Stockberger: Marry your house, date your rate

October 11, 2022

Kyle Swiden at Plains Commerce Bank, one of our One Roof Solution and Home Support Team lending partners, introduced me to the saying “Marry your house, date your rate,” and it instantly resonated.

My first home was purchased using a loan product that stepped up the rate over a specific time frame, ending at 6.25 percent. While I loved that little house, we knew it wouldn’t be our forever house — actually it is not a house anymore at all because it was knocked down and likely will be a forever Sanford parking lot — and promptly refinanced into a lower interest rate once it presented itself.

That first home was a fabulous and sound investment, but we saw only a 6 percent appreciation. Comparing that to the year-to-date average sales price increase of 16.5 percent, according to RASE September housing market statistics, buying a home seems like a very smart financial decision.

Pulsenomics recently published the Home Price Expectations Survey – a survey of a national panel of over 100 economists, real estate experts, and investment and market strategists. These experts are predicting home price appreciation for the next several years.

The saying “Bad news travels fast, good news takes the scenic route” could not be more spot on in recent years. You would be hard-pressed to have not heard of the interest rate hikes.

Yes, interest rates have increased, but home prices are going to continue to rise as well. With the growth pattern Sioux Falls is on, we likely will not experience a surplus of housing supply any time soon, even with the amount of new construction development happening on nearly every side of the city.

Because of the smart leadership we have had in the past and currently that has offered so much opportunity to developers, major corporations and entrepreneurs, we could see at least 3,000 new jobs in our market in the next couple of years. Job creation creates supply and demand, which allows for the wealth building of net worth through real estate. My favorite things in this world are my faith, my family and building big, juicy legacies for our clients and team.

This amazing short-term rental opportunity at 4414 W. Shipton St. is one example. In a popular and convenient south-side location, this town home is listed at $284,900 and is being sold turn-key, meaning all the furniture, TVs, dishes, linens and small appliances are being sold with the home. Turn-key to start renting it out immediately.

The past Airbnb history shows the home was being rented out for as high as $250 per night, which means you could rent it out for less than 10 days a month to pay the mortgage — wealth through real estate is at its finest.

As history has proven, when interest rates go up, creative loan products from lenders are created. Plains Commerce Bank has a new loan product it’s calling the 2-1 Buydown, where sellers are able to buy down the rate of the buyer’s mortgage by up to 2 percent. And the good old adjustable rate mortgages become more popular again, where the rate steps up over a specific period of time. Again, marry your house, lock in that price before they continue to rise, and date that rate — you can always refinance once rates normalize.

It also is worth mentioning something the national news is not saying: Consumers are still and will continue to pay 8 percent or more on car loans and 15 percent on credit card debt. These items typically  depreciate not appreciate like real estate.

At the risk of sounding like a broken record, I cannot stress how important it is to understand that there is no such thing as a national real estate market. Home prices in New York City do not affect the price of your home in Sioux Falls. Home inventory levels in San Diego have no effect on the average days on the market for homes in Sioux Falls. List price-to-sales price ratios in Seattle give no weight to the actual list price-to-sales price ratio here.

The macro view of the housing market can give an insight of market trends, of course, but each real estate market is specific to its specific area. The local economy, its growth trajectory, employment opportunities, government regulations, affordability, and supply and demand all contribute to the local real estate market.

Reporting of an increase of inventory nationwide is a little misleading. Nationwide and locally, there is a lot of new construction, and often builders put homes on the MLS that are not fully finished; sometimes just the footings of the foundation are laid. Buyers cannot move into and close on a home that is just footings, so you need to take those new listings out of the equation because they are not immediately available.

Before 2020, September has been a statistically lower pending sales month mainly related to the holiday, kids going back to school and families adjusting to the school year calendar again. However, the Sioux Falls region saw a 9 percent increase in pending sales year over year this September.

The advantage for buyers in our local market right now is that we have more inventory on the market, so they do not have to make break-neck-speed decisions and likely are not competing with as many multiple offers. Inventory levels are up over 2 percent year over year for September.

The advantages for sellers in our local market right now is that our list price-to-sales price ratios are still over 100 percent, and we have only a 2.4-month supply of homes on the market, making it still a very favorable seller’s market. Sellers have more equity in their homes than ever before, which means they have more flexibility for bigger down payments on their next home, making their monthly payments lower and giving them more opportunity to use equity to build their net worth through an investment property.

As always, if you or someone you know has a life change coming up, Amy Stockberger Real Estate would love to help create wealth through real estate.

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