An Email to a Client About Buying and Selling in Our Slow Market

My clients, who want to buy and sell a new home, asked me if it were better to act now or wait until spring.  Ultimately, as I'm not omniscient, there is no 'right' answer to give. But this is how I view it - a 'bird in the hand' approach.   This email was a couple of weeks ago.  My clients, in the meantime, also spoke to their lender and we're going to ask the seller to pay the costs for a temporary 2-1 buydown. (Buyers cannot pay for temporary buydowns though they can pay for permanent rate buydowns.)  Very briefly, a 2-1 buydown takes the nominal rate, say 7.5% and drops the rate by 2 points the first year and 1 point the second year.  So -   Year 1: 5.5% Year 2: 6.5% Year 3: 7.5% (the full rate)   The idea here is that the rates will drop enough in the next couple of years so that refinancing makes sense. If rates don't drop, then you're still doing as well as or better than the market. There is, of course, more to know about buydowns but let this suffice for the moment.   Enough backstory.  Here's the email:   Listing in the spring could make a difference - of course, it's impossible to speak to the future.  And it's particularly hard lately because we've had such strange markets in the last few years, so stats aren't always following normal patterns.  What follows are my thoughts - I could be right or wrong - but it's how I would make a decision for myself. (That's my official disclaimer!)   Here are the things to consider:   Interest rates: where will they be?  Right now - today - they are the highest they have been in decades. They have been climbing all month (despite the fact that the Fed did not raise the rate at their September meeting).  The Fed has indicated - but remember they're only making their best guess - that they will raise the rate a couple of more times.  The goal of leaving rates be in September was to let the economy 'catch up' to see the effect of past adjustments.  This will help the Fed decide on future increases/not-increases.  The Fed raises the rates to fight inflation.  Their goal is 2%. Last week the PCE was at 4%, so future increases seem likely unless that inflation number chills out.   But the rates could come down by spring.  They will eventually. But when and how far is impossible to say.  There is talk of rates coming down and there is also talk of them hitting 8%.  Regardless of buying now or in spring, you'll probably be in a position such that you'll be refinancing down the road.   That said, if the rates come down, it will obviously help on your purchase.  It will also make the market more competitive. Spring is more competitive than fall already; if rates decrease, it will bring a lot of potential buyers, now on the sidelines, back to the market.  So potentially-more-palatable payments come with increased competition.   Spring, again, is a busier time than fall.  So as a seller, you will have more competition as well because there will almost certainly be more homes on the market.   The good thing about spring is that prices tend to rise, so you can get more for your house. The bad thing about spring is that prices tend to rise, so you will pay more for your new house.     You are buying and selling in the same market and you are buying ‘up’, i.e. more expensive.  Let's say the values today are: $430K sales price and $580K purchase price. Let's also say the market increases by 5% from now to spring (totally made up for the example's sake). You will get $21,500 more on the sale of your house and you will spend $29,000 more for your new house.  So a net loss of $7,500.  Buying and selling in the same market neutralizes or worsens the effects if you're 'buying up', as you are.   Conclusion   I have been telling folks to buy now because:   competition is scarcer, giving you greater odds of success on the house you find (fewer bidding wars);   the rates can do three things - go up, go down, stay the same.  If they go down (far enough), you refi; if they stay the same, who cares?, if they go up, bummer for you.  A refinance costs but, meanwhile, you're in the house you want and enjoying it.  Even if you wait until spring and the rates have decreased, they're unlikely to have reached the new lows of the next downcycle, so you're probably going to refinance eventually, anyhow.  So the refi cost is in your future, either way.   I would guess that one of your concerns is taking a loss on the sale of your house.  However, remember #4.  And extend it out.  If your house is worth $430K and you wait until it's $500K - a 14% increase but no loss - the house that was $580K is now $661,200.  In pure numbers,  you've made $70,000 but lost $81,200.  So a loss on your sale is actually a gain in the bigger picture.  To put it another way, if you buy the more expensive house now, you're collecting the 14% (or whatever the number is) increase in equity on a bigger number.  

