War and Interest Rates

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Our clients are curious to know what the conflict in the Ukraine will mean for mortgage rates.

The short answer is down in the near term and up in the long term.

Generally speaking, economic and political uncertainty drive people to invest in bonds rather than stocks, which puts downward pressure on interest rates.

So, in the near term, the conflict in the Ukraine will push rates down slightly.  We have already seen this happen as 30-year rates have dipped in the last few days.

The conflict is likely to push oil prices up which means higher gasoline prices.  This will cause upward pressure on inflation, which ultimately causes upward pressure on interest rates.

So, the longer the war lasts in Europe, the more likely it is to push interest rates even higher.

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5 Ways to Create a Sustainable Kitchen

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In many ways, the kitchen is the heart of a home. All the time spent making delicious food, sharing recipes, and enjoying meals with loved ones gives it a central role in home life. A consequence of the time spent in the kitchen is the creation of waste. But by adopting more sustainable practices in the kitchen, you can reduce waste and make your home more eco-friendly. Here are five ways you can create a sustainable kitchen.

5 Ways to Create a Sustainable Kitchen

1. Cut Down on Food Waste

It’s no secret that a certain portion of food always seems to go to waste, but how can you avoid throwing away perfectly edible food items? It starts with being intentional about your grocery shopping. This helps to prevent overbuying and will give you a better chance of cutting down your food waste. Food preservation is key, as well. Invest in high-quality, reusable containers to prevent food from rotting, wilting, or expiring before you intend to cook it.

2. Choose Energy-Efficient Appliances

Kitchen appliances generate a significant amount of power. By using an energy-efficient refrigerator, freezer, and/or dishwasher, you can reduce the overall energy consumption of your household. When deciding on which appliance to purchase, the most sustainable choice you can make is the one you plan on sticking with for a long time. When deciding on a gas versus an electric range, know the pros and cons of each option before making a final decision.

 

A young man and a woman take care of their kitchen herbs and houseplants.

Image Source: Getty Images – Image Credit: Pekic

 

3. Reusable Materials

Getting more uses out of the items in your kitchen will help make your household more environmentally conscious. Reusable kitchen towels are an eco-friendly replacement for paper towels when you’re cooking, wiping down your counters, or doing dishes. Using reusable grocery bags is an effective way to transport groceries sustainably. It will also help keep your kitchen organized by avoiding a plastic or paper bag pile-up under your sink. This line of reusable thinking in the kitchen can even extend to design. If you’re looking to give your kitchen a makeover while keeping sustainability in mind, consider incorporating reclaimed wood, sustainably-sourced countertops, or natural materials like bamboo. 

4. Use Natural or Organic Cleaning Products

Creating a sustainable kitchen isn’t just about reducing food waste and choosing reusable materials. By using organic and/or natural cleaning products, you can ensure that your cleaning practices are sustainable as well. Using natural cleaners, like baking soda and vinegar, can also create less waste when you repurpose jars and bottles to create your preferred solution. Buy ingredients in bulk, then re-purpose old spray bottles and use towels instead of paper products to clean. Certain conventional cleaning products with synthetic chemicals can negatively impact the air quality in your home, which can have harmful effects on your health, especially if you have respiratory sensitivities.

5. Be Mindful About Water Usage

Neglecting to monitor your water usage is a slippery slope. Not only will using too much water increase the overall waste output of your home, but it will also increase your water bill. Be mindful about using only the required amount of water for cooking, do your best to avoid leaving the faucet running, and if there is a drip, fix it as quickly as you can. Using too much water can also strain your home’s water systems, putting your pipes at risk of bursting. Tempering your water usage can help to prevent water damage and the high costs that come with it.

Going zero waste doesn’t have to be expensive. Try first to extend the life of the things you already have like plastic bottles and textiles. For more information on how you can adopt sustainable practices at home, read our guide to going low-to-zero waste:

A Guide to Going Low-to-Zero Waste

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Money at a Discount

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This week, for the first time in 32 months, mortgage rates hit 4%.

While this increase may feel painful for buyers currently looking at property, it is important to put today’s rates in perspective.

