Real Estate Blog

Northeast PA's home for local Real Estate News, Market Trends & Statistics

 

Dec. 27, 2017

FED Rate Increase

Increased Mortgage Rates

Nowadays the market has become tough for homebuyers as the prices are high and the supply of available homes is low. Furthermore, if you are sitting on the fence that means you are losing your purchasing power right now RAPIDLY.

The Federal Reserve’s Rate Hike is making it expensive to buy homes. The benchmark interest rate was increased by the FED by one-quarter of a percentage point recently.

The FED Rate Hike took place on Wednesday making the target federal funds rate by 25 basis points to a range of 0.75% to 1.0%. Though the FED does not set the mortgage rates directly, its actions impact the housing market. Since the end of 2015, the rates have been raised three times by FED. The first hike surfaced in December 2015, the mortgage rates started with a drop in the initial few week in year 2016.

A 30-year fixed rate has increased on average from 3.590% to 4.30+%. As a result of this a buyer who was capable of a $1M home on Friday lost about $40k from their purchasing power. Now, they qualify for $960k purchase price.

The mortgage rates move with the government’s 10-year Treasury note that acts as the benchmark for various forms of credit as well as mortgages.  Since Donald Trump was elected president, the interest rates on the notes have risen already and will continue to do so when the FED tightens the monetary policy.

The hike seen on Wednesday was expected. The market priced it already so most of the experts do not foresee rates going higher in the upcoming weeks. The markets believe that the election of President Trump is boosting the economy. A better economy brings higher mortgage rates and a struggling economy brings lower rates.  The FED rate hike is being seen as something as a vote of confidence in the US economy that has witnessed job growth and increasing inflation.

A year ago, the average rate of a 30-year fixed mortgage was 3.68% which climbed to 4.21+% last week. Buyers will be paying around $57 more each month at the current interest rate compared to previous year if the price tag is assumed to be $235,000 with 20% down payment.  For a majority of buyers, this might be a deal breaker and could certainly hurt those who are looking for home in more expensive localities or those who are just on the margin of affording a home. This will come as a shock for those looking forward to home-shopping this spring season.

 

The Central bank is expected to increase the rates three times this year. If the bank’s actions become more aggressive a sharper raise in mortgage rates can be expected. The global economic scenario is doing fine at the moment and things look good. Markets are not only reacting to action of the FED but prospects in rest of the world as well.

 

- MU

Posted in Market Updates
Dec. 27, 2017

Maximize Your ROI

Best Home Updates

When you begin to update a home, it’s important to spend money wisely but trying to update areas that add the most value. You don’t want to makes repairs that cost much more than the value they add in return.

Even if you live in the home, you should be making smart choices and decisions regarding repairs and what to update.  You need to be careful while spending money on things that add to your Return on Investment - ROI. A house needs to be observed in the bigger picture, not in terms of the individual repairs. Some cases might allow you to know the exact amount added to your home, for instance adding another bedroom, bathroom, or garage; but the initial cost is expensive. Every house is different and possesses different levels of repairs.

Under normal circumstances, a house with updated fixtures and furnishings will sell for more than a house without them.  So how do you know which updates are the best for the ROI of your home? You have to make sure that your house is on par with similar houses in the Neighborhood, or School District to sell for a reasonable price. Updates should be done to bring your home on a similar level to surrounding homes in your neighborhood, not multiple levels beyond them.

Based on Areas:

Expensive homes don’t always require expensive materials.  Let me let you in on a secret: most buyers DO NOT CARE what the materials were used as long as the finished product looks great.  You can make any home look fantastic with inexpensive updates. Sometimes the best way to determine what to update and how much to spend is to seek out similar sold homes in your area, and look at things like the kitchen, bathroom, flooring and fixtures.

The fanciest house on the block isn’t going to sell for much more than comparable homes in that neighborhood or school district. Extra items like a pool or hot-tub that will not add much value. I’ve been in multiple situations where the buyer turned down beautiful homes because the house came with a pool. What’s even worse is when these items are not fully functional and need repairs, it becomes more of a hassle.

Study the trends of the area and see what adds value and what does not.

The First Repairs:

Needed repairs, like updating a very old furnace, roof, or adding central air conditioning won’t necessarily add the same amount of value in return for the home. A lot of sellers are under the impression if you put a new roof on, it automatically adds the cost of the roof to the asking price of the house, which is not true. What it does do is make the home more desirable to purchase for potential buyers. If your house needs a furnace, new roof or wall work, fix those first – update the kitchen last. Major issues need to be fixed first, not cosmetic updates.

Best Room’s for Updates:

Bathroom’s and kitchen – they are the first rooms a home buyer looks at to see if it’s updated. The living room’s floor and wall’s might be caving in but they will still come back to the kitchen and figure out a way to make it work. I’ve seen this multiple times. These will always be a good place to spend money, but ensure that you do not overdo it.  There is no need to spend $50,000-$100,000 on a kitchen. You will not recover total cost, so be careful while spending.

 

Conclusion:

To wrap it up - just remember to always talk to a Real Estate Professional and the Contractors they recommend to figure out the best places to spend money. Your house is an investment, and we may have sold multiple homes in your neighborhood and know exactly what potential buyers are looking for and what to expect. There is no such thing as a ‘forever home’ because life and circumstances can change instantly, don’t put all your eggs in one basket.

 

– Mike Urban

 

 

Posted in Market Updates
July 31, 2017

Curious About Becoming a Realtor?

Local Realtor

TBD

Posted in Market Updates