Oregon Property Taxes

Green and Yellow - Tax a Fellow   It’s Oregon Property Tax Time and… I’m conjuring up mental images… your bill is either green or… wait, it’s coming to me…  yellow!  You may not have realized there were two colors (since you only see one tax bill at a time) and that these colors have significance.  If your bill is green, think, “Go!”, as in go get your checkbook or debit card and pay the county. (See Oregon Property Tax Rules, below, for more on this.) If your bill is yellow, slow down!  Someone else – most likely your mortgage loan servicer – is paying the bill. This is not an act of benevolence on their part, by the way. A portion of each monthly mortgage payment you’ve made has been saved in an escrow account.  These monthly contributions are timed to accumulate to cover your taxes and/or insurance when they come due. (If you receive a green bill but your mortgage servicer is deducting monthly payments, make sure to get to the bottom of this.  Clerical errors can occur.  For example, if your servicer changed, a mistake could have occurred.  It’s up to you to follow up with the servicer and county to make sure that all is well.) Interesting fact: a loan servicer will sometimes write one big check to a county to cover the combined tax bill for all its clients in one fell swoop. Oregon Property Tax Rules State law requires all Oregon property tax bills be sent out by October 25. Once received, you have three payment options, all with a November 15th first payment: If you pay the entire bill on November 15th, you receive a 3% discount. If you pay 2/3 of the bill on this date, you receive a 2% discount. The remaining 1/3 is due by May 15th. Your final option is to pay 1/3 on November 15, 1/3 on February 15th, and the final 1/3 on May 15th. Of course, if your mortgage loan servicer is paying the bill, you don’t need to worry about these dates.  If anyone asks, just tell them that ‘your people’ are seeing to it.

Living in Lake Oswego

Nestled in Clackamas County, Oregon, Lake Oswego stands out with its unique blend of scenic vistas, esteemed educational institutions, and luxury residences. If Lake Oswego is on your radar for a potential move, this comprehensive guide has got you covered.   The Lake Oswego Lifestyle: Peace Meets Community Serene and Welcoming Atmosphere In the heart of Lake Oswego, tranquility awaits. This city offers a haven for both families and individuals, radiating a tight-knit community vibe, making it easy for newcomers to integrate and feel at home. Recreational Activities in Lake Oswego Lake Oswego’s Waters: The pristine lake isn’t just the city's namesake; it's a hub for activities. From boating to beach lounging, it's all here in Lake Oswego. Dive deeper into lake activities here. Parks and Trails: Lake Oswego is dotted with parks ideal for picnics, hiking, or cycling. Lake Oswego: A Cultural Epicenter Art enthusiasts will appreciate Lake Oswego for its myriad galleries and museums that celebrate local talent. Explore Lake Oswego’s cultural treasures here. Discover Lake Oswego's Varied Neighborhoods First Addition: Lake Oswego takes pride in this historical enclave, characterized by its vintage charm and picturesque streets. Hallinan: For those seeking serenity in Lake Oswego, this area, with its abundant green spaces, is a top pick. Other Neighborhood Gems: From Mountain Park to Westlake, Lake Oswego has a neighborhood for everyone. Delve into Lake Oswego’s neighborhoods here.   Making Lake Oswego Your Home: Tips for New Residents Financial Aspects: Lake Oswego boasts a refined lifestyle, reflected in its real estate prices that are notably above the US average. Top-notch Facilities: Lake Oswego justifies its premium living costs with superior amenities, from elite schools to safety, ensuring an enhanced quality of life. Finding the Right Lake Oswego Home: Enlisting a local Lake Oswego realtor can simplify your home search. Connect with a Lake Oswego property expert here. Activities to Engage in Lake Oswego Lake Oswego Farmers Market: Emblematic of the city’s spirit, this market, running from May to October, offers the best in local produce and handcrafted items. Know more about Lake Oswego market schedules here. Festive Vibes: Events like the Lake Oswego Festival of the Arts keep the community spirit alive throughout the year.   Savoring Lake Oswego's Culinary Delights Upscale Dining in Lake Oswego: Gubanc's Pub and Nicoletta's Table stand out as Lake Oswego dining stalwarts. Relaxed Bites: For a casual culinary journey in Lake Oswego, locales like Stickmen Brewery & Skewery are a must-visit. Sample more Lake Oswego eateries here. Lake Oswego is more than just a city; it's an experience. Offering everything from stunning landscapes to a warm community spirit, Lake Oswego promises a fulfilling lifestyle. As you mull over the decision to relocate here, lean on a Lake Oswego real estate specialist to streamline the process. With so much on offer, Lake Oswego beckons you to explore its riches.

Why Your Portland-Area Home isn't Selling as Fast as You'd Like

VIDEO! Do rising foreclosures mean a crash?

There's been a lot of talk for a year or so about the troubles with the real estate market: the crash is coming, it's 2008 all over again... oh my!  Here's one minute of thought on that subject.      

The Life of an Escrow Infographic

The Life of an Escrow infographic.