015. Savvy home buyers who've been waiting for the right time are likely to recognize the opportunity to lock in to our current low rates.

Given these points, and because I am personally sitting on the oldest edge of the millinnial generation (so I have a front row seat as all friends go through this) this year I've decided to regularly host a free seminar for first time home buyers. It's a pretty casual event where a local lender and I will walk you through the 8 steps to the home loan and home buying process while answering questions from the attendees. Our goal is to make sure that everyone who is thinking of buying a home this year starts out on the right foot.  If you'd like to attend please visit my website for more info about the Free First Time Home Buyer Seminar.

New study shows rents increasing

Your rent keeps going up and it's not likely to change any time soon.

According to newly released data from the Bureau of Labor Statistics, rents are rising at the fastest pace in six years. Combined with vacancy rates at 20-year lows it is currently a "landlord's market" in American real estate with rent rates increasing faster than inflation.  

Builders are working on the demand side of the equation and more multifamily units are being built, however they will take time to be completed. Vacancy rates are projected to stay low for at least two years. 

Is it time for you to stop paying your landlords mortgage and start building equity in your own home? What questions are standing between you and home ownership? Attend my free class for first time home buyers to learn more.