The Fed Funds Rate is an overnight bank-to-bank lending rate. While this rate isn’t available to consumers, the Federal Reserve (America’s central bank) uses it to help influence overall rate levels in the economy.
When times are tough, the Fed lowers the Fed Funds Rate to stimulate the economy. In the heat of the 2008 financial crisis, it cut the Fed Funds Rate all they way down to .25 percent, and kept it there until December 2015, when it felt the economic recovery had solidified.
Then it started hiking in increments of .25 percent, and have done so four times: December 2015, December 2016, March 2017, and June 2017.
Even though the Fed Funds Rate has now risen to 1.25 percent, traditional mortgage rates haven’t risen much – and, in fact, are near 2017 lows as summer kicks off.
Certain mortgages are already up 1%
When we say “traditional mortgage rates” are holding near 2017 lows, we mean rates on primary mortgages that most people get on their homes.
HELOC rates are based on two components: a set base rate called a “margin,” plus a fluctuating rate called an “index.”
The index for HELOCs is the Prime Rate, which is a rate that is directly tied to Fed Funds. In fact, the Prime Rate is the Fed Funds Rate plus 3 percent.
We know that the Fed Funds Rate is now 1.25 percent after recent hikes. This means that the Prime Rate is now 4.25 percent.
Therefore anyone with a HELOC now has a rate of 4.25 percent plus whatever their margin is. Margins are typically somewhere between zero and three percent in addition to Prime, and your margin is based on your credit quality and how much or little you’re borrowing relative to the price of your home.
HELOC rates rising 1 percent because of recent with Fed hikes means that your monthly interest cost on a $100,000 HELOC is now $83 more per month.
The reason rates on primary mortgages most people get haven’t spiked like HELOC rates is because primary mortgage rates are tied to trading in mortgage bonds, not the Fed Funds Rate.
Most U.S. mortgage loans up to $424,100 are packaged into mortgage bonds, and these bonds trade daily in global markets. Mortgage rates fall when prices of these bonds rise on economic uncertainty, and vice versa.
Rates have been holding near 2017 lows as demand for mortgage bonds remains strong. The reason for this demand is that these bonds are considered a safe investment when policy initiatives in Washington and global economic growth looks uncertain (like it does now).
Where do mortgage rates go from here?
Thirty-year fixed mortgage rates on loans up to $424,100 are currently at or just below 4 percent as of this writing – please note mortgage rates change throughout each day.
The Mortgage Bankers Association updates its rate forecasts monthly, and the June forecast calls for rates to rise very slightly – about .125 percent to .25 percent – from current levels as we move through the summer. And they call for rates to be around 4.375 percent as we move into the holidays.
These projections can change monthly as the economic and political environment evolves in the U.S. and globally, but for now you can see that rates might rise by about .375 percent by year end.
On a $300,000 loan, this would mean your payment rising by $66.
Not that $66 is small, but in the context of the global rate market, this is a relatively small increase that shouldn’t fundamentally alter how much home many people qualify for.
After months of searching for the perfect home, making some offers, and maybe even competing with other buyers, you finally have a deal on your dream home. It took some negotiations, but you and the seller have come to terms.
Or have you?
Too often, getting a signed contract and putting your money into escrow is the beginning of what can become yet another round of negotiations. Here are five things every home buyer and seller should know about last-minute negotiations or credits.
Buyers may ask for credits based on property inspections.
Usually, a real estate contract either provides for a property inspection, or buyers inspect before signing. Depending on the property and the issues, a buyer might also have a particular type of inspection for the sewer line, septic, pool or roof.
These inspections can bring to light issues that the buyer couldn’t possibly have known about before making an offer. Once inspected, the buyer may still be interested in pursuing the sale. But given the needed repairs they will probably want to re-negotiate the price by asking for credits or a reduction in the purchase price.
Sellers should consider having a property inspection before listing.
The goal is to avoid negotiations once you’re under contract, because they’re not going to be in your favor. If you know the roof is near the end of its life or the furnace breaks from time to time, let it be known upfront, because rarely can you “sneak” something past the buyer.
You might even go as far as having your property inspected before listing the home. This way, you can address any issues, and make the inspection report available to buyers. They can come up with their best offer upfront, knowing what they’re getting.
If you have an inspection report or are otherwise assured your property is in great shape, you could even ask for an “as-is” clause in the contract. Although it’s not necessarily enforceable, it will send a strong message to the buyers that you aren’t open to more negotiation.
