Financial Friday

 

Take a Deep Breath—The Fed’s Rate
Increase May Not Mean What You Think

by John Stickle

Take a deep breath and relax. The Fed's latest quarter-point interest-rate hike may have very little direct effect on a 30-year mortgage.

The Fed primarily controls short-term interest rates. While mortgage rates can react to its decisions, the 30-year mortgage rate is driven more by inflation, Treasury bond yields and what investors believe is coming next. A quarter-point Fed increase does not automatically mean mortgage rates will increase by a quarter point.

Even if a $400,000, 30-year mortgage moved from 6.95% to 7.20%, the principal-and-interest payment would increase by approximately $67 per month. Nobody likes paying more, but it may not be the budget-buster the headlines make it sound like.

Interest rates matter, but they are not the only factor driving the real estate market. Here in St. Augustine and St. Johns County, it still comes down to the basics: price, inventory, condition and competition.

A well-priced home in good condition can still sell, while an overpriced home can sit regardless of what the Fed does.

The bottom line: one quarter-point increase should not cause buyers or sellers to panic. Look past the headlines and pay attention to the numbers that actually affect your property and your monthly payment.

Financial Friday

 

Some may say property appraisals and Agency Relationships don’t fall into the Financial conversations….think again.

We recently experienced an appraisal issue on the sale of a listing so I am very much in favor of the changes that started earlier this year and will be phased in over the course of the next few months. In this case the property listed had amazing views a resurfaced pool, new fenced in rear yard and total updated renovations over the course of the past 5 years. The appraiser and I had extensive conversations about the condition of the property and every dollar spent on updates outlined for him. The problem was a house a few doors down sold for a LOT less and he refused to make adjustments for the improvements. Adjustments for condition weren’t required, detailed photos of the interior weren’t required and he hit the easy button.  Everyone else involved (including the buyer and their agent) felt the value was there  but the appraisal fell short of contract price.  The end result was an agreement between buyer and seller to split the difference. A reasonable position and one made possible by close communication between realtors and their customers with the best example of Transaction Broker relationship I’ve seen in a while. Open, direct and honest discussion vs. a debate that would have resulted in disappointed buyers and sellers.

So, YES, appraisals, appraisal requirements and Agency Relationships matter to the bottom line.