Are We Heading for a Crash?

Mortgage rates are always closely tied to the 10-year bond rate.
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Are interest rates going up?

First, think about what causes interest rates to go up. As I've always said, real estate is all about timing. Those who make money in real estate are the ones who have timed it well. Other factors like location and condition matter, but timing is what people make or lose money on.

There has been a lot of talk lately about the Federal Reserve potentially raising rates soon. Some people are under the impression that mortgage rates will go up if the Federal Reserve raises rates. However, the last time the Federal Reserve raised rates, mortgage rates actually dropped even lower.

Mortgage rates always closely fluctuate with the bond market. Looking at the bond market will probably give you a better idea of what is going on with interest rates. Bonds are at one of their highest historical prices, and the higher the bond prices, the lower the yield.

" Mortgage rates are
always closely tied to the 1-year bond rate."

The lower the yield, the lower mortgage rates will be for you and I. You can look at 10-year bonds and their interest rate to determine mortgage rates, usually, because most lenders base their rates on the 10-year bond.

Today's price for a 30-year bond is one of the highest it has ever been. As a result, it has a lower yield than it has in the last 30 years. In fact, it is the first time in 30 years that the 30-year bond yield is lower than the rate of inflation.

This is because other countries with negative interest rates are rushing their money to the United States to take advantage of the positive interest rate, even as low as it is.

Many on Wall Street believe that the next bubble is a bond bubble. If this bond bubble really bursts, bond prices will go down, yields will go up, and as a result, our interest rates will go up. 

Additionally, interest rates have fueled home prices to go higher. Any changes in the interest rate will have the same effect, but in reverse. Affordability will drop and so will prices.

So when asking if interest rates will go up or not, look to the bond market. The bond market's rates are as high as they've been in 30 years, and most people think they need a correction. I don't think anybody can say whether it will be a correction or a bubble.

If you have any more questions about mortgage rates and the factors that affect them, give me a call or send me an email. I'd be happy to help you.

How to Pick the Right Home

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How do you know that you’re buying the right home? If you are looking for a home and you find one in the neighborhood that you want with the right number of bedrooms and bathrooms and in your price range, that could be the right home.

However, as many of you know, these are not the only factors to consider. Things like lighting, upgrades, layout, and the condition of the home make a big difference. These factors make you feel a certain way about the home and help you figure out if you like it enough to make an offer.

Still, what happens if there are four or five homes in the same area that meet your wants and needs? Which one do you pick? As a general rule, if a home meets 80% of your wants and needs list, that should be the right home. It is very rare to come up with a home that meets 100% of your wants and needs.

" Stay firm with your need list
and be flexible with your wish list. "

When you evaluate the homes to select which one is right, make sure you are in the location that you want and that the home is orientated the way you want. You should also evaluate the price of the home. Look at comparable properties with your Realtor to determine whether or not the home is overpriced. Don’t rely on sites like Zillow for home value; Zillow’s estimates are often way over the actual value of the property.

As I mentioned, one factor you should pay attention to is the layout. The home should have the layout you want or be easily modified. Cosmetic issues are important but, again, it’s very rare that a home has 100% of the cosmetics and upgrades you want. If everything else is right about the house, don’t let cosmetics be the deciding factor.

Ultimately, keep in mind that you need to stay firm with your needs list and be flexible with your wish list. If you have any questions, give me a call or send me an email. I would be happy to help you!

How Buyers Can Successfully Compete in Multiple Offer Situations

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Welcome back to the second part of our series on how to handle multiple offers in the surrounding Irvine area. As a buyer, how can you compete and increase the likelihood of getting your offer accepted in a bidding war?

"Reduce the contingency
period at all costs."

Of course, sellers will the take the price into account first. However, it’s not the only thing they look for. Although sellers are looking for the highest bidder, they also want to make sure the buyer can close in a timely fashion. As a buyer, it’s your job to assure the seller you are that buyer they can rely on. Here are six useful tips to remember when submitting an offer.

1. Provide detailed documentation on the source of your down payment.
2. Reduce the contingency period at all costs.
3. Get pre-approved with a local, reputable lender and provide the pre-approval letter, including your FICO scores and your assets.
4. Inquire about the seller’s motivation through your agent, such as what they’re looking for or why they’re moving.
5. Get personal and include a family photo with your offer.
6. Be flexible with the closing date.

If you’d like more tips, please reach out. Give me a call or send me an email. I’d be happy to talk! I can answer any and all of your questions as well.