In this issue, reflections on 2017, an update on the market, some thoughts on what increased interest rates might mean for you, and current listings.
2017-A Look Back
2017 was a whirlwind of a year for us. We grew a lot, we learned a lot and we made time to enjoy life, too.
In 2017, Chris decided to transition from real estate sales to real estate development, a transition that was exciting, entertaining and, like most new endeavors, harder than we expected. He undertook his first renovation and building projects and completed several projects in Central Austin. It’s crazy to look back at how much more we know at the end of 2017 than we did at the beginning. Permitting, zoning, and construction all used to be subjects about which we knew virtually nothing. But we jumped in head first, with the support of some great mentors, and can now say at the end of 2017 “Wow! We actually know how to do this!”
Me and Chris in one of the renovation projects. With missing vent hood. Now properly installed.
The transition was difficult for two reasons. First, construction was more complicated, cost more, and took longer than we planned. Everyone tells you this is true, but until you live it, it’s hard to really understand.
Second, I needed to reorder my brokerage business. In 2016, Chris and I both worked in sales. In 2017, it was pretty much just me. We had lofty goals to double our production from 2016, and I’m not sure we realized we would be working with half the man power (woman power, I suppose, is more appropriate.)
But despite those challenges, we had a great year. I had the pleasure of helping dozens of world-class people buy and sell real estate in Austin, and I had a lot of fun doing it. I committed in 2017 to improving my presentation skills in buyer’s appointments and listing presentations. I phrased this to Jason, my performance coach, as “help me not be boring.”
There’s a saying I picked up somewhere along the way from some sales book that said “If you can’t be funny, just be fun.” I wanted to confidently present to my clients in a way that delivered the information they needed but was also engaging and fun for all of us. Mastering presenting and public speaking is not a small feat, and I’m still working on it, but I know I made serious progress in 2017.
With all of this change happening at work in 2017, I’ll just go ahead and admit that it was a stressful year. So stressful, in fact, that I’m grateful, because it forced me to do several things. To keep my sanity, I had to institute a day off. I easily could have worked 12 hours a day seven days a week, but I quickly realized that just because I could doesn’t mean I should. It wasn’t good for me, it wasn’t good for my life outside work, and it wasn’t good for my clients (you guys) if I was stressed out and on my last nerve.
One way I attempted to de-stress in 2017. Vacations. Note to self: renting a car in Mexico and driving yourself around is not necessarily relaxing. Pictured here: Chris holding a hub-cap that fell off after we drove over a pot hole on a secluded Mexican desert highway.
So I committed to a day off every week and mostly took one. On that day off, I started regularly attending yoga, which has been amazingly transformative for me in myriad ways. I also started taking West Coast Swing lessons every week and gardening. I think the best way to sum up what happened in 2017 is that I reclaimed my identity outside my work. I am a real estate agent. I like being a real estate agent. And I’m a darn good one. But that’s just one aspect of who I am. And 2017 reminded me of that.
What’s unexpected about all this is that I’ve come back around to my work more positive, more joyful, and more ready to kick butt in 2018. The pressure’s off. Now it’s time to have some fun.
What I Read in 2017
I’ve always loved to read. Ever since my mom used to sit us three kids down on the couch every night to read a 1970s cartoon version of The Hobbit, and then when we finished it start all over again… (yes, my family was that dorky. We also watched Star Trek together. And had rabbits named Yvonne the Terrible, Pandora the Angora and Thor.)
I came across this picture of me and my siblings with one of the rabbits. Don’t remember which historical or mythical figure this one was named for. I’m the youngest one with the awesome headband and old lady pajamas.
I sat down to make a list of the books I read in 2017, and it was both colorful and long. If you’re interested or looking for some new reads, you can see it at this link.
It includes books on marketing, religion, spirituality, self-help, history and more.
