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Patient buyer gets $35,000 discount waiting out overconfident seller
By Jeff Lazerson
What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.
Rate news summary
From Freddie Mac’s weekly survey: The 30-year fixed averaged 4.35 percent, unchanged from last week. The 15-year fixed rate averaged 3.78 percent, down one basis point from last week.
The Mortgage Bankers Association reported a 5.3 percent increase in loan application volume from the previous week.
Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $484,350 loan, last year’s payment was $23 higher than this week’s payment of $2,411.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at a zero point cost: A 15-year FHA (up to $431,250 in the Inland Empire, up to $484,350 in Los Angeles and Orange Counties) at 3.50 percent, a 30-year FHA at 3.75 percent, a 15-year conventional at 3.625 percent, a 30-year conventional at 4.125 percent, a 30-year FHA high-balance (from $484,351 to $726,525 in L.A. and Orange counties) at 4.0 percent, a 15-year conventional high-balance (also $484,351 to $726,525) at 3.875 percent, a 30-year conventional high-balance at 4.25 percent , a 15-year jumbo (over $726,525) at 4.0 percent and a 30-year jumbo at 4.75 percent.
What I think: Earlier this week, CoreLogic announced a 17 percent drop in Southern California home sales in Januarycompared to one year ago. And, almost 20 percent fewer homes sold in January compared to December.
If you are an informed and patient home shopper, and you plan on holding your home for five or more years, I say nonsense to these falling home sale numbers.
Consider my client whom I will nickname Patient Perry.
Late last summer, Mr. Perry found a Laguna Niguel home that really caught his eye. He made an offer and went into escrow. All was good until the estimated value of the appraisal report fell short of the sales price. Patient Perry and the seller could not come to terms on a price reduction. Escrow cancelled.
Some months later, Patient Perry went back and made another offer on the same property and this time the deal stuck. We closed in January.
Between the sales price and closing costs, Patient Perry paid $35,000 or roughly 4 percent less than he would have had the original offer stuck.
Indeed, Southern California property values have soared over the last several years.
More recently, and in addition to the sales volume drop, home prices are flattening or even dropping. Yet, many real estate listing agents and home sellers won’t acknowledge these facts — as evidenced by increased price reduction trends, longer average days on market and cancelled listings.
Even fix-and-flip trends are down. Last year, Los Angeles County, Riverside County and San Bernardino County all experienced lower numbers of property flippers than the previous year. Nationally, 2018 showed a seven-year low in property flipper volume, according to Christine Stricker of Attom Data Solutions.
My takeaways for buyers in this declining market are:
" If you prefer to select one loan provider rather than spend time shopping, Mortgage Grader looks like a good choice" - Washington Posts
Website May Lead to Fairer Loans
"It's a noble proposition; getting folks a square deal on a mortgage using the ubiquity of the internet." -Jonathan Lansner, Business Columnist
"My post was about the difficulties inherent in getting consumers to choose this superior model for getting financial advice."
- Justin Fox, Business and Economics Columnist