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Buyer Beware: Red Flags to Look Out for When House Hunting

If you are thinking of buying a home, you have probably already begun your search. It’s easy these days, with up-to-date listing information available on a wide variety of websites. And it’s fun!

House hunting is one of the most exciting parts of real estate, and it draws a lot of interest on TV shows and in-person open houses. Viewing and touring potential new homes means thinking of possibilities and dreaming about your future.

As fun as it is, though, it’s easy to get caught up in the thrill of house hunting — the perfectly staged rooms, the must-have features, the pool or kitchen you always wanted. Focusing too much on the aesthetics and amenities can lead you to miss some warning signs about a property, and a poor decision can lead to years of regrets.

We’re here to help you avoid making any costly mistakes in your home search. Read on for a quick guide on the red flags to spot when house hunting.

No Photos in the Listing

The vast majority of homebuyers start their search online to get a feel for the market and their options. It’s a good way to get a glimpse of the types of homes available, their price, and which neighborhoods might suit you best. However, not all online listings are created equal.

For example, if a listing has few photos (or zero photos), it’s probably not a good sign. Either the homeowner doesn’t want to show you what’s inside, or they don’t care enough to make an effort. Either way, chances are slim that it’s the right home for you.

Don’t just think about what’s shown in the pictures. Consider what’s not being shown.

Signs of Water Damage

Next, while touring homes, keep an eye out for signs of water damage. This can include cracking and bubbling paint, discolored walls and ceilings, pooling water, and moldy/mildewy smells.

Signs of water damage can be especially concerning because they can indicate damage to drywall, flooring, and structural components of the house, all of which may be very costly to remediate and repair. Worst of all, water damage can also mean the presence of toxic mold hidden throughout the house.

Signs of Pests

Recent studies have shown that 84% of homes have some sort of pest presence. Typically, this means small, not-very-significant issues like the occasional bug or insect. However, if the home you visit while house hunting has obvious signs of a widespread infestation, you might want to think again.

Pest infestations can be tricky (and costly) to get rid of. Not to mention, most pests cause multiple forms of damage to a house. Termites chew through wood, rodents destroy materials and leave waste everywhere, etc.

As is the case with all these red flags, you might choose to simply move on and look at other homes. But if you really like some features of the home and think you can make it work, you can always negotiate a lower price, or ask the sellers to remedy the problem.

Obvious “DIY” Renovations

As you house hunt, work on your eye for spotting obvious DIY work. While there’s nothing wrong with a homeowner learning new skills and saving money by completing DIY repairs and updates, you can never be sure of the quality of their work. Additionally, the owners may have failed to follow the proper permitting process for a job.

DIY repairs and renovations that violate the city coding laws could come back to haunt you, even if it was the previous owner who did them. More importantly, they may not be completely safe or sound.

Weird Odors

Weird smells are never a good sign while house hunting. Cleaning is an important part of the listing process, so if a home for sale still has lingering odors, they may be hard to fix or foretell deeper problems.

As noted previously, musty smells could be an indication of mold and mildew. Additionally, questionable smells could point to pests, pet accidents that weren’t properly cleaned up, rotting food lying somewhere and so on.

Similarly, if the home is covered in air fresheners, it might indicate lingering, foul smells. Of course, it could just be the seller and listing agent trying to make the home more inviting. But an excessive amount of scents could mean they’re trying to mask an unpleasant odor.

Your Real Estate Agent is Also the Listing Agent

When looking for a house to buy, it’s always a good idea to hire a real estate agent. They can help you find the right house based on location, size, features, property size, etc.

However, if your real estate agent is also the listing agent for the house you’re looking at, make sure that they have your best interests at heart. Agents are only people, after all. Most are good folks and they try to do right by their clients. But buying a home that’s also listed by your agent/agency can open things up to a conflict of interest.