We believe we will look back a few years from now and see that a 4% rate was like buying money at a discount.

Interest rates hovered between 4.5% and 3.75% for the 8-year span of June, 2011 to June 2018

Between January, 2000 and December, 2010 rates were as high as 8.25% and as low as 5.0%.

When looking at the history of interest rates and researching economists’ forecasts, we believe it is reasonable for rates to hit 5% within the next 24 months. 

When interest rates increase 1%, a buyer’s monthly payment increases 10%.

So, if rates do go to 5%, it is like an additional 10% price increase for a buyer.

Given all of this information, we believe the biggest risk to a buyer in today’s market is to wait.

Mortgage rates are likely on their way up and there is an opportunity to buy money at a discount today.

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What are Closing Costs?

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The closing process in a real estate transaction finalizes the terms of an agreement between the buyer and seller, leading to the transfer of the property’s title. This step of the buying/selling process comes with its own set of costs. Before a buyer can hold the keys to their new home, and before a seller can celebrate the sale of their property, closing costs must be paid.

What are closing costs?

The term “closing costs” refers to the various expenses, taxes, and fees paid by both the buyer and the seller to finalize a real estate transaction. The purchase agreement—signed by both parties—will dictate the terms of how the closing costs are paid, but there are some standards about who pays what.

In general, buyers can expect to pay about 2-5% of the total purchase price in closing costs, while sellers’ costs can range anywhere from about 6-10%; the difference being that buyers are using extra cash to pay for their closing costs while the amount sellers owe is typically deducted from the proceeds of the sale of their home. Note—these percentages may vary depending on property taxes, insurance rates, and other factors involved in the transaction.

Closing Costs for Buyers

Typical mortgage-related closing costs for buyers include an application fee, an underwriting fee, and prepaid interest (the accrued interest cost between your settlement date and first monthly payment). If you make less that a 20% down payment on the home, you can expect to pay your lender for private mortgage insurance (PMI), as well.

Two main property-related closing costs for buyers are the appraisal and the home inspection. Lenders will require an appraisal to double-check that the value of the property matches your mortgage loan amount, which will typically cost you a few hundred dollars. A home inspection provides the buyer with a clear understanding of the home’s condition and what repairs need to be made, either in the future or before closing. In competitive markets (a seller’s market), it’s more common for sellers to conduct pre-listing inspections and for buyers to waive the inspection contingency to make their offer more appealing. Buyers will also pay a variety of title, insurance, attorney, escrow, and property tax fees to finalize the home purchase. Usually, your lender will require you to purchase homeowners insurance before settlement to protect against insured disasters that may occur on the property.

These are just some of the costs inherent in the closing process for buyers, which are a fraction of the total costs of buying a home. Working with a Buyer’s Agent will help you stay organized as you navigate through these crucial final steps of your home purchase.

 

A young man and woman shake hands with their real estate agent at their kitchen table.

Image Source: Getty Images – Image Credit: PeopleImages

 

Closing Costs for Sellers

The seller will pay the agent commissions on the sale, typically to both the buyer’s agent and the listing agent. Agent commissions usually come in at around 4-6% of the sale price of the home. Other closing costs for sellers may include attorney fees, title insurance, a transfer tax, and the home’s property taxes for the current year if they have not yet been paid. The terms of the agreement will spell out what the seller is additionally responsible for, including HOA fees if applicable and any escrow money promised to the buyer.

Typically, escrow fees are shared between the buyer and seller, which cover the costs of distributing the funds involved in the transaction. In buyer’s markets, it’s more common for sellers to agree to pay for a portion of the closing costs—what is known as “seller concessions.” A common example of a seller concession is when the seller agrees to pay for repairs discovered during the buyer’s home inspection. 

 

So, whether you’re buying or selling a home, it’s important to remember that a series of fees and payments must be completed to finalize the transaction. Learn more about the costs of buying and selling a home here:

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Rent Record

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Records continue to be broken in real estate, including the rental market.

Rents just rose another $2 per month to $1,594, a new record.

The annual rent growth of 13.5% nationally in 2021 was more than double any previous year, and apartment absorption counted nearly 600,000 units, which is roughly 50 percent more than the previous annual high, set in 2015.

