CHM Blog

Making the move to buy. Should you do it now?

Every year real estate bloggers write about what happens each season. How the “buying season” begins with warm weather and lasts through the summer, and how people take their homes off the market during the winter holiday time.

According to Realtor.com’s Anne Miller, however, winter offers great opportunities for buying a house, especially for renters looking to become homeowners, growing families trading up to larger houses, and baby boomers seeking homes to fit their evolving lifestyles.

Housing choices during the late fall are still out there, making October and November great months to go house hunting. While December is usually sparse, you could luck out if that fits your timeline. Especially with new construction.

So what are the advantages to buying a home at year-end? Are there any? You bet. For one, tax savings. Closing escrow on a house on December 31 enables you to deduct mortgage interest, property taxes, points on your loan and interest costs. “These deductions are significant, especially in the early years of your loan when you’re paying off a lot of interest,” says Miller.

It’s also a time of year when sellers are especially motivated. Why? Because they are eager to enjoy tax savings on the next home they purchase. It’s that domino effect. “They may accept a lower bid in order to meet Uncle Sam’s deadlines,” says Miller. “However, if you’re in a strong seller’s market, you’ll want to be conservative and heed advice from your real estate professional.”

And how about those builders? They are just selling a house — they’re running a business, and most offer incentives to get buyers on contract. “If you’re buying a brand new house, there’s a good chance builders may push to close the books on their year—and meet quotas. They may offer upgrades or little extras to sell houses before the calendar turns,” Miller explains.

Ever think about how moving companies tend to be booked six weeks or more in advance during the busy summer months? Fall and winter, however, are a truck of a different color, as it’s usually easier to secure the services of a moving company or rental equipment on shorter notice.

You may not have thought of it this way, but if you’re renting, your monthly check goes toward something that will last you a month. You’ll never see any return on that money except having had shelter. Buying a house is an investment. Your monthly mortgage payment goes toward a roof that’s your own. Besides, landlords can increase your rent. Once you secure a mortgage, you can rely on consistent payments if you have a fixed-rate loan.

If you bothered to paint or update the rental you’re living in, remember that it wasn’t just an act of home improvement. It was an act of goodwill, and you can’t take any of what you’ve done with you when you move. Buying a home means you can modernize your kitchen, paint your home’s exterior a color you like, change your fixtures and replace carpeting with hardwood. No one can tell you not to.

Lastly, appreciate the appreciation that lies ahead. There’s that element that’s always present in the American Dream — that you can eventually sell something for more than what you paid for it. “In the beginning, most of your payment goes toward interest,” says Miller. “But gradually more will go toward paying off your principal, meaning you build up equity—or savings—in your home.” And as home values rise, so does your rate of equity. Happy New Year.

Realtor, TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are under moderate pressure today. The MBS market worsened by -17 bps last week. This was not enough to increase mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) The Fed, 2) Central Banks and 3) Inflation.

1) The Fed: The much anticipated FOMC meeting is this Wednesday. Currently, the markets are not pricing in any interest rate change nor a change in policy. The significance of this meeting is the release of their Economic Projections which is used to create the famous "dot plot" chart. While the Fed has been steadfast in communicating that they would remain at their current rate through 2024, the bond market is pricing in a series of rate cuts in 2024 and will be paying close attention to the Fed's dot plot chart to see if the FOMC starts to show lower rates in 2024.

2) Central Banks: We get key interest rate decisions from the ECB, Band of England and the Swiss National Bank this week.

3) Inflation: We get key inflationary readings this week with CPI and PPI. CPI is expected to be mild while PPI is expected to show deflation.

Treasury Auction: We some very important auctions this week.

12/11 3 year and 10 year notes.

12/12 30 year bond.

This Week's Potential Volatility: High

This morning markets are under mild pressure as money gets back to work. Volatility has started high and will likely remain high with FOMC and inflation data later in the week.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

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