Today's Rate Indicator

If you don’t buy a house now, you’re either stupid or broke.

If you don’t buy a house now, you’re either stupid or broke.
Interest rates are at historic lows but cyclical trends suggest they will soon rise. Home buyers may never see such a chance again, says Marc Roth.
By Marc Roth



Well, you may not be stupid or broke. Maybe you already have a house and you don’t want to move. Or maybe you’re a Trappist monk and have forsworn all earthly possessions. Or whatever. But if you want to buy a house, now is the time, and if you don’t act soon, you will regret it. Here’s why: historically low interest rates.

As of today, the average 30-year fixed-rate loan with no points or fees is around 5%. That, as the graph above – which you can find on Mortgage-X.com – shows, is the lowest the rate has been in nearly 40 years.

In fact, rates are so well below historic averages that it should make all current and prospective homeowners take notice of this once-in-a-lifetime opportunity.

And it is exactly that, based on what the graph shows us. Let’s look at the point on the far left.

In 1970 the rate was approximately 7.25%. After hovering there for a couple of years, it began a trend upward, landing near 10% in late 1973. It settled at 8.5% to 9% from 1974 to the end of 1976. After the rise to 10%, that probably seemed O.K. to most home buyers.

But they weren’t happy soon thereafter. From 1977 to 1981, a period of only 60 months, the 30-year fixed rate climbed to 18%. As I mentioned in one of my previous articles, my dad was one of the unluckily stuck needing a loan at that time.

INTEREST RATE LESSONS

And when rates started to decline after that, they took a long time to recede previous levels. They hit 9% for a brief time in 1986 and bounced around 10% to 11% until 1990. For the next 11 years through 2001, the rates slowly ebbed and flowed downward, ranging from 7% to 9%. We’ve since spent the last nine years, until very recently, at 6% to 7%. So you can see why 5% is so remarkable.

So, what can we learn from the historical trends and numbers?

First, rates have far further to move upward than downward; for more than 30 years, 7% was the low and 18% was the high. The norm was 9% in the 1970’s, 10% in the mid-1980’s through the early 1990’s, 7% to 8% for much of the 1990’s, and 6% only over the last handful of years.

Second, the last time the long-term trends reversed from low to high, it took more than 20 years (1970 to 1992) for the rate to get back to where it was, and 30 years to actually start trending below the 1970 low.

Finally, the most important lesson is to understand the actual financial impact the rate has on the cost of purchasing and paying off a home.

Every quarter-point change in interest rates is equivalent to approximately $6,000 for every $100,000 borrowed over the course of a 30-year fixed. While different in each region, for the sake of simplicity, let’s assume that the average person is putting $40,000 down and borrowing $200,000 to pay the price of a typical home nationwide. Thus, over the course of the life of the loan, each quarter-point move up in interest rates will cost that buyer $12,000.

LOAN COSTS

Stay with me now. We are at 5%. As you can see by the graph above, as the economy stabilizes, it is reasonable for us to see 30-year fixed rates climb to 6% within the foreseeable future and probably to a range of 7% to 8% when the economy is humming again. If every quarter of a point is worth $12,000 per $200,000 borrowed, then each point is worth almost $50,000.

Let’s put that into perspective. You have a good, stable job (yes, unemployment is at 10%, but another way of looking at that figure is that most of us have good, stable jobs). You would like to own a $240,000 home. However, even though home prices have steadied, you may be thinking you can get another $5,000 or $10,000 discount if you wait (never mind the $8,000 or $6,500 tax credit due to run out next spring). Or you may be waiting for the news to tell you the economy is “more stable: and it’s safe to get back in the pool. In exchange for what you may think is prudence, you will risk paying $50,000 more per point in interest rate changes between now and the time you decide you are ready to buy. And you are ignoring the fact that according to the Case-Shiller index, home prices in most regions have been trending back up for the last several months.

If you are someone who is looking to buy or upgrade in the $350,000-to-$800,000 home price range, and many people out there are, then you’re borrowing $300,000 to $600,000. At 7%, the $300,000 loan will cost just under $150,000 more over the lifetime, and the $600,000 loan an additional $300,000, if rates move up just 2% before you pull the trigger.

What I’m trying to impress upon everyone is that if you are planning on being a homeowner now and/or in the foreseeable future, or if you are looking to move your family into a bigger home, then pay more attention to the interest rates than the price of the home. If you have a steady job, good credit, and the down payment, then you really are being offered the gift of a lifetime.

Marc Roth is the founder and president of Home Warranty of America, which touches just about every part of the real estate industry since it sells through builders, real estate agents, title companies, mortgage companies and directly to consumers.

