In the recent past, most of the current homebuyers and sellers were alive to witness the lowest real estate mortgage interest rates ever.
The national average for a 30-year, fixed-rate mortgage at the beginning of July 2015 was 4.08%. Rates hit a historic low of 3.31% in November 2012, according to Freddie Mac. Since then, they spiked almost a percentage point, fell back to 3.59% in February 2015, and have been climbing ever since.May 26, 2016
This little history lesson regarding mortgage interest rates is prevalent because today, due to rising interest rates, the real estate market has not reached full bloom.
The lacking component of an even faster moving real estate market is having more available inventory. Within the Santa Clarita Valley we currently have 473 real estate listings for sale. This intel is derived from the SCVnest website.
With the current buyer drive, even if that amount was double overnight, the housing market in the Santa Clarita Valley cities would remain in a seller’s market.
Triple the Santa Clarita real estate inventory and you’d see the market shift from a seller’s real estate market to a buyer’s real estate market!
The factor holding back the sellers from engaging the housing market, and getting their homes placed up for sale, are the interest rates.
If you are a homeowner, you are looking at it in this way. “I need to move up, downsize or relocate. I currently have a 3.31% interest rate on my mortgage. It’s a 30 year fixed and I can say that the payments are very comfortable.
I maybe able to “buy down” the interest rate, but from what I understand that is not a ‘cheap’ option. In fact, it’s quite the contrary, so much so, it’s not worth it if I plan to sell the new purchase in the next 7 years.”
One of the items that is mentioned related to buying a home at a higher interest rate is the “Mortgage Interest Deduction” that homeowners, who have a mortgage, can take advantage of with their taxes.
The amount of the deduction you are able to take is going to depend on your personal income tax profile. Ask your tax preparer or accountant what your mortgage interest deduction equates to in real dollars and cents.
In most cases it’s substantial. Therefore, if you are a current homeowner at a 3.31% interest rate and are going to sell to buy another home at a 4.31% interest rate – you maybe not as bad off as you think taking into account your ability to claim additional mortgage interest rate deductions from the money you earn.
Another item that our home sellers think about is the “necessity” to move. What is the core reason why they are contemplating moving? Have they really outgrown their home, having multiple children in the same room? Maybe they have a home with smaller than normal bedrooms and are feeling as if they live aboard a submarine.
It could be that they are at odds with their neighbors. While this does not seem like an adequate reason to move, it’s a horrible experience and many a homeowner have pulled the pin to escape horrible neighbors.
Relocation for job and or family. This is paramount reason and know that there are very few real estate markets as “expensive” as Southern California. If you are leaving here to go to New York – you will be about even to a more expensive real estate market.
However, relocating to Tennessee or Texas – you will be able to buy more home for less money than you are able to in Southern California. When you factor in the equity you will be taking with you and what it will cost to buy a home in other areas, even with higher interest rates, you maybe surprised to see the cash flow impact is to your benefit.
We have been blessed to have worked with some really great Santa Clarita real estate clients. We have also been blessed to be able to travel to other Southern California Cities to represent buyers and sellers of real estate. I’m Connor MacIvor. I’m a Cop turned Realtor and protection and service are both my middle names. 🙂
Be safe – search well and make sure you are using an encrypted real estate website to search for homes.