Cheap Money, Get Some While You Still Can

By | July 9, 2015 at 1:20 am | No comments | Columns, Real Estate

By Bruce Cathcart

When I bought my first house in the early 1980’s mortgage interest rates were over 16%.  Most of you reading this article are likely too young to even imagine such a thing or too old to remember the not-so-good old days.  But for those of us who were trying to make a living selling real estate back then we will never forget it… or as the outlaw Josey Wales put it, “Dying ain’t much of a living”.  Those were some pretty tough times but somehow we managed to get through them and by comparison, interest rates have (with a few hiccups along the way) gone down ever since.  Today our mortgage interest rates are still hovering around historic lows even though they hit a 9 month high this past week (ending July 2, 2015) averaging 4.08% for a 30 year fixed rate mortgage.  This is still super cheap money but most economic experts predict that it won’t be around much longer… and I am starting to believe them!

Before I get into some different ways to take advantage of these low interest rates, let’s take a quick look at the real estate sales activity for the month of June.  At the end of May we were still lagging behind last year’s numbers despite some minor gains being made.  Would a much improved June finally catch our numbers up to last year’s figures?  Here’s what happened.

According to the Desert Area MLS (as of 07/01/15) there were 841 pendings of residential properties here in the Coachella Valley in June. There were 898 pendings in the previous month (May) which means activity is slowing down following our normal seasonal sales pattern, but certainly not as drastically as last year.  Looking at the pendings from June of last year (2014) there were only 698 pendings for the month of June.  This is a huge year over year increase in pendings and the first sign of solid improvement over last year.  What’s more, it is good news for likely closings in July!   Checking the actual sales data we see the same thing.  In May there were 804 solds and in June we had 809 solds reflecting MORE closings than in May and the best news of all is that last year in June we only sold 764 homes.  This equates to a 6% increase in year over year June sales.  This is the first significant gain that we have made over last year’s sales and with the increase in June’s pendings we may just catch up with last year’s sale totals by the end of July.

Our inventory of homes for sale dropped significantly AGAIN this month with 4,567 homes available as of June 1, 2015 compared to 4,030 as of July 1, 2015.   That’s almost a 12% drop in inventory in just one month and while there are still over 660 MORE homes on the market compared to the same time last year this could become a major factor later this year if the trend continues.  As we learned last month, when real estate inventories dry up, sales volume slows down and prices usually go up!   We will continue to watch this closely over the next few months.

So what are some ways that you can get some of the cheap money that’s available right now?  If you are currently renting your home you need to seriously consider buying one.  If you have decent credit and can scrape together a minimum down payment you will discover that right now you may be able to buy a home for the same amount you are currently paying in rent.  This is only possible because rents are currently up and interest rates are down.  If you currently own your home you should review your current interest rate and equity position and consider a refinance.  You may be able to significantly reduce your current monthly payment and/or the term of your current loan.  How about buying an investment property for yourself or perhaps help your children to buy a home?  You say that sounds good but you don’t have a 10% or 20% down payment saved up.  Consider refinancing your home for more than your current mortgage and use the extra money for your down payment.  On the other hand, if you have extra cash sitting idle in the bank, now is the time to convert that “electronic wealth” into something more substantial (with four walls and a roof!) by leveraging your cash and borrowing some of that cheap money!  If any of these ideas appeal to you contact your trusted real estate agent and ask them to help you to realize your real estate goals before the cheap money isn’t so cheap!

Join me each month this year as we keep a close eye on our Coachella Valley real estate market.  If you have a real estate question or concerns please email me at the address below.

Bruce Cathcart is the Broker/Co-Owner of La Quinta Palms Realty, “Your Friendly Professionals” and can be reached by email at laquintapalms@dc.rr.com or visit his website at www.laquintapalmsrealty.com.

BruceRates_070915

Share

Comments are closed.