When you buy that listing, the agent makes double the commission since they represent both parties. If you have a good agent, this is not typically a problem. But an unscrupulous agent might be willing to withhold information or negative details about the home that might otherwise deter you from placing an offer.

The bigger lesson here is to work with an agent you trust!

Negative Drainage

When house hunting, it’s not just the interior of homes you should examine. You should also take a walk around the property to look for anything disconcerting.

For example, take a look at the landscaping around the foundation of the house. Does the ground slope away from the house, toward the house, or is it flat? Ideally, the foundation should slope down away from the house to ensure positive drainage.

Negative drainage will drain water back toward the foundation, which can cause water leaks in the basement/crawl space, damages to the foundation, etc. All of these problems can be expensive and frustrating to deal with.

Questionable Roofing

The roof of a house is one of the most important components. It’s the primary defense for your home against the elements.

That means your roof is also the part of your home most susceptible to incurring damage. Inevitably over time, the wind, rain, hail, snow, ice and sun can break down a roof.

If the roof needs to be replaced due to regular wear and tear, it won’t be covered by most insurance companies. This means the seller is less likely to invest in roof repairs or a replacement before selling. The last thing you want to do is buy a house that needs thousands (or tens of thousands) of dollars in roof repairs.

An Insanely Low Price

We all know the importance of comparing house prices while house hunting. Comparable sales are the chief way that home values are determined by appraisers and other real estate pros.

When a sale price seems too good to be true, it probably is. In other words, a super cheap home is likely super cheap for a reason.

If the home sounds too good to be true, there’s likely something fundamentally wrong. This is more common in homes that have been listed on the market for more than four or five months.

If you run into this situation, ask your Realtor to find out why the listing price is so low. Alternatively, you could place a contingent offer on the home based on the results of a home inspection. It will cost you some money to get answers, but at least you’ll know what you’re dealing with.

Ready to Start House Hunting?

It’s exciting to house hunt and think of the possibilities in your new home! Just make sure you keep an eye out for the red flags listed in this article while house hunting. A home is a huge investment, and the last thing you want is for an oversight to come back and haunt you.

Whether you’ve been searching real estate listings for a while, or you’re just getting started or mulling your options, we’re here to help. Connect with us today to start the conversation and discuss your options to buy, or sell and buy, a home! We would love to help you achieve your goals and find a home that’ll make you happy for years to come.

How Will Prop 22 Affect the California Real Estate Market?

When most people analyze the real estate market in a given area, they only look at the obvious factors. They consider home values, local schools and amenities, property taxes and so on. The reality is, however, that even minor societal or economic changes can be like stones falling in the pond of a community, sending their ripples through the real estate market and beyond.

One of those stones is Proposition 22 or Prop 22 for short. While the legislation itself has been widely discussed throughout California and the US, its impact on California real estate has not.

What Is Prop 22?

Proposition 22 is a California proposition that was passed by the state voters in 2020. It is the latest in a tug of war among the state’s leadership to decide how to handle the growing gig economy, especially as it pertains to freelance drivers for gig-based apps like Uber and Lyft.

In 2019, California passed Assembly Bill 5, or AB5. AB5 stated that all freelancers or independent contractors who performed more than a minimal amount of work for a company must be classified as employees.

This was meant to address the concern that companies take advantage of workers. Businesses label workers as contractors rather than employees, to avoid giving them benefits like health insurance, paid leave, and unemployment insurance.

However, the true effect this had in many cases was an inability for freelance workers to do their work and earn an income. Prop 22 is a compromise of sorts.

Prop 22 exempts app-based drivers, like rideshare and delivery drivers, from the AB5 employee classification. In exchange, it gives them other protections like minimum pay guarantees, health insurance in some circumstances, and compensation for on-the-job injuries.

How Will Prop 22 Impact the California Real Estate Market?

Proposition 22 has had a positive reception overall, as it offers some benefits for both contract drivers and their client companies. There are several ways it’s likely to impact the real estate market in the process.

