Long story short, it was in the shop on Monday, and it became clear that some high-ticket repairs were likely coming. We had some work done to prolong its life, but knowing what was ahead, we discussed beginning to look and budget for something newer and more reliable.
Within hours, she had found a new truck she liked and called to see if it was available for a test drive. Within 36 hours, she had negotiated the price, negotiated her trade-in, gotten approved for a loan, and walked out with a new set of keys.
It was surreal watching her handle all of it.
I think my job here is almost done. 😊
Mortgage Question of the Week*
I had an interesting discussion with an agent last week about using a seller concession for a 2/1 buydown, so I thought I’d share some real numbers from the scenario.
The listing price was $800,000. Assuming a 5% down payment, the cost of a permanent 1% rate buydown, combined with the 2/1 temporary buydown, would have resulted in a total seller concession of approximately $26,000.
In this particular scenario, the buyer would have had a rate in the low 5% range during year one and the low 6% range during year two. The estimated monthly payment reduction from the temporary buydown would have been approximately $988 in year one and $494 in year two.
Now compare that with simply reducing the sales price by the same $26,000. The estimated monthly payment benefit to the borrower would have been approximately $182.
So, which provides the borrower more value?
Every transaction and every borrower is different, of course, but I thought this was a good case study to show how the numbers can play out. A price reduction isn’t always the only strategy worth considering.
If we can provide real numbers or help evaluate options for any of your listings, please let us know.
Market Notes
What a wild ride last week for mortgage interest rates.
I’m sure you’ve seen plenty of news, anxiety, and reels talking about this market. Having followed the markets for the better part of 30 years, what I can tell you is this: if you think you know… you don’t. 😊
The markets are the markets, and we are along for the ride.
The short version of last week’s volatility and upward pressure is that rates are approximately .25% to .375% higher than they were a week ago.
Interestingly, much of the movement followed a report that normally doesn’t have this kind of impact on long-term rates. A report measuring business activity in the manufacturing and services sectors was released Wednesday morning, and the market reacted almost immediately.
The readings came in notably higher than expected, and the selling began.
What followed was essentially a repricing of the market’s rate outlook. Investors began asking a different question: What if the Fed is behind the curve on inflation, the economy is strengthening, and demand is continuing to put pressure on prices?
As I write this, the market is now pricing in the possibility of additional short-term rate hikes in the coming months.
Looking Ahead
So, where do we go from here?
Although Wednesday and Thursday were hard to watch, we did see some improvement on Friday.
This week is chock-full of economic reports that could influence the near-term trend, with Friday’s jobs report likely to be the headliner.
Buckle up. Make sure buyers who are under contract have discussed locking their loan terms with their lender, and be patient.
Unfortunately, no one can predict the markets. What we can do is provide guidance and sound strategies to help make the homebuying experience more affordable.
Enjoy a nice week. Feel free to ring with any mortgage-related questions or needs.
-Steve-
*All loans are subject to credit approval and program guidelines.