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By Kim Murphy
Murphy and Murphy Southern California Realty 

Real Estate Round-Up: Lightning in a bottle

 

Last updated 8/24/2019 at 10:58am



What if someone told you that the perfect time to travel to one of your favorite vacation spots was the next eight months, because prices are low and may even go lower during that time period and, after that, the price to travel would most likely be going up and the weather historically will be inclement.

Would you go now, or would you delay and plan your trip for later next year? Most of us, if we could take advantage of this perfect situation would go, right?

Right now, we’re in a similar time period for real estate. The 30-year fixed-rate mortgage fell to 3.60% from 3.75%. The interest rates for a mortgage are now hovering around a full percentage point lower than they were a year ago, making it less expensive and more attractive to borrow for a similarly priced home. This is great news if you are a buyer.

Buyers make a purchase based on payment. Buyers know their personal budget reflects more what they can afford than their tax returns reflect. Often, buyers are approved for a higher monthly payment than they are comfortable paying.

When interest rates drop a point, a buyer's buying power increases approximately $75,000. A buyer approved to purchase a $650,000 home last year, when mortgage rates were at 4.6%, could purchase a $725,000 home this year, and have the same payment, assuming they could provide the same percentage of down payment.

Many more homes become available for their consideration because during this time of lowering interest rates, prices have stayed nearly the same. We’ve had slight increases and then slight decreases.

Fallbrook’s overall price average is down just under 3%. Sounds like a winning situation for buyers. Lower interest rates mean lower monthly payment or being able to purchase more home for their money.

Sellers, on the other hand, have already seen price decreases over the past year. Thirty-eight percent of all homes sold in California over the past 12 months, had a price reduction, before receiving an accepted offer.

Moving into late 2019 and into 2020, the National Association of Realtors and the California Association of Realtors, Chief Economists, both expect prices to remain stable until the third quarter of 2020.

So, if prices remain stable and interest rates remain lower, a larger pool of buyers can afford to purchase your home. Seems like a good time to catch lighting in a bottle. What do you think?

One more component to consider is that currently a yield curve inversion exists, which means that the 10-year Treasury note is yielding less that the two-year Treasury note. The last time the yield curve inverted was back in 2007, just as the Great Recession was taking hold.

Economists believe that this inversion could signal that the U.S. could face a recession. We are currently experiencing one of the longest economic growth periods. All good cycles eventually lead to a down cycle. Economists believe the timing of this recession will be late 2020 and last for approximately 18-24 months.

I’m not spelling doom and gloom. I believe I’m sounding the alarm, to get off the sidelines and take action. If you are a buyer who is reading this, now’s a great time to take advantage of low interest rates and reasonably priced properties. You could wait until the end of 2020, but interest rates will not stay this low forever, so even a 10% drop in prices will easily be absorbed by a 1% increase in interest rates.

If you are a seller, put your best foot forward, price your home correctly and take advantage of stable prices and the larger buyer pool available to you. In the hands of an experienced, knowledgeable, professional Realtor, you will be able to maximize your selling price.

If you’re a homeowner and are planning on selling, now is the time. If you think you have the luxury of waiting it out, remember 2008. If the economists are correct, and if we have additional price adjustments, we are potentially looking at a drop-in price and an increase in interest rates.

The housing market peak was in the second quarter of 2018. The adjustment in pricing has started. By lowering the interest rate, Federal Reserve is attempting to prop the economy up.

At Murphy and Murphy, we believe there is an eight-month window of selling opportunity. Learn from history. Take advantage of lower interest rates and serious buyers. Murphy and Murphy Southern California Realty is here to help you navigate the best decision for you.

Kim Murphy can be reached at kim@murphy-realty.com or (760) 415-9292 or at 130 N Main Avenue, in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.

 

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