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Orly Steinberg

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Those of us who keep abreast of where our Northern New Jersey’s home loan interest rates are likely to head haven’t had much to keep track of lately. By the end of last week, that was beginning to change.

Ever since the Federal Reserve’s single boost in their Fed Funds rate by a quarter of a percent last December, the interest rate scene had been quiet. At that time, a gradual increase in the Funds rate had been predicted by nearly every observer. It’s the benchmark rate by which banks determine their prime interest rates, which are generally about 3% higher; our Ringwood, Wanaque, Pompton Lakes and Wayne’s home loan interest rates are closely related to those.

 But the widely hailed gradual rise in rates failed to appear in January; then again in February—the result of the Fed’s Governors getting cold feet. The economy, battered by some nasty weather and further rained upon by disappointing employment numbers, was judged to be simply too uncertain to have more cold water poured upon it (interest rate hikes do that). The consensus view gradually turned to an expectation that home loan interest rates were stuck in neutral.

This month began with most observers sticking to their guns. The 24/7 Wall Street web site ended April with the headline “Little Chance (or None) Seen for Fed Rate Hike.” They elaborated that “Some economists feel that the rate hike risks have all but dried up for 2016…it does imply that rates will rise far slower than what had been expected...

Ringwood, Wanaque, Pompton Lakes and Wayne businesses (Passaic County real estate among them) generally stand to benefit by the continuation of the stimulative effect of low interest rates, so having rates frozen at historically low levels is treated as good news. Sooner or later there will have to be a return to normal interest rate levels, but in the meantime, few voices argue very strenuously against the status quo.

That quiet was broken last Wednesday with the release of minutes from the Fed’s last meeting—the gist of which seemed to be that a June hike in rates was now being seriously considered. Most press reports made it sound as if a rate hike was imminent; but closer scrutiny made that considerably less than a sure thing. What had really been enunciated was subtle.

CNBC’s Kate Rooney had the clearest take in an article about Wall Street trying to make sense of the Fed’s announcements. Since Fed Chair Janet Yellen’s statements in March had led all to believe no rate hike was anticipated, the new strong statement may have been intended to undo too much reliance on that. What was really being said was that a hike would be likely if current positive trends continued, rather than that newly strengthening trends were required. Most importantly, NO prediction was being made: everything would depend on the data (and events like the British vote to leave the European Union).

The bottom line for where home loan interest rates were likely to head? The best call is that unfolding events will determine that—and even the Fed itself awaits what’s to come. The one absolute in all of this was that right now, our Ringwood, Wanaque, Pompton Lakes and Wayne’s home loan interest rates remain extremely attractive. It’s nice to have at least one certainty—which continues to be that it’s a very good time to call me!    

 

It’s a great feeling to assist clients on the great adventure of discovering and landing their new Northern New Jersey home. The final part of the real estate sale comes with the closing, where the papers are executed and house keys handed over.

Virtually all of my Passaic County real estate sales proceed to closing without significant hitches. That’s not by accident: I’ve helped clear the path by methodically checking off every item on each sale’s unique ‘to do’ list. That checklist has evolved to include the various technical legal and financial items that need to be addressed before a change of ownership can happen. At closing, they’re all addressed.

But—as everyone with many closings to their credit will tell you—even well-laid plans can begin to unravel when the unexpected pops up. Apparently “closing nightmare” stories make for great internet fodder, because you can find scores of them online. Some are tall tales, but others are exactly what’s to be expected if care isn’t taken to head them off.

Here is a list of five of those kinds of closing predicaments. They reflect common missteps that can derail things when everything else is in order. Since most are easily preventable, they’re unlikely to occur at the last minute if real estate professionals have been part of the picture from the start:

1.Agreed-upon repairs aren’t completed. This can happen for any number of reasons, but innocent or not, if the timetable for completion hasn’t been met, it can threaten to derail the real estate sale. This one doesn’t have to prevent closing. If everyone wants to proceed, the R® for the parties can work out an escrow arrangement with funds set aside to cover the shortfall.