Increased State Income Taxes

With the Prop 22 exemption, there are increased opportunities for contract drivers now that companies can “hire” more of them. This will lead to an overall increase in income because more people are making money this way. Because those drivers will pay state income taxes on the new income, the overall amount of income tax in California is expected to increase.

Analysts also expect that rideshare and delivery companies who hire these drivers will see stock price increases. When their investors sell those stocks, they will pay income taxes on the profits. This further adds to the increase in state income taxes.

This could affect real estate depending on how the state decides to spend that money. For instance, if the state invests the added tax revenue in new developments, real estate prices in that area will increase. Or real estate prices could decrease if the state unveils a new (and sorely needed) affordable housing program.

More Demand for Real Estate

While AB5 was meant to help gig workers, it sent a wave of fear through many in the freelance community. Many felt that they were overlooked or miscategorized in a way that would prevent them from continuing to operate as their own business. As a result, some either considered leaving or did leave California.

Because 36% of the US workforce does some amount of freelancing, we’re talking about significant numbers here. For many app-based drivers, Prop 22 puts them in a better position in California than they would be elsewhere. Not only can they keep operating independently, but they also get benefits they wouldn’t receive in other states.

The result is a higher population of earning adults, and that means a higher demand for real estate.

Shifts in the Landscape of Mortgages

Independent contractors aren’t only different from employees in the benefits they receive. Their income predictability is very different as well, and this affects their ability to receive mortgages.

Historically, contractors have had a more difficult time securing mortgages. Because their income is more varied, they need to provide long-term proof of income to qualify.

Now that we expect to see an increase in freelancing in California, this could go one of two ways. We could see a higher demand for rental properties because fewer people may be able to qualify for mortgages.

On the other hand, the number of contractors and freelancers in the US is expected to continue increasing overall. It is possible that we’ll see changes within the mortgage industry that accommodate this growing population of solopreneurs.

More Overall Income

It’s important to note that the gig economy is not entirely made up of people who traded their 9-to-5 salaried job for independent contracting. In fact, many app-based drivers use driving to supplement their existing income.

Now that app-based gig work is a more available and an increasingly appealing option, we expect to see even more people taking advantage of it. This could lead to a higher average income in California.

For the real estate market, this would create a shift toward higher-priced properties. More people would have the income to afford these pricier homes, so the demand would increase.

Fewer Foreclosures and Short Sales

We’ve talked about people who use app-based driving as their primary income source and people who use it to supplement their income. There’s another common situation, though.

When people lose their jobs due to downsizing or other reasons, gig work can fill in the gaps. It’s fairly easy for most people to get work from app-based driving services, because the need is so high. They may not earn the same amount they did previously, but at least they have some income while they hunt for a new, more permanent job.

Now that this on-demand earning potential is so accessible, fewer people may find themselves without the income to pay their mortgages. The result, barring other factors, is fewer foreclosures and short sales on the real estate market.

Looking Ahead Thanks to Prop 22

The real estate market is always complicated, with countless factors coming into play. Prop 22 is only one of many. Fortunately, you don’t need to figure it all out on your own.

Contact our real estate team to discuss your options for buying or selling your home and the market circumstances you need to know.

What Is a Smart Home and Why Should You Want One?

When people think of the latest gadgets, they imagine new smartphones, smart watches, computers, laptops, and gaming consoles. But another new advancement in technology has been happening right here at home: smart home devices!

What is a smart home? A smart home is equipped with smart devices meant to make your daily life easier, from regulating your HVAC system to automatically adjusting your lighting and sound system. As more homes become “smart,” more folks are seeing the benefit to smart home devices, and demand continues to grow. It’s estimated that there are more than 45 million smart-equipped homes in the US, with the market expecting to climb to $141 billion by 2023.

If you are curious to find out more about smart homes and how they can benefit you and your home’s value, keep reading.

What Is a Smart Home?

