What Lower Interest Rates Mean For You

In REAL dollars and cents

As I write this, interest rates are close to the lowest they’ve been in 3 years, making this a GREAT TIME to buy (or possibly to refinance your existing mortgage).

As an example, I created a little side-by-side comparison of a 30-year fixed conventional loan, using a $300,000 purchase price, 20% down payment, and a buyer with a 740 credit score – your interest rate could be as low as 3.625% in today’s market!

Comparing that to the exact same loan with a 4.875% interest rate (which is where rates were at 3 years ago and is still a great rate in itself, especially when you look at the big picture of mortgage interest rates over the last 30 years  ** for details on this keep scrolling down **) and notice the difference in monthly payment:

 

 

 

 

 

 

 

 

 

 

Now obviously, your individual credit score and down payment amount, as well as the loan type you’re using will impact your interest rate, but you get the picture — using the example above that’s a monthly difference in payment of $176!

Next, of course, we need to talk about how that same difference in interest rate effects the amount of money you’d be paying in interest over the life of the loan: it would cost you over $63,000 MORE with a 4.875% interest rate versus a 3.625% rate on that same $240,000 loan — and that’s not nothing!

Historical Perspective

For a quick trip down memory lane you can click on this interactive chart (provided by one of my favorite lenders, Cheryl Bullard at Premier Nationwide Lending) to see what interest rates have been doing over the last 30 years, and you’ll see what I mean when I say that that 4.875 rate is still nothing to sneeze at. (Seriously: look at where we were at in 1989!)

If you’d like more information on this topic or are ready take advantage of near historically low interest rates I’d love to chat with you about it.  You know where to find me! 😉

Growing Like a Weed

Boomtown Austin — still booming!

For those of us who live here, we already know this: the Austin metropolitan area has been growing like gangbusters for a while now.  And according to Ryan Robinson, the City of Austin’s demographer, the Austin area population will increase 2.75 percent in 2019; if this prediction holds up we will see 61,000 new residents in 2019, the equivalent of about 167 people per day!

So, whats driving this frenetic population growth?  Says Robinson: “With the pace of overall job creation remaining near 3.5 percent in Austin, anyone would be hard-pressed to predict much of a slowdown.”  Austin’s unemployment rate of 2.6% is well under the already impressively low national figure of 3.6%

JOBS, JOBS, JOBS!

Our once-crunchy, weird, small-ish city has grown into a massive tech hotspot, with some of the biggest names in the industry moving or expanding their operations here: Apple, Amazon, Facebook and Google (just to name a few) have begun or announced their company expansion plans for our fair city.

Increasing what is already a substantial presence here, Amazon recently announced their plans to add 800 new jobs at their tech hub near the Domain, which will bring their overall number of Austin-based employees to around 7,400.

Apple’s new Austin campus, which will be located just down the road from its existing facilities in northwest Austin, will initially accommodate 5,000 employees, with plans to eventually grow that number to 15,000.

Google has announced their plan to add an additional 5,000 employees who will be housed in a 35-story building downtown, with an expected 2022 opening — and this is in addition to the 800 or so Google employees already located here.

And Facebook, currently with about 700 employees in their downtown Austin offices, has now leased all 17 floors of the Domain 12 tower, which should be completed by the end of 2019.  In addition, the company has plans to lease 32,000 square feet at the upcoming Parmer Innovation Center in northeast Austin.

And again, the above is just a taste of what’s happening with Austin’s rapidly expanding job scene.  As of the end of March 2019, Austin added 22,700 net new jobs during the preceding 12 month period, pushing our ranking to 16 on the nationwide list of fastest growing major metropolitan areas.

GETTING HERE

With all those new bodies, we obviously need to update our capacity for folks to fly in and out.  In February, the first phase of the $350 million terminal expansion project opened in the Barbara Jordan Terminal at the Austin-Bergstrom International Airport — and this is just the beginning of ABIA’s expansion plans, which will see it gearing up for an expected 30 million air travelers passing through annually by 2030. Considering there were approximately 16 million travelers who passed through the Austin airport in 2018, that means in just over 10 years’ time we will see almost double that number — wow!

GETTING AROUND

Of course one of the more pressing issues that comes with all these new people showing up on our doorstep is the worsening congestion on our roads.  Ask anyone who commutes on our already clogged highways — even after the addition of toll roads and express lanes over the last decade — we are still struggling mightily.  To be honest, we are way behind the curve when it comes to reasonable mass transit options in Austin, which is something our city planners, along with Capital Metro are trying to address.  We are currently in the community engagement phase of Project Connect, which is a bold  and multi-pronged plan to tackle some of our our transit problems and will include fully electric high capacity rapid transit vehicles, light rail, express bus and commuter rail expansion.  Ongoing right now is engineering and environmental review, along with vehicle review/selection.  There is a proposed referendum date for the project of sometime in 2020.