2.The house can’t be sold. This rarer situation should have been identified before closing, but it’s possible that a mechanic’s or tax lien can show up late in the day. In cases where there has been a death in the family, it’s also possible that the heirs may mistakenly believe they will have legal title to home in before the probate process can be completed.

3.The home loan appraisal comes up short. Both buyer and seller may be in perfect agreement about the value of the Northern New Jersey property— but if the chosen bank’s appraiser demurs, it may be back to Square One.

4.The buyer’s finances change. When a lender green-lights a loan based upon the buyer’s debt-to-income ratio, that’s considered a key qualifier. If the buyer changes that ratio by losing income or taking on new debt (or even paying off an existing debt!) it alters the ratio, which can trigger a new investigation, stall the loan—and waylay the closing.

5.Homeowner’s insurance falls through. It’s a bad idea to assume that every insurance company will grant required homeowner insurance. Since their binder or policy will be needed, better to take the extra moments to call to more than one agent.

The best Passaic County closings are no accident: they happen when all contingencies have been discussed and worked out well in advance. They start at the very beginning—hopefully, with a call to me!

Thoughtful Ringwood, Wanaque, Pompton Lakes and Wayne investors find themselves in an increasingly uncertain environment. Although the official cost of living numbers indicate that inflation isn’t much of an issue, few Passaic County residents who mind the family budget are convinced. Even if that were currently the case, even fewer think it a situation that will last indefinitely. At the same time, dollars banked in savings accounts earn next to nothing. And at this point, many feel that trusting in the stock market requires nerves of steel. Last week, The Wall Street Journal was reporting that even the biggest hedge fund managers, convened in Las Vegas for their annual SALT get-together, were displaying “decided pessimism.” Unnerved by their inability to guarantee future value to their clients caused a “mood that was anything but festive.”

It’s not surprising, then, that lately real estate is the ownership investment class type that’s on the rise. Ringwood, Wanaque, Pompton Lakes and Wayne investors may agree with analyst Grant Cordone, writing recently in Entrepreneur magazine:

 Income-producing real estate is one of the few investment classes that, as a hard asset, has meaningful value. The property’s land has value, as does the structure itself, and the income it produces has value to future investors. Income producing real estate investments do not have red and green days, as does the stock market.

These qualities are augmented by some of the outside factors affecting the nation at large. U.S. News’ Money feature gave property managers some good news about rental rates­ with its spoiler alert: “rental hikes are not going away.” It predicts a solid 8% increase for the year. That kind of income growth—which has already been steady and sustained for years­—coupled with the “real” nature of investment real estate makes favorable comparison with most other investment classes easy to accomplish.

During times when future events are as uncertain as they are today, the appeal of get rich quick schemes and other risk-laden ventures succumbs rapidly. Especially given the abundance of solid Passaic County real estate investment opportunities that are out there this spring, even those who haven’t really considered the idea in the past might be well-served to weigh the idea seriously. As an investment category, real estate comes out as the class act­—one that’s easily accessible…in fact, opening the doors to the many Northern New Jersey opportunities is just a phone call away!

 

While reading a real estate magazine article about “the pros and cons of buying during the peak selling season,” I was fairly certain (as you probably would be) that, one way or another, the cons wouldn’t outweigh the pros. The Ringwood, Wanaque, Pompton Lakes and Wayne’s peak selling season is certainly prime time whenever there are homes for sale, but often there are reasons when other times of year can be opportune.

The article in came up with more pros than cons. No surprise there: we can all bank on the inevitability of that conclusion (that NOW is a good time to buy or sell) whenever we’re hearing from an industry whose business is buying and selling!  

So—how do you actually get the straight scoop on the subject?