Sellers may try to avoid giving credits by having work done before escrow closes.
After inspections, the seller might agree to have work done before the closing. Or the seller may require that a payment is given directly to a contractor for the purpose of performing the specific, required work and nothing else.
These agreements help protect the seller, because buyers sometimes ask for credits just to help offset the closing costs – and never intends to do the repair work.
It also protects the seller if initial estimates for needed work turn out to have been overstated.
Buyers who ask for credits just to get the price down may be taking a chance.
Sometimes the buyer concedes on the purchase price thinking they can come back after the property inspection and ask for an additional concession.
The buyer may even feel empowered now that they’ve completed a series of inspections and are just weeks away from closing. The seller isn’t going to go back to the drawing board with a new buyer over a few more dollars, right?
Actually, they might. If it’s a strong buyer’s market, there’s a good chance the buyer can pull it off, but if it’s more of a neutral or a seller’s market, the seller may call your bluff. They’re assuming that you’re the one who, having invested all this time and money on inspections and an appraisal, isn’t going to walk away over a few dollars.
Buyers nearly always ask for credits, so sellers should give themselves some cushion.
You should also leave some additional room for negotiation when you’re in escrow. Always assume the buyer will ask for minor repair work – they nearly always do, even if there are no major issues. If you leave some cushion for yourself, you’ll feel better about the deal, and you’ll have protected yourself against the inevitable.
Conversely, the last thing you want is to be blindsided by a buyer asking for a few thousand dollars credit – just when you think the deal is finally done.
If you’re approaching the end of your lease, it’s easy to think of reasons to move – new neighborhood, change of scenery, different amenities. But there are many compelling reasons why staying put might be a better choice.
Take these three considerations into account before packing up and making the move.
Dollars and cents
From security deposits to moving supplies to renting a truck or hiring movers – and even time off work to get unpacked and settled – moving is never cheap.
Moving to a new place can cost renters between $2,900 and $4,500 – not including the rent itself, according to Nathan Miller, founder and CEO at Rentec Direct, a company that creates software for landlords and property managers.
“And that’s just our sample size in Portland, Oregon,” he notes. “When you consider bigger cities like San Francisco, Seattle, or New York, it could be two to three times that amount, and many people don’t have that much cash available.”
Deposits and move-in fees can be double or triple the monthly rent. And while many tenants count on getting the full deposit back to put toward a new deposit, it’s rare to get it all back, even if you’ve taken great care of your unit.
“In many cities, landlords aren’t required to refund your deposit for 30 days, so you can’t immediately use that money for your new place,” Miller notes.
The ball’s in your court
If you decide to move, your property manager has to spend money on advertising to fill the vacancy, plus pay at least two to four weeks of carrying costs until a new tenant moves in and starts paying rent.
Landlords paying attention to their bottom line would rather keep you – especially if you’ve been a good tenant that pays on time – than spend time and money finding someone new. This alone puts you in a great negotiating position, so ask for a discount on your rent, better lease terms, or complimentary amenities like parking.
While you negotiate the terms of your new lease, keep this in mind: Many cities and towns put limits on how much a landlord can increase your rent at one time. And given that rental prices are rapidly increasing in many big cities, the new rent your current landlord is proposing may very well be lower than what you’d pay somewhere new.
A bird in the hand
If you have a good rapport with your landlord, like your neighbors, and are generally satisfied with the amenities your community offers, it may not be worth rolling the dice on somewhere new.
“Going into a new community, you don’t always get the personal connection you’re used to,” says Kristen Gucwa, executive vice president of marketing at Richman Signature Properties, a property management group with apartment communities in Colorado, Florida, and Texas. “If you already have a connection with the front desk worker or the maintenance supervisor who always comes right over to help you, there’s a huge benefit there.”
Miller agrees. “If you like your landlord now, there’s absolutely no guarantee you’re going to like the new one. You’re giving up something you know for a complete unknown.”
If your lease end date is approaching, take some time to crunch the numbers and consider the less tangible pros and cons. You just might find that staying put is the right choice – nobody likes to move, anyway.
Bare, white walls are usually the reality when you first move into a new home. But if you want to show off your personality, there’s no better way to do it than with original art. A one-of-a-kind piece transforms a space, makes you feel more at home, and expresses your personal interests.