HOUSING

So what effect has this growth had on local real estate? As you might have easily guessed, our housing market remains incredibly strong, with the median single family home price in the greater Austin metropolitan area reaching $320,000 in April.

We are currently ranked 5th nationally in new home starts, up 7% over last year, and indications are that this should remain strong throughout the year.  Leasing demand in Austin is up 7% over last year, with the average apartment occupancy rate hovering around 93%.

THE GOOD NEWS

The good news is Austin is a vibrant, flourishing city with a strong economy and loads of opportunity. Homeowners and investors have seen their real estate values skyrocket in a relatively short period of time (and unlike the housing bubbles in other cities of years past, this increase is based on actual growth rather than speculation).  And our home prices, while increasing steadily, are still among some of the most affordable compared to other major tech hubs around the country (I’m looking at you, San Francisco).  Yes, we are experiencing some growing pains, but there is a reason why Austin keeps being voted the Best City in America — and it ain’t just for the barbecue!

 

March Madness

It ain’t just about basketball

As a seller you love them, as a buyer you dread them: the multiple offer situation.  And in March, when the (somewhat) somnolent winter real estate market starts revving back up into high gear with the onset of spring, multiple offers become a more frequent occurrence.

Let the delight or dismay ensue!

From a buyer’s perspective, the obvious issue is that you don’t know what you might be up against when you hear the dread “submit your your best and final offer” phrase.  If you don’t know what the other offers are, how are you supposed to know how to beat them?  The listing agent can only disclose that there are other offers, but not what’s in those offers (unless specifically directed to do so by the seller — which is rare, but does happen).  You have to know how to structure an offer which will be the most appealing.

Obviously, upping your offer amount is the first thing to look at.  Offering more than the asking price is very common, especially in our crazy hot Austin real estate market, and something I alert my buyers to the possibility of when I’m certain we are going to be in a multiple offer situation.  I have often chosen to go in initially over asking price, as long as I feel that price will be supported by the appraisal.

But one thing to know about multiple offers is that sellers don’t necessarily always go with the highest dollar amount; oftentimes there are other factors which can be more enticing to them.  For instance, it can be a quick closing date that wins the day.  If a buyer can close in 2 weeks instead of 45 days that can be very appealing to a seller who needs to move in a hurry.  Conversely, it can be a buyer who doesn’t need to take possession right away but can allow the seller a leaseback for a certain period after closing while the sellers wait to close on their new home.

When offers received are very similar in price and time needed to close, other things which can tip the scales in your favor are a shorter option period (note: I would never advise NO option period) and/or a higher option fee, a larger earnest money deposit and a greater down payment.  These are things which speak to the seriousness of the buyer and to their financial stability, so there appears less risk that the deal will fall apart from financing issues.  I would also include in that same category (if it’s feasible) for little to no ask for seller contribution to closing costs, or an offer for the buyers to pay the owner’s title policy, which can be a substantial amount of money and is typically paid for by the sellers.  This would translate to a higher net for them — because for some sellers it is ONLY about the Benjamins!

Another contributing factor in some seller’s decision-making process is a bit more nebulous: the sentimentality factor.  While for some folks it’s just a piece of real estate and doesn’t mean anything to them on a personal level, for many sellers their home carries a lot of emotional weight and they want to know it is going to someone who will love the home and care for it as they did.  Many sellers like knowing that, after having raised their own family in a home, the new buyers will be doing the same.  They made many fond memories in their home and they want to see that continue with a new family.  They want their old home to be appreciated, its history respected.

Knowing this, one of the things I like to include in my offers is the “love letter”, which is just a short paragraph or two about the buyers and their hopes and plans for their life in the new house, what they love about the home and/or the neighborhood — them, their kids and the family pets all get starring roles in the love letter!  Nothing schmaltzy, mind you, just something to pluck the heartstrings a bit, or stir up fond memories for the sellers of when they themselves first bought the home.  I have seen sellers turn down a higher dollar offer on their home by investors who were planning to flip it and instead sell it to a family for a little less based on their love letter.  Never underestimate how much of a role sentimentality can play for some sellers.

My final thought on submitting an offer that stands out and hopefully wins the day is make it clean, fill everything out completely, attach all pertinent documentation (financing agreement, lender’s pre-approval letter or proof of funds letter from bank, and any other addenda needed) and summarize the offer in a cover letter with bullet points showing the specifics so they can quickly get a complete picture of your offer without having to read a dozen pages.  And then keep your fingers crossed! 🙂