The answer may lie in understanding why a true best answer for when to put up Ringwood, Wanaque, Pompton Lakes and Wayne homes for sale always does tend to be “now.” It’s because of a phenomenon called “The Riddle of the Ultimate Buyer.” The riddle goes like this:

The “Ultimate Buyer” is the prospect who will ultimately wind up buying your Northern New Jersey house. Before you put it on the market, there is no way to accurately forecast very much about who that will be. We can set our marketing outreach to target the haunts of the most likely buyer profiles (in fact, that’s what we do), but as any experienced Passaic County Realtor will tell you, the Ultimate Buyer could also be anyone—and their identity is often surprisingly unlike what anyone would have predicted. Frequently, their choice of which residence to buy has been shaped by equally unforeseeable motivations.

Not only is the profile of the Ultimate Buyer unknowable, her or his schedule is equally enigmatic. The only thing we do know for certain is that your Ultimate Buyer will be looking, become interested, and make an offer while your Northern New Jersey home is up for sale. If you put off listing for a month or two, those months might have been the only ones during which that prospect was looking to buy in Ringwood, Wanaque, Pompton Lakes and Wayne. That might have been the only time when that buyer happened to drive past your house (it would have been without my “For Sale” sign out front); might have been the only time he or she was available to take a tour; found suitable financing—any number of factors might have been in play.

The Riddle of the Ultimate Buyer is such a puzzle that we can only rely upon the one thing we know for certain: that buyer can only materialize once the home is up for sale. That’s why now is a better time to list than a month or two from now, when the person who would have been your Ultimate Buyer has already moved into another Northern New Jersey house. They’re someone else’s Ultimate Buyer—and they won’t be back!

So, while there’s no pat answer to when is absolutely the best time to list a home for sale, logic says it’s more likely to be now rather than later. Especially while we’re wrapping up our Northern New Jersey’s peak spring selling season, when there are usually a greater number of potential Ultimate Buyers actively searching, it’s a doubly good time to give me a call!

Mortgage Rates’ Unbelievable Drop Produces…Yawns

by Orly Steinberg

This is sort of fun:

Mortgage rates, Ringwood, Wanaque, Pompton Lakes and Wayne home loan applicants and soon-to-be-applicants should be delighted to hear, went down again last week. The national average quoted in the Washington Post notched down to 3.61% on a 30-year fixed loan, down from blah blah blah

You will probably not be surprised by the presence of the multiple blahs. By now, everyone in Ringwood, Wanaque, Pompton Lakes and Wayne has simply heard this so often and for so long that it has practically lost all meaning. But it’s sort of fun to realize that we were already celebrating the decline in mortgage rates to 3.8% a year ago, although it was pointed out even back then that we’d been hearing it for so often and so long…

Despite the repetition, in the real world of our Northern New Jersey—where low mortgage rates translate into very real payment dollars saved every month—this is the kind of news that impacts a family’s future disposable income more than any other. The difference between last year’s average mortgage interest rate and that average last week means savings of more than $13,000 over the span of a $350K loan. And that was just the improvement since last year. The savings over historical average mortgage rates (7.49%) amounts to a gasp-inducing $306,000 for the same loan…a difference that surely deserves banner headlines.

That didn’t happen. Even the most financially sophisticated journals seemed to have all but succumbed to the numbness-producing sameness of the news, partly because the Fed’s announced plan to raise their Fed Funds rate seems to be fizzling out. The Economist described the moves by the Federal Reserve variously as “lackluster” and “dovish.” “If any other lift-off were so sluggish,” they yawned in the print edition, “you would not want to be aboard the rocket.”

There was little more excitement evident at The Wall Street Journal, who focused on guessing what mortgage rate changes might be in store. They found that the mix of good and bad economic numbers meant that the Federal Reserve “may opt to simply wait”—rather than rocking the boat and raising in June, as had been expected.

“Mortgage Rates: Trending Down Going Into Homebuying Season” was the most excitement Forbes’ headline writers could muster; possibly because the news that followed was anything but new. Forbes quoted Freddie Mac’s chief economist with his less than stirring pronouncement: “Since the start of February, mortgage rates have varied within a narrow range.” Forbes’ deduction? “For now, home loans are really cheap.”  