There’s a lot that can make a home “smart,” but put simply, smart homes include devices and capabilities that connect with the internet, with your smart phone, or with other smart devices, to provide advanced functions. Most smart home devices can be used via voice commands, like “Hey Siri, turn down the lights,” or “Alexa, what’s the temperature outside?”

Automated smart devices handle much of what you previously had to manually do yourself. The artificial intelligence that drives these devices allows homeowners to have a better living experience.

Smart Devices Offer Convenience

The beauty of technology lies in convenience. Most Americans own at least one “smart” product in their home and are happy with the ease that comes with it. Every little interaction may not seem like much, but altogether they can save anywhere from a few minutes to an hour or so in your day, as well as save you money by better regulating your power usage.

With smart devices, you no longer have to get up to turn a device on or off. Smart devices allow you to relax — they do the work for you! This added ease of use allows you to multi-task and get more things done in less time. You can focus more on the things that matter.

Smart Devices Save Money and Energy

In addition to saving time, smart homes help you be smarter with your money. For example, automated smart thermostats can detect how many people are in a room and make necessary adjustments in your heating or cooling to keep things the ideal temperature.

Because you can use your smart phone control a smart home device from anywhere, you can set up your smart thermostat to start cooling or heating when you’re ready to come home from work. A smart thermostat allows you to be comfortable when you are home, without wasting valuable energy when you’re away.

Because of these smart features, a smart thermostat can save as much as 10 to 15 percent on your electricity bill. Heating and cooling cost the most money of any energy expenditure, and the addition of a smart thermostat can rack up as much as $1,000 in savings by the end of the year.

You can also save more on your utilities with smart lights that help you decrease unnecessary usage. When you leave a room or leave your house, the smart AI will recognize this and turn lights down or off all by itself.

Smart devices can help you save water, too. Smart showers and smart washing machines can be set to use less water or run only at certain times of day, when energy is cheaper. You could cut as much as 40 to 50 percent off your bill.

Enhanced Safety and Security

Most home buyers place a premium on safety when looking for the right neighborhood in which to settle down. Smart homes can help with that too! Most security systems available today are enhanced by smart technology, providing by-the-minute updates on your home security and quick notifications of problems.

Smart safety devices can also detect fires, radon, moisture, and carbon monoxide levels in your home. There are even security doorbells that allow you to see who is on or near your property through motion detection.

The best part is, you are able to check in and control these smart safety devices wherever you are, whether you’re relaxing at home, out at work, or off on a weeks-long vacation. With the addition of a smart lock for your front door, your security setup is complete! Whether you are home or away, smart home safety devices help to keep you protected around the clock.

Smarter, Better Entertainment

Smart home devices such as smart TVs and Bluetooth offer easy access to entertainment. You can control entertainment devices by voice, connect devices together, and even control them all from an app on your phone.

If you change rooms and need more volume to hear the movie or song you were listening to, you can raise the volume via voice command. If you want to stay connected to social media or speak with family and friends, you can make video calls too.

One popular smart home device is the Amazon Echo. Like many smart devices, it’s a great purchase in large part because it is also highly compatible with all your other smart technology!

Smart Homes Sell For More Money

Convenience, entertainment, security, and saving money and energy are great… but do smart homes add value to the property? They sure do! Smart homes are popular among older and younger generations, and nearly everyone places a premium on smart-equipped homes. A home with smart tech will be valued higher than the same home without it.

A smart-equipped home can sell for up to five percent more money. Smart home devices are a smart investment that you can take advantage of to increase your enjoyment of your home while you live there, and increase your closing price when you sell.

Buying a Smart Home in Orange County

Getting a home involves an extensive process of planning and budgeting. Every home buyer wants a house that makes life easy when they live there, and makes a healthy return when they sell.

If you want to learn how you can find the perfect home (smart-equipped or not), don’t hesitate to reach out for a no-pressure conversation. Connect with us today! It’s our pleasure to help guide you through the process, start to finish, and help you make the right choices while minimizing your stress.