CURRENT RATE TRENDS AS OF 12-18-2009:
30-Year Fixed (with 1 point) 4.625%
15-Year Fixed (with 1 point) 4.125%

MERRY CHRISTMAS!!!!!! 803-917-1893 WWW.TROYOTT.COM

A MATTER OF HONOR

I have watched the Mark Sanford saga with a high degree of trepidation like all South Carolinians. In reflecting on this matter the subject of southern honor comes to my mind most frequently.  Being raised in the South like Mark and Jenny I understand full well the meaning of the word as do they both I am sure in their heart of hearts.  Mark had the opportunity when this matter first became exposed publicly to do the right thing, admit his mistakes, ask for forgiveness, and then act with honor and remove himself from office without hesitation. He chose not to. No state employee no matter how low or high their pay grade who conducted himself in a similar manner would have had a job to go back to, why then should the chief executive of the State of South Carolina be any different.  He instead subjected the entire state including his supporters like myself, to a shameful display of self centered pride and ego gone wild. His concern was first and foremost for himself, not for his constituency, his family, nor the future of his State.  Jenny had the opportunity as well to act honorably by choosing not to write a tell all book and lament her marital problems publicly on national television. She could have retreated from public life with honor and gentility in the attempt to heal her marriage, family, personal hurt and anguish without allowing her ego and loss of pride to take center stage. It is truly sad that both of them despite all the damage that has happened still fail to seemingly understand that while their personal lives are of no one's concern and certainly we all have sinned and are without perfection, it their own actions coupled with a single minded unwillingness to look beyond themselves and their personal self interests that has put the good and honorable name of South Carolina and her people through the proverbial mud. Perhaps one day they will both come to realize that leadership and privilege has it's price and no one should aspire to it without the willingness to bear it

UNIVERSITY HILL NATIONAL HISTORIC AREA @USC

There are two different kinds of historic designation. First, there is the National Register District. This is administered for the federal government in this state by the SC Department of Archives and History. Here is their website explanation of the register: "The National Register of Historic Places is a list of properties significant in our nation’s past, which is maintained in Washington, D.C., by the National Park Service. Properties are added to the list by nominations submitted by citizens nationwide through State Historic Preservation Offices. South Carolina has over 1,300 listings in the National Register. This includes over 160 historic districts. " National Register Designation requires a thorough surveying of individual properties and a district such as University Hill must have many architecturally fine and intact structures to qualify for the Register. Once on, individual structures may qualify for tax credits for eligible work--the tax credits can be significant depending upon the amount of work done. There are no restrictions on building or demolition when there is a National Register district in place, but ineligible work may disqualify structures for tax credits. Here is the link to more information if you're interested: http://shpo.sc.gov/properties/register/results.htm. Also, the nomination information for University Hill can be found here: http://www.nationalregister.sc.gov/richland/S10817740131/index.htm

 

Here at the City, we also designate districts, but generally we call these local districts and University Hill has the name "University Hill Architectural Conservation District" for its historic designation. This actually coexists with the National Register district in place. The City, however, reviews changes made to the exterior of buildings (remember--changes visible from the public right-of-way?"). The goal of the district is to maintain the architecture and character of the district while allowing for contemporary needs. Many projects are reviewed by staff (out of my office) but larger projects must go to the Design/Development Review Commission. They process a large majority of projects in one meeting. The local historic designation can help to maintain eligibility for the National Register and also provides access to the Bailey Bill for eligible properties. The Bailey Bill is a tax abatement measure passed by City and County Councils. This combined with state and federal tax credits has made many projects feasible for property owners in the last couple of years. Here is the link to the guidelines for University Hill as well as the City's Bailey Bill:  http://www.columbia.sc.gov/coc/index.cfm/development-gateway/planning-and-development-services/preservation-and-design/.

 

803-917-1893 WWW.TROYOTT.COM  

 

TIME FOR A CHANGE

When faced with making a political decision concerning matters of governance our elected representatives be they local, state, or national should focus like a laser in making their decisions based upon on two overriding principles. 1st. Is the matter in question constitutional valid, being in alignment and in accordance with the principal governing document of our Republic  2nd. Is this matter in the best interests of the working men and women of our state. Simply put, Nothing else matters. One man who is running for governor that I know personally exudes these principals from his very core,  his name is Andre Bauer.  Andre is a public servant, not a politician always has been, and always will be.  Ask a senior citizen who has been touched by his tirelessly work on their behalf their opinion, ask an entrepreneur who in the sate house most represents their interests, none other than the man who embodies the entrepreneurial ideal, who has through sheer will, hard work and perseverance  succeeded on his own and by his own merits in the real world arena of business and ideas. Andre understands the meaning of the words integrity, duty, self sacrifice, tenacity, and honor. He understands them full well because he has lived them his whole life. Call or email him today with a question or a concern and you will find his response will be one in the same whether you are a CEO, senior citizen, laborer, or a young student needing assistance.  That response being, how may I serve.