Does this mean that Northern New Jersey home buyers can relax for a while longer, content to rely on an extended period of this kind of bargain-basement financing? Perhaps. But although those historical averages are reassuring when compared to current mortgage rates, they also stand as a sobering reminder of what the new normal could become. In other words, if striking while the iron is hot is still common sense, giving me a call sooner rather than later could be a prudent move!

The Huffington Post (“Huffpo” to its friends) has an entire section devoted to real estate doings. Although the vast majority of those dispatches are tidbits about awesomely expensive celebrity condos in Manhattan, sometimes the Huffpo editors’ attention wanders momentarily to other matters. Last month they uncovered a study which delved into a topic of interest to any Passaic County homeowner who’s been thinking about when to enter the Passaic County listings.

The best time to sell a house, according to the study, is, specifically, RIGHT NOW!!!!

That is, between May 1 and May 15!

Or maybe not.

The picture for Ringwood, Wanaque, Pompton Lakes and Wayne was a little less definite than the Big Picture claim that “homes that sold in the first half of May…sold, on average, around 1.5 days faster than homes that weren’t listed in that timeframe.” It turns out that the study, which was put together by Zillow, was wishy-washy when it came to specifying individual Northern New Jerseys. The “on average” part of the claim makes the conclusion less conclusive.

Because the sales statistics that were analyzed were collected from all over the country—differences in seasonality was given as the reason why any individual region might not line up with the average. Seasonality was what we think of as weather. And since weather is not the same everywhere…

In other words, the best time to sell a house in our Northern New Jersey might not expire at the end of this week, after all. There’s no need to panic if you plan to list your own property but haven’t quite put the place in show condition. The window isn’t going to slam shut on Sunday. The reason for the uncertainty about the best time to sell your house specifically here in Ringwood, Wanaque, Pompton Lakes and Wayne (in addition to seasonality) has to do with data smoothing and suppression. The study went into how data experts apply those to raw numbers before reaching a conclusion—but since they weren’t going to be able to zero in on the best time to sell a house in Ringwood, Wanaque, Pompton Lakes and Wayne, let’s skip those details.

It was noted that the entire month of May is a good time to sell your house, in most Northern New Jerseys. That’s something everyone can agree with. In fact, the whole spring selling season is universally recognized in those terms—the Huffington Post included.

Meantime, we here will be doing our best to continue to make right now a very good time to sell your Northern New Jersey home. That will begin to happen as soon as you give me a call!

Why it is that we’re drawn to “Top 10” lists in general is a matter we can leave to the psychologists. Suffice it to say that the lists are a staple on the super market tabloids and they’re all over the web. I admit they get more than their share of my own attention, even when my curiosity about a list’s subject matter is negligible. It’s probably because they’re quick to skim through and agree or disagree with…

Since they are so pervasive, it occurred to me that there might be something to learn if we could determine which ones that deal with real estate topics get the most attention. Ringwood, Wanaque, Pompton Lakes and Wayne real estate didn’t have its own Northern New Jersey-focused Top 10 real estate lists—but for the whole country, I guessed there could be hundreds (there were).

There turned out to be a lot of ads mixed in with the ones that were legitimate; but after 15 or so minutes of deep internet research, here’s what registers as—

The Top 10 Top 10 Real Estate Lists

(Out of deference to the now-retired David Letterman, they’re presented in reverse order):

#10.      Top 10 Choices for a Rental Apartment with Pool in NYC

#9.        Top 10 Real Estate Terms Everybody Should Know

#8.        Another Top-10 List—Best (and Worst) Cities for Real Residential Estate [sic]

#7.        Top 10 Real Estate Traps (fyi, Number 10 is ‘Bad Laws’)

#6.        TopTenRealEstateDeals (it’s actually a website, so no spaces between words)

#5.        Top 10 Real Estate Trends

#4.        Top 10 Real Estate Myths

#3.        Top 10 Real Estate Markets to Watch in 2016

#2.        Various Top 10 Real Estate Lists [honest, that’s the name of a list!]