The single-family rental market continues to outperform the multifamily sector.

Throughout 2021, the average U.S. asking rent gained $190 and 2022 is forecasted to increase by another 5%.

Source: Multi-Housing News

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7 Signs You’re Ready to Buy a Home

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Making the leap from renter to homeowner doesn’t happen overnight; it requires steady planning to put yourself in a good position to buy your first home. Prospective first-time home buyers can often feel like they’re waiting for a sign to indicate they’re ready to start making offers, when really, it’s a combination of factors. Here are seven signs that you’re ready to buy a home.

7 Signs You’re Ready to Buy a Home

1. You Know Which Homes You Can Afford

To know whether you’re ready to buy, you need to identify your price range. If you’re unhappy with your pre-approval, or need more money for your desired location, there are ways you can increase your buying power. Once you know which homes you can afford, you can work with your agent to find the right home and prepare an offer.

2. You Understand Your Local Market Conditions

The dynamics of the market in which you’re buying will play a role in determining whether you’re ready to buy. The local market conditions will dictate what kinds of offers you can expect to compete against, what tactics other buyers may employ, and whether the buyer or seller will have the leverage during negotiations. Therefore, it’s important to understand the difference between a buyer’s market and a seller’s market so you and your agent can strategize accordingly.

3. You’re Comfortable with the Responsibilities of Being a Homeowner

Having a mortgage instead of paying rent isn’t the only difference between owning a home and renting. You’ll be responsible for maintaining the property, making repairs, and completing remodeling projects. That doesn’t always mean you can’t predict a future need. The best way to prepare for unexpected projects on any home is to get a home inspection before you buy so that you know every inch of the property and can start to save for larger expenses that might come down the road.

4. You Have Funds Available for Home Buying Costs

The costs of buying a home are more than just your down payment and monthly mortgage. Before you move into your new home, you’ll have to pay closing costs, moving expenses, and appraisal and inspection fees, to name a few. Property taxes can sometimes be part of the mortgage and depending on the time of year may need to be paid before you move in. Once you’re settled, homeowners insurance will enter the fold. If you can afford these costs, it’s a sign that you are ready to buy.

5. You’re Making Progress on Your Debt

Having zero debt is not a realistic expectation for every first-time home buyer. But, if you have a plan in place for paying off your outstanding debt and can show evidence of the progress you’re making, it will strengthen your buying credibility. Lenders will factor this into their assessment of your financial health during the pre-approval process.

6. You Have a Strategy for the Down Payment

It is true that lenders view a twenty percent down payment as favorable and won’t require you to purchase private mortgage insurance (PMI), but it’s not game over if you can’t make a lump sum payment of that size. With a lower-than-twenty percent down payment, you may incur higher interest and fees over the life of the loan, which could put a greater strain on your finances long-term than waiting until you can pay more principal down. Whichever route you choose, make sure you have a solid plan in place to repay your loan.

7. Your Life Aligns with Buying a Home

Buying a home means you’ll be putting down roots, so it’s important that you and your household are ready to establish yourselves in one area before you buy. There’s financial logic behind this line of thinking, as well; in general, the longer you stay in one home, the more equity you’ll build. Career and income stability also play a role in determining whether you’re ready to buy. Landing a job with long-term prospects may be just the thing you need to green-light your decision to buy your first home.

 

To learn more about buying your first home, connect with an experienced Windermere Real Estate agent today by clicking on the button below.

 

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2022 Forecast

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Yesterday we held the annual Real Estate Market Forecast with our Chief Economist, Matthew Gardner.

To get the recording of the full presentation, please reach out to your Windermere real estate broker.

Here are some of the big takeaways from Matthew:

  • The national economy is very strong and the rate of inflation is expected to slow during 2022
  • There are many millions more open jobs available versus the number of unemployed people looking for work
  • Mortgage interest rates are expected to reach 3.85% by the end of the year
  • Home price appreciation along the Front Range will again be in the double-digits this year due to high demand, low supply and low interest rates
  • Home price appreciation is not expected to sustain the current pace over the next few years, but no price declines are expected

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