Investing Archives - Live Texan Realty

Mortgage Rate Mitigation

Buy, Home Improvement, Investing, Market Simplified / August 2, 2023

The big question is; what do you do when housing prices present buying opportunities, but mortgage interest rates don’t. After spending several months embedded in this exact situation, we have discovered that many buyers may not realize that there might be options available to help solve this exact problem. This in turn would allow buyers to take advantage of the current lower prices before they inevitably start to climb again.

While it is expected that the Fed will raise interest rates at least once, if not two more times in 2023, those are widely expected to be the last rate hikes for some time. Inflation numbers continue to look better and as they continue to fall, we will likely see interest rates fall with them. What this means for buyers is that while they will likely face steeper payments in the immediate future, those could be very justifiable if there is an option to refinance to a significantly lower rate in the not too far off future. To assist in swallowing that pill in the near term, we often advise our clients to factor in seller paid closing costs with their offer to effectively have the seller pay to decrease their immediate interest rates. Sellers knowing the situation buyers are facing are often happy to contribute to those costs to get their property sold.

Another option for the near term is to look at non-conventional loan products that may be currently available. Russ Laing, Loan Officer with Vista Lending explains that many buyers will opt to use what is commonly referred to as a “Buy-Down” loan. These are typically 3-2-1 or 2-1 buy downs. Here is a brief, non-lender explanation of how this works:

The seller contributes a certain amount of money at closing based on the loan amount for the purchase. In the case of a 3-2-1 buy-down, your interest rate would be reduced by 3% for the first year, 2% for the 2^nd year and 1% for the third year. What the lender loses in interest is made up by the seller’s contribution at closing. For a more detailed explanation of this type of loan, we would be happy to put you in touch with Russ Laing at Vista Lending.

Please feel free to reach out to us to discuss your options if you are currently in the market for a new home or rural property, we are here to help!

Jordon Russell

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The Austin Market; (Recent) Past, Present and Future

As most of us know by now, the incredible boom that the pandemic brought with it in Austin and the country in general has passed. 2022 started as strong as 2020 and 2021 but began to taper off quickly around April. Sold property prices increased approximately 185% from January 2022 to May 2022 and then as if to define the term “market correction”, pricing proceeded to decline by approximately 18% by December.

The decline can be almost entirely blamed on interest rates and the Fed’s attempts to curb inflation. Mortgage interest rates quickly climbed which made a lot of buyers press pause on their home search and sit on the sidelines waiting to see what would happen next. Many listings went through significant price reductions or were even withdrawn from the market in the 2^nd half of 2022 and pending properties dropped significantly.

Well, as of now (2/7/2023), mortgage rates have somewhat stabilized and have been fairly consistent for the past few months right around the 6% mark for 30 year fixed notes. So, the big question is; Where is the bottom and have we hit it yet? While many believe we are at or very close to it, others like Goldman Sachs believe we will see another 2.6% overall price decrease by the end of 2023.

Any way you look at it, 2023 can likely be considered a buying opportunity. Even if we are to see another 2.6% decrease, that will likely be quickly made up and more when we start to climb out of this low point. There are also loan products available like the 3-2-1 and 2-1 buy down loans that can significantly mitigate interest rates for the first few years of the loan. With these products buyers can get as low as 2-3% for the first year of the loan which would obviously help carry a buyer into lower future rates and refinance options. Please feel free to reach out to us for more info on those and we can also put you in touch with a lender for even more details.

We are excited about what 2023 has in store. We are always available to chat about your needs whether you are selling your property or looking to take advantage of the current lower prices to purchase something new. Please reach out any time if we can be of assistance!

Natalie Russell