-drumroll, please:

#1.        Top 10 Celebrity & Spectacular Homes

Number 1 won’t come as a surprise to many here in Ringwood, Wanaque, Pompton Lakes and Wayne—who can resist an invitation to take a peek at spectacular celebrity homes?

Closer to our home, we have some pretty spectacular properties on the market right now (you can find them here on my site). Interested? Give me a call for a closer look!

When we are keeping tabs on the Northern New Jersey’s real estate scene, it’s only natural to go directly to the portion of the market we are most connected to. If we are a renter or investor, our eye is drawn to trends affecting that segment. Passaic County home sellers (or potential home sellers) can be counted on to pretty much ignore that information, instead concentrating on the latest single family residential listings, asking prices, and news related thereto.

Yet some trends in one sector can significantly impact the others. That’s the way it is with construction—any kind of construction. Whether it comes in as new building or remodeling, when construction goes up, lots of impacts can find their way to our Ringwood, Wanaque, Pompton Lakes and Wayne—some right away, some after a significant lag.

Last week there were reports and reactions to some recent national readings:

HUD reported that March building permits were 4.6% stronger than in last year during the same period. Permits is one of those lagging indicators—a timelier statistic comes in the form of actual housing starts. Starts are bird in the hand numbers, as opposed the permits, which are birds in the bush. U.S. single-family starts came in at more than a million (1,089,000)—a happiness-inducing number if you are a builder. That’s a full 14.2% stronger than in the previous year, though not as robust as in February.

Investors would be more apt to notice starts for buildings with five or more units. Like the single-family starts, they were down from the month before but stronger than in 2015. Usually, availability of more rentals relieves price pressure on the single-family residential market. But in today’s situation, where listings for starter and trade-up homes has been decreasing for four long years—the overall inventory shortage makes that effect less likely for Passaic County home sellers (at least anytime soon).

In the same way that it’s simple to imagine the builders smiling at the year-over-year building starts statistics, it’s equally easy to picture the bankers as less exuberant. Let’s face it, the nature of the banking industry is to be more restrained. After all, when we put our own money in the bank, we definitely want them to be cautious. Risk-averse. Stingy, even.

The BankersOnline website (“For Bankers/From Bankers”) played into the prototype, concentrating on housing completions rather than will-o’-the-wisps like permits or starts. And although the numbers there were even stronger (a whopping 31.6% gain over the previous year), a word of caution about over-reading the meaning of that leap is in order. A year ago March, residential completions had been unusually dismal.  

All in all, even The Associated Press—who for some reason framed the same numbers into a gloomier cast than seemed reasonable—couldn’t help reporting what the National Association of Home Builders sentiment index showed: “an overall optimistic outlook for new homes as the industry heads into the all-important spring sales season.” That construction industry assessment might not seem to directly affect what Northern New Jersey home sellers will encounter, but a lively market is good news for each. I hope you will give me a call if this spring’s market is one you are interested in exploring further!

 

The headlines last week had a familiar look to them, but in terms of what they actually signified for readers who might be potential home buyers or sellers in Ringwood, Wanaque, Pompton Lakes and Wayne, they really should have triggered a snap-to moment:

Mortgage Rates Fall to New 2016 Lows,” was the Star Tribune’s headline.  Yahoo Finance echoed that, adding, “Is Now the Time to Buy?” 

“Ho-hum,” readers might have reacted; “same ‘ol, same ‘ol…”

The so what? treatment was also what most media outlets gave the news. After all, haven’t mortgage rates been low for a long time now? So what if rates hit the lowest mark since May 2013? TV newscasters (cable and otherwise) were mostly mum, except on the financial channels. News is about what’s new—and this just didn’t seem to qualify.

Wrong!