Is Buyer Demand Causing Housing Prices to Rise? What You Need to Know in Fall 2020

The start of 2020 put California’s housing market into a big ol’ slump. The coronavirus pandemic led to strict stay-at-home orders enforced throughout the state. For a short time in March, the California housing market was essentially frozen in place.

In the proceeding weeks, the freeze began to thaw, and by the start of the summer the market was heating up. Buyer demand began to rise, sales were beginning to rise, and more homeowners came around to the notion that it actually might be a good time to sell. This sudden change of course was one of the largest monthly surges in almost 40 years.

Now, the question folks are asking is, “How long will it last?” Will housing prices continue to rise the rest of this year? Or is it too good to be true?

Are you curious about how buyer demand is impacting the housing market this year? Here’s everything you need to know for fall of 2020!

Housing Prices During the Pandemic

At the start of the pandemic, the housing market chugged along at a snail’s pace. While the most motivated buyers and sellers continued in their pursuits, many more elected to postpone their buying or selling for a later time when pandemic restrictions loosened.

Those who did buy during this time saw record-low mortgage rates. The pandemic caused mortgage rates to drop as low as 3.29% for a 30-year conventional mortgage, at the time a 50-year record low which has since been lowered even further.

While homebuyers enjoy these low mortgage rates, housing prices are rising due to limited availability of listings. Those looking to buy have a smaller selection of homes available to purchase, and what is available is selling for more money than ever due to increased demand. Because of this scarcity of listings, many buyers are eagerly waiting in anticipation for more sellers to bring their homes to market.

As is natural in economics, limited supply has led to an increase in prices. While rising prices have become the trend in the last decade, the rise has been even more forceful in 2020. In May of 2019, the median closing price in the United States was around $278,200 which grew about 2.3% by May of 2020.

For 3 continuous months, housing sales declined. It wasn’t until June that the housing market finally hit a turnaround point.

Home sales have spiked, particularly in existing homes, but also in new construction. From May to June of 2020, there was an increase of around 20% more home sales which includes condominiums, townhomes, and single-family homes. This is largely due to increased buyer demand.

While many buyers and sellers enjoy success in this recovering, booming market, some are wondering about what the Fall will bring. There have been second and third waves of the pandemic affecting different parts of the globe. What will the housing market look like for the rest of 2020?

Is the Housing Market Recovering?

June through August showed considerable promise in regards to a recovering housing market. Home sales all over the country continue to rise, as they did throughout the summer.

The country’s coasts are leading the recovery, showing greater sales than even before the pandemic hit in March. The end of July showed a rise in not only sales but in demand and price as well.

Is Buyer Demand Still Growing?

Buyer demand is continuing to grow as we enter the Fall Season. By the end of July, the demand index was almost 17 points above that of January. Analysts calculate this number by tracking search activity online.

Some may find this surprising, as house prices are rising and inventory remains low. But with rock-bottom mortgage rates, many homebuyers want to get in while it’s good. On the other hand, many home sellers are still waiting before putting their homes on the market.

Researchers believe buyer demand will continue to grow throughout the Fall of 2020. The biggest challenge sellers are facing is that a large number of them are also buyers.

Growing buyer demand and limited inventory can make finding the right new home to buy a challenging process these days. Some prospective sellers are finding it easier to refinance and renovate their current home than to find something better.

Other issues sellers face include health and safety concerns during the coronavirus, along with potential job loss given the tumultuous state of the economy.

Buyer demand will likely fade towards the end of the year, as it always does in the holiday season. But this fall, activity should remain very strong compared to the spring market. Millennial buyers will continue to make up a huge part of the buyer demand as they search for their first taste of home ownership.

Will current home buyer demand be sustainable throughout the rest of the year? If more sellers come to market this fall, buyer demand may be satiated. But if buyers are still fighting for a small supply of listings well into next year, then high demand isn’t going anywhere either.