The Market-A look back at 2017
We don’t have December numbers yet, but based on info we do have, we’re on track to finish out the year at between 5%-6% appreciation over last year. For reference, 2014-2015 and 2015-2016 were in the 8%-9% ranges. All of these numbers are awesome appreciation, as most markets hope to hit 3% over the long term.
If you want to browse the numbers for yourself, you can do so here.
To simplify this, this means your home in Austin is likely worth about 5% more than it was last year. Of course this varies by neighborhood, and price range, and condition and all sorts of things. If you want a more accurate estimate for your home in particular, just ask me.
Also we have this cool new thing called “Neighborhood News” that will send you a report each month for your zip code with sold properties, and market statistics. You can sign yourself up here to get that email.
For more information, contact me at 973.432.7026 or email@example.com
More on the Market-Interest Rates
People ask me often if they should wait to buy when Austin gets “cheaper.” They’re hoping for some kind of massive correction so they can buy low. Anything is possible, but I wouldn’t hold your breath. Those who waited in 2015 for a 2016 correction were disappointed, as were those who waited in 2016 for a 2017 correction. There’s no time like the present, especially with interest rates still historically low, in the 4% range, but rising as we speak.
We’re in a period of historically low interest rates, and I don’t think buyers are as informed as they should be about what a return to “normal” mortgage rates could mean for their ability to buy in Austin in the future.
I’d like to address a few scenarios and what this could mean for you.
- If rates go up and prices in Austin go down, do buyers benefit? And what should sellers do?
- What if rates go up but Austin prices stay the same or increase? What does this do to your buying power?
- Is there a scenario where buyers win by waiting?
The Federal Reserve just raised rates in December for the third time in 2017, another 25 basis points. The increased rates throughout 2017 didn’t significantly effect mortgages, but eventually these changes will get reflected in new and adjustable mortgage rates for home owners.
There’s a solid argument to be made that an increase in mortgage interest rates could put downward pressure on home prices. The logic goes like this:
- Interest rates increase
- Buyers have to pay more in monthly payment for the same purchase price
- Fewer buyers are willing to buy or able to qualify
- Buyer pool decreases
- Home prices drop
I don’t disagree with this logic. But I think this is a bigger danger for sellers than it is a benefit for Austin buyers. Keep reading to find out why.
If rates go up and prices in Austin go down, do buyers benefit? And what should sellers do?
Let’s first assume prices do decrease because of higher interest rates. Your monthly payment as a buyer will still probably be the same or HIGHER.
If you’re planning to buy a $400,000 home and put 20% down, your current mortgage payment at 4.5% interest would be $1621.39. If interest rates increased by even 1%, your monthly payment goes up by almost $200 to $1816.92 for the same purchase price and loan amount.
But we’re assuming that prices drop due to this increase in interest rates. How much do prices have to drop before you’re back down to a monthly mortgage payment around $1621.39? A lot. That house has to drop in value to $356,250 or LESS before your monthly mortgage payment is in the $1620 range again. That’s a bit more than 10% in depreciation.
So as a buyer, increased interest rates are likely to hurt you more than they help you in your quest to get the best deal possible, even if home prices overall drop.
For sellers, you’ll want to keep an eye on interest rates if you’re considering selling. Keep in mind that as interest rates go up, buyers will have to pay more per month to buy your house, and fewer buyers will qualify for a mortgage payment at 5.5% interest than at 4.5% interest. Buyers who can today qualify to buy your home for $400,000 at the top of their budget will only be able to qualify to pay you about $350,000 if interest rates increase just one point.
What if rates go up but Austin prices stay the same or increase? What does this do to your buying power?
I can also imagine a scenario in which interest rates go up, but home prices in Austin stay level or continue to appreciate. I think this is possible for several reasons. There are many major employers moving to Texas and Austin specifically; we have an attractive tax environment for businesses and high income earners; there is a cache to living in Austin; and lastly, housing is still considered affordable by people moving here from large, expensive metropolises like New York City, Chicago and San Francisco.