In terms of real people’s lives, the actual impact of what those headlines mean is all but seismic. If you are selling your Northern New Jersey home, the number of potential buyers depends on how many people can afford to shop in your asking price’s range. Likewise, for serious house hunters, the real contenders are those that fit your budget.

That’s where the current Passaic County mortgage rate picture is more than slightly interesting. It can be decisive. The impact that even small rate adjustments make are substantial—and that makes the current environment truly momentous. The average mortgage rate over the past 3 decades has been 7.49% (that’s what you get if you average out the official numbers since April of 1986). That means that a $300,000, 30-year fixed rate home loan would create a $2,095 monthly payment.

That’s why last week’s news should have been earth-shaking—at least to anyone on the fence about making a move in the current market. The official word from quasi-government entity Freddie Mac was that nationally, mortgage rates actually dropped again, inching down to a national average of 3.58%.

The math is remarkable. That same $300,000 home loan payment would today cost only $1,360—a savings of $735 every month. About a third. Put another way, on the same budget, the same Northern New Jersey house hunter could afford “a third more house.” In terms of any kind of shopping discount, that’s a wild one!

So I’d argue that there was actually a great deal of news value in last week’s drop in mortgage rates, whether the actual percentage shift was a small one. The news is that these incredibly low rates aren’t being treated as news—despite their importance to real people buying and selling real homes.

There is a danger in how people have the capacity to accept current conditions as normal—even if they’re extraordinary. That capacity has a downside: it means we can be lulled into acting as if today’s reality will continue on forever. History has a way of creating dramatic wakeup calls on that score…all of which is another way of suggesting why today is a terrific time to give me a call!

 

They’re called “swings” or “bridges”—but they don’t belong on a kindergarten playground. They’re the specialized loans that can help Ringwood, Wanaque, Pompton Lakes and Wayne home buyers get past the kind of cash crunch that can snag an otherwise perfectly achievable purchase.

This is a timing situation that happens quite frequently; it’s in the nature of residential real estate transactions. Suppose you are selling your Northern New Jersey home to an out-of-state buyer. The deal is well on its way to being finalized on the agreed schedule. Meanwhile, you have found a new, bigger place that’s perfect for your family (it’s in Ringwood, Wanaque, Pompton Lakes and Wayne, too—also in a great neighborhood). The problem is that you need to close on the new home before the sale of your current one is finalized. That’s the cash crunch.

The solution can be a bridge loan (AKA, a swing loan). It’s a loan for the short period of time that will allow a home buyer to close on the new home purchase as the other sale closes. Of course, the problem is (this is what the lender has to be thinking) what if the sale of the old house falls through? The answer is to be able to produce a binding contract for that sale—without it, there is little chance the loan will be granted.

Bridge loans aren’t terrifically popular with lenders, since they involve a certain amount of paperwork for a transaction with such a short duration. I find that lender reluctance is minimal when we deal with one which is already involved—either holding the earnest money deposit or otherwise engaged with the parties. Even so, the terms of a bridge loan will be more expensive than other kinds—but since the term is brief, the higher interest cost does not amount to much of a deterrent.

Bridges and swings aren’t the only possible way to solve the buying-before-closing dilemma. Sometimes a line of credit (HELOC) on the old house will fill the void, particularly if it has not yet been entered in the Passaic County MLS. If it is already listed, the line may come with some extra charges, including cancellation or closing charges to compensate for the likelihood of its short duration. It is sometimes also the case that the lender financing the purchase of the new home is willing to provide a bridge loan by using the old property as security. Although that is a secured loan, it’s likely to be an expensive one.

When my clients buy or sell, or, as in some of these situations, buy and sell, some of what I do is to help put together creative solutions. Seeing you successfully sell—or move into—your Northern New Jersey home is what my service is all about. It starts when you give me a call!  

 

   

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Orly Steinberg

Coldwell Banker Residential Brokerage
130 Skyline Drive, Ringwood NJ 07456

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