Why Housing Prices are Rising

Like buyer demand, housing prices are also rising. Compared to the median home price in January, homes in September are about 5.5 points above January prices.

What’s causing this rise in house prices? The main 2 factors influencing home prices are a record low housing supply and a growing buyer demand. The few sellers on the market feel more confident asking for more as they’re likelier to make a sale with such a large demand. Bidding wars are becoming more frequent.

Typically during an economic downturn, housing prices remain stagnant, or grow more slowly, or even fall. This year has been a clear exception, as housing prices have accelerated upwards throughout the summer.

This upward trend may slow later this year and early into next year. Future economic impacts remain to be seen, and a hit to the economy could slow the rate of buyer demand and increasing home values. In any case, it’s unlikely that home values will rise at such a quick pace for many more months to come, though they will likely continue to rise.

Changes in Home Sales

Since May, home sales have risen monthly by 16.6%. There has also been an increase this year of 6.3% since June of 2019.

Most buyers are looking for affordability and space. The combination of stay-at-home orders, working from home, and schooling from home, is driving people to look for more spacious places to live. Of course, this is a greater challenge given the limited inventory of active listings.

Listings are spending less time on the market compared to a year ago. Buyers and sellers are connecting and closing sales much faster than before.

Is Housing Supply Increasing?

Since the spring, supply of listings has been slowly increasing. Compared to years before, however, the supply is still growing at a much slower rate than in January. More sellers are re-entering the housing market, but with a certain amount of caution.

Some prospective sellers express concern that their homes are unlikely to sell due to social distancing. Some are unwilling to show their homes in person and others are waiting until the pandemic passes. After months of working safely according to state and local regulations, these fears are largely unfounded, though it’s always good to be safe.

The reopening of the United State’s economy plays a key role in the housing supply. The current trend is an increase in housing supply, but everything hinges at least in some part on the future twists and turns of the COVID pandemic.

Housing Market Predictions for 2021

The overall number of home sales in 2020 is likely to be significantly less than the year before. Many houses will sell this fall, indeed, but the overall rate will likely drop to one not seen since the early nineties.

Many analysts believe the economic cost of the pandemic will continue to burden the economy in 2021 and for years to come. The projections for the 2021 housing market have also lowered from 6.3 million to 6 million sales.

A few likely scenarios for the rest of 2020 and into 2021 include:

– Housing prices will continue to grow, but growth may slow

– Mortgage prices will almost certainly remain at record lows

– Housing availability will remain lower than normal, but should continue to rise through the fall

– Buyers will continue to prioritize affordability and space, both inside and out

– Buyer and seller confidence will continue to rise, barring any unfortunate developments in the pandemic

The unforeseen health crisis and its economic impacts will continue to influence buyer demand and listing supply. Some of the largest metro areas in California and throughout the United States have seen an increasingly tight inventory of listings in recent months. If more sellers decide to jump into the fray, this trend could reverse in a busy fall selling season.

The affordability of homes remains an ongoing struggle and will be an even greater challenge as prices rise. Before the COVID pandemic, many younger buyers struggled to find a home that fit their budget.

Unfortunately for them, housing prices will continue to rise for the rest of 2020. Newly constructed homes will not be much help, as homebuilders continue to focus on mid-high to high-end homes rather than affordable housing solutions.

The Housing Market is Looking Up

Since the lull in early spring, the housing market has been looking up. There have been glimmers of hope in the pandemic, giving the economy a chance to breathe. Uncertainties still abound, but buyer demand remains strong thanks to low mortgage rates.

If you’re looking to buy or sell a home this year, now is the time. Buyers can enjoy all-time low mortgages. Sellers can benefit from selling their homes at higher prices and potentially a faster rate than before the pandemic.

Are you looking for a home or planning to list yours? Do you know a friend or family member who is? Let’s connect for a no-pressure conversation. We’re happy to lend our expertise and carefully guide you through every step of the home-buying and selling process!

