Spring Home Sales and Mortgage Report

Yalecrest area homes have seen a 21.8% increase in median selling price over the last year. In April 2017, the average Yalecrest area home sold for $496,500 compared to this April’s $604,950. Cost per square foot for homes sold in April 2018 also showed the same percentage increase (22%) over last year, with homes now selling at average of $279.55/sf.

While inventory is still tight, we are seeing homes that are larger or overpriced sitting on the market longer. At the end of April 2018, there were 30 unsold homes available in the Yalecrest area. These homes were priced on average at $790,234; 30.6% higher than the homes that did sell in April. Cost per square feet of the unsold inventory was curiously lower at $254/sf—a price indicative of homes that are larger or not updated (but still overpriced).

Expect market prices to continue trending upward at a slow and steady pace. Cash offers are still the exception and mortgage appraisals are keeping home prices in check; lenders are not funding homes beyond their appraised value. Unless there is a substantial increase in cash offers into the neighborhood, as seen in Seattle and the Bay Area, home prices will continue on their steady incline.

WHAT IS A TAILORED MORTGAGE?

Author Jesse Theurer, Mortgage Brokers LLC

Nothing beats the feeling of a bespoke suit custom tailored to your exact specifications. But did you know you can also achieve a more custom fit when selecting a mortgage? It’s true, and this “Tailored Mortgage” could save you thousands of dollars just by asking the right questions and working with the right mortgage broker.

First, a step back. When you are given a mortgage rate, your rate is based on the compensation level your mortgage brokerage, credit union or bank would like to receive. Higher rates yield a higher profit margin for the lender, whereas lower rates often have a cost associated with them for the buyer (referred to as “paying points” or “buying the rate down”). Few mortgage professionals explain the option of accepting a higher rate in exchange for a credit. This credit is paid back to you, the borrower, out of the lender’s higher profit margin. A “Tailored Mortgage” means the loan officer won’t automatically assign the lowest interest rate, but takes the necessary time to go over a low-, medium- and high-rate option.

But why is this necessary? Don’t all clients benefit from the lowest rate? Not always. Let me explain.

Say a client is offered a $300,000 loan at a rate of 4.375% over 30 years with no additional fees. The principal and interest payment for this scenario is $1,497.86. In the interview process, the loan officer discovers that the client plans on occupying the home no longer than 5 years.  A quick calculation of the same loan amount at a rate of 4.5% shows a principal and interest payment of $1,520.06, which is $22.20 higher each month. The loan officer then discloses that the higher 4.5% rate comes with a credit equal to $3000, which may be applied to lower other costs at closing.  A quick calculation shows that over the 5 years the borrower intends to own, that the higher rate of 4.5% would cost them an additional $1,332 in payments, which is more than offset by the $3000 credit available to them.

This same approach for cost savings can be used in other circumstances as well: for borrowers who are short on funds for closing costs; for borrowers who have depleted their savings for a higher down payment while trying to eliminate mortgage insurance; and even those borrowers who want to have funds left over for potential remodel projects or new furnishings.

Don’t forget to ask your lending professional to present a low-, medium- and high-rate option the next time you take out a loan or refinance—and ask them to detail the various costs and credits associated with each one. Take the necessary time to understand your options, and make sure they are tailored to fit your specific needs. This simple suggestion could end up saving you thousands of dollars.