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VOL. 46 | NO. 25 | Friday, June 24, 2022

To ARMS! Time to bring back old mortgage solution

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Everyone knows the Federal Reserve raised rates last week by 0.75 percentage points, the biggest increase since 1994. But few know what it means in terms of residential real estate.

So, we should party like its 1995, the year after the great increase. Billy Hamburg of Cardinal Financial notes that the interest rate on 30-year, fixed-rate mortgages is 5.875%, a rate considered outrageously high as compared to the foolishness consumers have enjoyed the past few years.

In June 1995, mortgage rates were 7.57%. So comparisons to the hike in 1994 are not totally applicable.

Lenders have taken steps to provide some stability to the chaos, Hamburg notes. By offering term interest-rate locks of 90 days – as well as 120, 180, 270 and even 360 days – buyers can rest assured they will not be assailed by the whims of the Federal Reserve as it attacks inflation.

Rates, he adds, have risen from 3% to 6% in the past five months. It had to happen.

Yet another tool in the lenders’ toolbox is to dust off the age-old adjustable-rate mortgage, a concept that was initiated in the 1980s when mortgage interest rates had blossomed to 18%.

A five-year ARM can be utilized at 5.25%. Rates for Jumbo loans – a mortgage for an amount that exceeds the limits set by Fannie Mae and Freddie Mac – are currently available for 5.375 on a 30-year fixed-rate mortgage. In times like these, many mortgage lenders opt for adjustable-rate mortgages for their own loans, and many real estate professionals tend to follow their lead.

Hamburg cites industry analysts who say rates will settle at around 6% this year and could increase during the next two years until inflation is curbed. Some insiders say rates could hit as high as 7% in 2023 and then will slowly drop as inflation numbers lower.

All the better reason for buyers to consider ARMs and sellers to begin to offer to pay to buy down rates for buyers so they can enjoy the ancient interest rates.

It’s a new world.

Sale of the Week

Amy Jackson Smith made her annual listing trip to Golf Club Lane recently when she listed 3414 Golf Club Lane for $2,549,500. She sold it last week for $2,530,000. Last year, she sold 2325 Golf Club Lane for $5,995,000.

Last week’s sale marked the sixth house on the sleepy street to sell for more than $2 million in recent years. Country music sensation Big Kenny registered the $5,995,000 sale, while his contemporary, Dierks Bentley, sold his residence for $4 million.

There have been reports and laments that the music business is suffering. If the country music business is soft, they are making hay in the residential real estate market.

The residence located at 3414 Golf Club Lane was described by listing agent Smith as “Pure Luxury” and includes $125,000 of upgrades, the description on Realtracs states. The seller hit the right buttons on the improvements with most of the investment going to custom, motorized, electronic shades and drapes. For a mere $85,000 the homeowner will no longer be burdened with manually raising and lowering shades and drapes.

It should be noted that the owner purchased the home for $2.199 million in August. When selling an upper-end home, perhaps the first call should be to the motorized drapery vendor. In houses that are less than $1 million, drapes are often referred to as curtains.

Additionally, the house features a smart washer and dryer – Ivy League, no doubt. The seller dropped another $19,500 on custom lighting and $6,500 on a “perfect” water system throughout the entire house.

The proof is in the pudding as the seller grossed $331,500 on $125,000 in improvements. That works.

The home was bought by clients of the legendary Richard Bryan, whose name can be seen on approximately 140,000 transactions each year, hence his nickname “The Hardest Working Man in the Real Estate Business.”

Each year, Bryan sells homes in Davidson, Williamson, Sumner, Robertson, Rutherford and Wilson counties. The past few years he – like most Realtors – has expanded his service area reaching into Marshall and Maury counties.

Back to Golf Club Lane, where the house at 3414, with its 5,483 square feet, sold for $461 per square foot. It has five bedrooms, four full bathrooms and two half bathrooms. Apparently, the seller hit the market at the best time.

Richard Courtney is a licensed real estate broker with Fridrich and Clark Realty LLC and can be reached at richard@richardcourtney.com.

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