COVID-19: Understanding Mortgage Rates and Opportunities

As we battle both a healthcare crisis and an economic crisis due to COVID-19, it can be hard to keep up with topics that might otherwise be important to you like mortgage rates and opportunities in the Orange County housing market.

When you do find time to consume the economic news, you might find it hard to digest. You’ll hear jargon like margin calls, short sales and T-notes. What does it mean for your average Orange County homeowner? What does it mean for Orange County home buyers and sellers?

Instead of relying on opinions from the talking heads, you can stay better informed by understanding the underlying principles behind housing and mortgages.

In this article, we’ll cover the broad strokes of the latest mortgage and housing news. We’ll explain the difference between the Federal funds rate and the 10-year Treasury note, and their effects (or lack thereof) on mortgage rates. And we’ll explore the unique challenges and opportunities presented by COVID-19 to Orange County homeowners and prospective buyers and sellers.

Battle for Wall Street: The Fed vs Coronavirus

The economic impact of COVID-19 has been swift and far-reaching. In just a few weeks between February and March, the stock market lost all its considerable gains from the previous three years. This sharp decline prompted the Federal Reserve to cut rates down to rock bottom (0.00-0.25%) on March 15th. Sounds good for businesses—what about prospective homebuyers?

When you hear that “the Fed cut interest rates,” that refers to the Federal Funds Rate. It’s the interest rate that the Federal Reserve charges banks who in turn lend to businesses and individuals. Lowering the Federal Funds Rate gives businesses easier and cheaper access to capital, thereby improving their quarterly outlooks and share values.

Since stocks are seen as a relatively short-term investment, other short-term investments tend to follow the same trajectory. In mortgage markets, these include variable-rate loans, such as 3/1 and 5/1 ARMs, as well as home equity lines of credit, or HELOCs.

As the Federal Funds Rate rises and falls, so do the rates on these shorter-term real estate loans. Rate cuts by the Fed directly benefit Orange County homeowners with an adjustable-rate mortgage and Orange County homebuyers looking to get one.

But adjustable-rate mortgages are nowhere near as popular as longer-term mortgages like the conventional 30-year fixed-rate. How are those affected?

Safe Haven in Long-Term Investments

When investors are spooked by uncertainty in the stock market, they flock to more secure and long-term investments like Treasury notes and mortgage-backed securities.

You’ve probably heard of the “10-year T-note,” at least in passing. It is the most widely tracked government debt instrument and a common benchmark for other economic indicators. Along with other bills, notes and bonds, the US government partially funds itself by issuing 10-year Treasury notes. Investors receive a modest and relatively safe return in the form of interest payments that are exempt from state and local taxation.

You probably know about mortgage-backed securities, too—they precipitated the Great Recession. When a lender loans capital to a homebuyer, they don’t necessarily hold onto that investment. Oftentimes, they package the debt and sell it, acting as a middleman between many homebuyers and their ultimate debtholder. If the economy falters, that debtholder is left holding a big bag of bad mortgages. So begins a cascade of financial ruin, which in 2007-2008 we saw firsthand. Fortunately, lending standards are tighter now, and Americans as a whole are less leveraged with debt.

Because mortgage debt securities and Treasury notes are both long-term investments, their rates also tend to follow the same trajectory. When wary investors shift from stocks to long-term investments, that increased demand prompts lower interest rates on the long-term investment supply.

In short, the falling stock market led indirectly to lower 30-year fixed mortgage rates due to increased demand for long-term investments.

Opportunities for Orange County Homeowners and Homebuyers

On March 5th, the national average rate for a 30-year fixed mortgage hit its all-time low of 3.29%. Homeowners and buyers leapt at the opportunity to take advantage of this historic low, and lenders were soon overwhelmed by an onslaught of refinancing applications. In response, mortgage lenders raised rates back up to 3.65%. Since then, rates have fallen yet again and leveled out at a very attractive 3.33% over the past two weeks.

