Mortgage Rate Blahs are the Good Kind for SW Florida Home Buyers

This is sort of fun:

Mortgage Rate Blahs are the Good Kind for SW Florida Home Buyers. Mortgage rates, SW Florida 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 SW Florida 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 SW Florida —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.” 

Mortgage Rate Blahs are the Good Kind for SW Florida Home Buyers. Does this mean that SW Florida 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!

SW Florida House Hunters Get Welcome Mortgage Rate News

SW Florida House Hunters Get Welcome Mortgage Rate News. 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 SW Florida, 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 SW Florida 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 SW Florida 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 quasigovernment 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 SW Florida 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.

SW Florida House Hunters Get Welcome Mortgage Rate News. 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 wake up calls on that score…all of which is another way of suggesting why today is a terrific time to give me a call Today!

For SW Florida Renters, Mortgage Interest Tax Deduction is MIA

For SW Florida Renters, Mortgage Interest Tax Deduction is MIA. Sometimes life throws curves your way. It can put you into situations you never intended—which may be hard to explain. That’s how it is with me and the tax collector.

As we recently experienced, there’s nothing like Tax Day to bring home the reality of just how many dollars are diverted into government coffers. Instead of quietly resting in our SW Florida bank accounts where they belong, great bunches of our dollars are dispatched to the tax collector, thinning the ranks of their fellows in the bank. They’ll be left to face the future alone. I’d be tempted to paint a picture of our remaining cash left shivering in the dark—but that might be overly dramatic. Let’s just say there would be a lot more of it were it not for April 15.

As usual, this past April 15 again forced us to put it all on paper—to gather all the telltale evidence that yields the whopping bottom line number: amount owed. Even if over-withholding meant that a refund check would be coming back our way, the tally of how much cash had flowed in the opposite direction was often jarring.   

A lone positive goes to SW Florida’s mortgage-paying homeowners. The degree of brow-wrinkling is always less for them than for SW Florida’s renters with the similar financial profiles. Tax Day is an annual reminder that the mortgage interest tax deduction lowers the tax burden right now…and substantially.

The tax deduction provision is actually only one of the two most financially rewarding aspects to SW Florida homeownership. A home’s equity—the barely visible sum that builds each month as the mortgage shrinks—increases quietly in the background. It feels a little bit abstract, even though the value represented is ultimately every bit as tangible. But especially on Tax Day, the interest tax deduction is right there in black and white—with three or more zeros behind it! Most homeowners can be forgiven for shuddering if a thought like, “what if we couldn’t subtract that?” momentarily crosses their minds.

It’s also why the tax collector (albeit unwittingly) is a palpable contributor to the real estate industry. My real estate industry. It’s only realistic to acknowledge that the irritating persistence of the Internal Revenue Service is a strong motivating force for home buyers. By default, anything that makes homeownership popular helps me help sellers reach their goal. Come to think of it, that could well be another reason that explains why the “spring selling season” is always the busiest time of year. Tax Day is right there near the kickoff point, timed perfectly to stir buyers to action.

For SW Florida Renters, Mortgage Interest Tax Deduction is MIA. So, it’s nothing I’d ever want to publicize, but I guess that, because of the huge financial advantage that the mortgage interest tax deduction carries, the tax collector would have to be considered an ally when you and I band together to sell your SW Florida home (but maybe it would be best not to mention that to anyone)!