Greater Seattle Real Estate Trends for November, 2015
My monthly updates are feeling more and more mundane with every passing month; it feels like I’m trying to find new ways to say the same thing month after month.
Though I’ll touch on some of the core stats, I think I would rather use this month’s update to discuss a specific strategies/idea for current homeowners to consider. Next month, I think I’ll touch on some options I have for buyers struggling with not finding many suitable options, though buyers can feel free to reach out to me prior.
First, the stats… here’s a nutshell recap: inventory/supply is low and demand has been strong due largely to the Seattle job market being so hot. Simple economics says low supply and high demand leads to rising prices.
In Seattle, where supply sits at a mere .91 months of inventory for single family homes, the median selling price of single family home sales in October rose 10.7% ($543,500) compared to last year. In King County as a whole, the median selling price rose 7.3% to $480,000.
Now for the meat of the monthly update. I was having a conversation with an investor client the other day, and I wanted to share an idea I had bounced their way. Interest rates are still incredibly low, prices have risen significantly, and the Fed continues to hint towards raising rates.
Many homeowners now have a significant chunk of equity in their homes. Something I suggest considering, would be pulling some of that equity out in the form of a cash-out refinance or 2nd mortgage. The concept is simple… real estate appreciates (or depreciates) regardless of how much equity you have in the home. Meaning, your equity isn’t technically earning you a rate of return.
So the idea is simple, based primarily on the fact that rates are around 4%… tap into your equity so you have that money to invest elsewhere (stocks, mutual funds, real estate, etc) and earn more than the 4% is costing you. This also gives you added liquidity.
This may not make sense for everyone, but I personally would rather have control of my own money so that I could put it to work and earn a better rate of return than the 4% it costs me to tap the equity. I personally like to keep some equity in the home, since we all know that home values can also fall and there are closing costs associated with selling, so I recommend keeping it to a max 80% loan to value on primary residences and 70% loan to value on investment properties.
Have questions about it? Want some help crunching numbers? Curious about the value of your home/investment? Need a referral to a mortgage broker who has been doing a great job for other clientele? Want a recommendation for a financial planner? Just let me know and I’ll help provide the info you need to come to your own decision on what makes sense for you!