With average 30-year fixed mortgage rates again close to historic lows, now is a great time to refinance your existing mortgage or even buy a home.

Keep in mind that refinancing has costs. All told, the fees associated with refinancing—like closing costs, term extensions, and debt consolidation—can total upwards of $5,000. The first step is to make sure the numbers work out in your favor.

Conventional wisdom says that you should only refinance if current rates are at least 1 or 2% lower than your existing mortgage. However, real estate analytics firm Black Knight contends that a refinance makes sense for any homeowner with an existing mortgage more than 0.75% (or 75 “basis points”) higher than the going rate.

For prospective homebuyers, low rates mean they can afford more home with the same savings and income. Every basis point, up or down, makes a tangible difference in the cost of a mortgage across its lifetime. At 3.33%, today’s near-rock bottom 30-year fixed rates are incredibly appealing for buyers. The question is… during a global pandemic, are they willing to buy?

The impact of the novel coronavirus is still evolving throughout local real estate markets and the national economy as a whole. Stay-at-home orders make home tours complicated, if not impossible. If you’re looking to buy a home while rates are low, are you open to making an offer based entirely on a virtual tour, videos, photos, and a look at the exterior? Are you open to leaving your place of residence to tour a property with your partner and a showing agent?

Your Trusted Orange County Real Estate Advisers

At the Stavros Group, we are working hard every day to facilitate the needs of our buyer and seller clients with the utmost concern for their health and safety. Some buyers and sellers are motivated by external life events like relocation, divorce, or a birth or death in the family. Some buyers are looking to take advantage of low rates while they last. The good news is that, although business has inarguably slowed, sales are still happening. New listings are coming to market, properties are entering escrow, and deals are being closed.

If you are thinking of buying or selling a home, taking advantage of low rates by refinancing, or if you simply have a question about the market, feel free to reach out. We are always here to help, and it’s our honor to be of service. Now more than ever.

Stay safe, stay healthy, and stay in touch—figuratively, of course!

3 Reasons You Will Love Searching For Dream Homes In Newport Beach

Searching for luxury homes can be very challenging: 3 reasons you will love searching for dream homes in Newport Beach

Searching for luxury homes can be very challenging if you don’t do it the right way. Finding the right agent can make all the difference. Here are 3 reasons you will love searching for dream homes in Newport Beach.

Perfect Weather Year Round

In some parts of the country, you must deal with bitter winds that might cause frostbite and shoveling yourself out of your driveway during winter. Fortunately, those living in luxury homes in Newport Beach don’t have those same problems. Our temperate climate is “not too warm and not too cold.” Our low averages 56 degrees and our high averages 73 degrees. Homes for sale in Newport Beach are located in the ideal environment for sunbathing, bodysurfing, swimming and water skiing. The best realtor in Newport Beach can match your love of water recreation with spectacular waterfront property.

Private Beach Access

And, with the best coastal homes in Newport Beach, you also have private, gated beach access. Host your important guests in style. Dream homes in Newport Beach can become your little oasis. Everything you need is in close proximity. Buy fresh fish at the Dory Fishing Fleet. Eat a little lunch at a Marine Avenue restaurant. Shop on Fashion Island. Or, take a bike ride on the Upper Newport Bay Ecological Reserve Loop. Buying a home in Newport Beach opens up the doors to the American Dream. The best realtor specializing in Newport Beach California can find homes that match your lifestyle.

#1 Golf Course

You have everything you need to enjoy the good life in Newport Beach. The Mariner’s Mile is where you can outfit your yacht. Conde Nast named the Pelican Hill Golf Course, with its 270-degree Pacific Ocean views, as #1 in the entire world. Throughout town, you will have scenic views of jaw-dropping beauty. At the Stavros Group, we introduce clients to real estate jewels.

Contact us today, so we can show you magnificent coastal homes in Newport Beach. You’ll fall in love with this “Crown of the Sea.”