So what if interest rates increase a point, but housing prices don’t drop? Here’s your monthly mortgage payment for a $400,000 home at 4.5% and 5.5% respectively, putting 20%.
That’s almost $200 more per month, $2,400 more per year, and $12,000 more over five years. And that difference is all interest.
Can you think of anything you’d like to do with $2400 next year? Trip to Europe maybe?
But in my experience, people often buy toward the top of what they can qualify for. This is particularly true of younger buyers. So the more likely scenario, especially for younger buyer, is not that you have to pay more per month, but rather that you will suddenly have to decrease your budget, limiting your options further. And it will be not because you did anything wrong, but simply because you waited and interest rates went up.
For sellers, what does it mean if mortgage interest rates increase, but Austin home prices stay steady? I can see a scenario where days on market increase and bidding wars become less common, but prices don’t drop. As a seller, you may have to wait a bit longer to get your money, and you may lose that fun “above asking price” rush that’s a common side effect of bidding wars today. So as a seller if you’re considering selling, choose the time that makes the most sense for you and your family. It doesn’t necessarily make sense to wait in anticipation that “next year will be even better.” It may be, but if it would be more convenient to sell now, then take advantage of the strong seller’s market we have today. Just like super low interest rates, these super low days on markets and frequent bidding wars aren’t the historical norm, either.
Is there a scenario where buyers win by waiting?
The scenarios where buyers win by waiting are, in my opinion, unlikely ones. Home prices in Austin would need to drop while interest rates remained the same. Trends for both home prices and interest rates point in the other direction. Alternatively, if rates go up, home prices would need to drop significantly in Austin, by say 15% or 20%, for buyers to feel a difference in monthly payment.
If you’re waiting because you have to, or because that kind of commitment really doesn’t make sense in your life right now, I get that. But if you want to buy, and you’re waiting hoping for that magic moment when prices drop, you’ll be looking back in 20 years saying “I sure wish I bought in Austin 20 years ago!”
Mortgage interest rates are historically low. Eventually, they’ll rise. And when they do, both buyers and sellers are likely to lose.
If you want to talk to a mortgage professional to get some good information personalized to your situation, just drop me a line and I’ll be happy to connect you with local lenders we trust.
And if you’d like to talk about how interest rates are likely to affect you, contact me at 973.432.7026 or firstname.lastname@example.org. I’m always here to help.
Coming Soon/Just Listed-12101 Cherisse Dr., Austin, TX, 78739
12101 Cherisse Dr.
4 bedrooms, 3.5 bath
3200 SF (approx)
Built in 2010
Asking mid-$400s. Contact me for details.
This home is not yet on MLS or anywhere online, except right here! It will be officially listed within a few weeks if not sold before. Located in the Meridian neighborhood of South Austin, this well-maintained four bedroom home feeds into Baldwin Elementary, Gorzycki Middle and Bowie High School.
Contact me at 973.432.7026 or email@example.com to get in early.
New Construction-2313 Oak Crest A and B
These two brand new units each have private yards.
2313 Oak Crest Unit A
3 bedroom, 2.5 bath
Asking price: $535,000
Additional photos and info here. Click the photo at top left on the map page for additional photos.
Back on Market for Investors-1204 W 29th Street
If you’re a builder, flipper or contractor with experience in renovations in Austin, this projects may be for you! This project hit the market a few weeks ago and quickly had several offers. We accepted one, but unfortunately that buyer backed out during option period this week. It’s back on the market, and we’re getting lots of interest from investors, so if you’re interested, give me call asap at 973.432.7026. Here are the details.
1204 W 29th Street, Austin, TX, 78703
3 bedroom, 3.5 bath
Lot size .31
After renovation value: $1.3M range
More photos and info here. Click the photo at top left on the map page for additional photos.
For more information, email me at firstname.lastname@example.org or call me at 973.432.7026.