Diving into the art world can feel intimidating, but it doesn’t have to be. To help you get started, here are six tips for purchasing art you’ll want to grow old with.
Work within your budget
To find pieces you like without breaking your budget, visit flea or craft markets, where affordable options are plentiful. While you’re there, keep an eye out for posters that aren’t limited edition but are still interestingly designed.
“It’s important to think broadly about what art means,” says Bettina Huang, head of consignment at Artsy. “Combine plants with some of the flat, light objects you may have collected in your travels, and mix those in with posters or things typically thought of as art.”
Another option: Hang framed versions of your own drawings, doodles, or sketches to give your walls customized style. “If you frame them and hang them like a salon wall, that’s a budget-friendly solution that feels personal,” says Huang.
Know your goals
“It’s important to have an honest conversation with yourself,” says Huang. “Do you want to decorate your entire home? Do you need to fill a certain space? Or are you looking for bigger statement pieces for a salon wall? If you’re interested in art investing, do you want to buy works by emerging artists in the hopes they’ll dramatically increase in value?” These answers will help determine your spending.
For example, if you have $1,000 and want to invest, you can probably only afford to purchase one piece. If you’re looking to decorate, Huang suggests buying several less-expensive works. The kind of art you select and your budget will dictate your options.
Hit the art circuit
“Art fairs can be really great, because you get to talk to gallery owners in person,” says Huang, noting that this helps you sharpen your tastes and investing instincts. “Practice gives you more confidence and a reference point, so you can compare pricing and really start to understand the kinds of works that are available.”
Art school exhibitions are another great way to meet emerging artists whose careers you may want to follow.
If you’re looking for more established artists, works on paper, including drawings, prints and editions, or multiple copies of a given work, are an affordable way to begin your art collection.
“It’s nice to go that route, because it means other pieces from that artist have likely been sold, so there’s a precedent for the price you’ve been asked to pay,” says Huang.
Whether you have $1,000 or $10,000 to spend, auctions, which are open to the public, give you a sense of what’s out there and expand your artistic horizons. “Research in advance to see what similar works have sold for,” says Huang, because the price a work sells for is closer to its actual market value. “There’s something reassuring about that level of transparency.”
As an aside, more auctions are being held partially or totally online, and sites such as Artsy play a big part in this. “A lot of times, online auctions are used to sell works that are somewhat more affordable,” notes Huang.
Do your homework
When buying secondary-market or previously owned work, Huang strongly suggests doing your research. Investigate the prices of comparable works, keeping factors like medium, size, rarity, and date in mind. “As much as possible, ask for a condition report, so you know if the work is pristine or if it’s been damaged.” The price will reflect this, too.
For high-end works by notable artists, check for a certificate of authenticity, and ask about the work’s provenance or history of ownership. With more transactions being done online, it’s particularly important to ask for the condition reports if you can’t view a work in advance.
Sell it if you outgrow it
“No matter what your budget is, your art collection should reflect your personality and interests, which will evolve over time,” says Huang. That means that buying goes hand-in-hand with selling when works no longer feel like they make sense for you.
When you sell, work with reputable establishments, and budget for (and ideally minimize) the commission and fees you pay for an auction house or gallery to take your work on consignment. “Services like Artsy get you proposals from networks of vetted partners, which makes the process easier, faster, and more transparent,” says Huang.
Dream of living the lavish life of a Washington, D.C. political power broker?
That dream is now within arm’s reach; the Washington, D.C. house best known as Frank and Claire Underwood’s home in the hit Netflix series ‘House of Cards’ is scheduled for public auction.
The regal brick Victorian is fully restored and features five fireplaces, 12-foot ceilings, and a dining room with a butler’s pantry, according to the listing. There’s also a rear patio with a grill and a detached two-car garage – perfect for visiting heads of state who might need a spot for drivers to idle during important state dinners.
Photos courtesy Jared Block
The home’s exterior was featured prominently throughout ‘House of Cards’ as the Underwood residence during the first four seasons of the show. Avid fans of the show know the Underwoods have since found a new D.C. clubhouse for their conspiring: 1600 Pennsylvania Ave.
The 4-bedroom, 3-bathroom house is scheduled for auction next month, with starting bids at $500,000 (only 20% more than the $400,000 annual salary of the real life President of the United States). It comes with a security system with cameras and a DVR – you know, in case you enlist someone to throw a brick through your window.