UNUSUAL ECONOMICS ARE GETTING BUILDERS TO OFFER HOUSING INCENTIVES
In a logical real estate market, what should happen when interest rates go up? Of course, we know that housing demand will take a pause, causing home prices to take a dip. Then homebuyers can at least get a price break, even if they can’t get an interest rate break.
That’s just the marketplace at work – until it doesn’t quite work.
Even with interest rates at 20-year highs, housing demand in popular markets like Northern Colorado has been sufficient to keep prices from falling, which is keeping some would-be buyers on the sidelines.
In response, there are signs that some players in the real estate industry are no longer waiting for the marketplace to come around. They’re taking matters into their own hands.
Numerous homebuilders across the country are stepping up to make their products more affordable with various financial sweeteners to lure buyers. For example, some national builders with deep pockets are acting as lenders and offering low fixed-rate mortgages to help attract buyers.
One case in point is Lennar, a national builder that’s active in Colorado and which has recently offered 30-year fixed-rate mortgages at 4.25 percent for certain communities where it’s trying to move inventory. (That compares to a national average of 7.79 percent as of October 26).
Locally, there are examples of builders in Northern Colorado that are offering up to $40,000 in direct incentives to make prices more palatable. Another enticement from some local builders is a 2-1 buy-down, in which the buyer gets a loan with below-market interest rates for the first two years of the mortgage.
The good news for homebuyers: Even in a market that’s not following the traditional rules of economics, there are opportunities to make the market work in your favor.
If you’re trying to make sense of an unsettled housing market, call me for insights that can help you make the best real estate decision.
CALLING ALL MORTGAGE APPLICANTS: YOU CAN OPT OUT OF ‘TRIGGER LEAD’ HASSLES
With lower mortgage volumes, competition for business among lenders is increasing. Consequently, many lenders resort to purchasing leads from the credit bureaus to learn which borrowers get their credit pulled by a mortgage company. In some cases, this has led to reports of consumers receiving dozens of calls immediately after having their credit pulled.
It works like this: Mortgage Company A pulls a borrower’s credit. But Mortgage Company B has a contract with credit bureaus to be notified if a consumer with their minimum credit score has their credit report pulled by a competing lender.
The credit bureau provides the consumer’s publicly available contact information to Mortgage Company B, which then solicits the borrower. These leads are called “trigger leads,” because the borrower’s credit pull triggered the solicitation. Unfortunately, there are dozens of Mortgage Company Bs that are buying the same leads.
Currently, the Federal Trade Commission allows the selling of trigger leads, believing the practice provides consumers with more options. Many consumers understandably feel differently. The good news? Legislation is in the works to amend the Fair Credit Reporting Act and prohibit the creation and sale of trigger leads, since it’s seen as hurting consumers and damaging the overall mortgage marketplace.
Until such legislation passes, mortgage seekers can avoid receiving countless irritating phone calls by opting out. To do so, consumers can opt out online or call 1-888-567-8688.
CAN'T GET A TRADITIONAL MORTGAGE? TRY THESE OPTIONS
While the vast majority of Americans count on traditional mortgage loans to buy a home, some would-be homebuyers – even those with seemingly ample resources – need to look for other options.
What can you do?
If you’re in the financial category of “well off but not mortgage eligible” (or simply don’t want a mortgage loan on your books), the Wall Street Journal recently spelled out three ways around the traditional loan.
Use investments as collateral. Borrow against your investment holdings. You don’t need to worry about closing fees, credit scores, or financial documentation. But, given the impact of rising interest rates or the risk of declining asset value, you may still need to post additional assets as security.
Take out a cross-collateral loan. Combine multiple assets – perhaps another property you own outright, along with the home you want to buy – to get 100 percent financing on a new purchase. In this case, you’re mortgaging both properties, most likely at a rate similar to a standard mortgage.
Sell off investment assets. If you’re in a competitive market, cash is an advantage. By liquidating holdings such as stocks, you can turn around and pony up for the new house. Of course, selling assets can have tax consequences, so tread carefully.
But what if you’re not endowed with investment assets? With a little help from third parties, there may still be options to finance your purchase, or to increase your chances on the house you want. Here are a couple:
Family gifting. Got relatives with resources? It’s increasingly common, especially for first-time buyers, to get a boost from loved ones. That might help you bring more cash to the table, so you can purchase the house with more agreeable loan payments.
Seller/owner financing. Another option is for sellers to help privately finance the purchase by “carrying” the loan. The seller and buyer agree to a payment structure that may be more favorable than a traditional mortgage. Such deals are typically for a short-term agreement with a balloon payment.
Call me to discuss alternative ways to finance your real estate or contact the experts at Group Mortgage 970-419-2374.
REAL ESTATE BY NUMBERS
- 303. Number of apartments in the Lake Vista Apartment Homes in Loveland, which was recently sold to a new owners for $94.5 million. Lake Vista is located in the Centerra development, near the UCHealth Medical Center of the Rockies in east Loveland.
- $15.5 million. Price paid by investors to buy the Rocky Mountain Hotel and Conference Center in Estes Park. The 139-room hotel is located at 1701 N. Lake Ave. The North Carolina-based owners also own the Elkhorn Lodge and Cabins in Estes Park, which they bought in 2020.
- $65 million. A California-based real estate investment company has purchased the Willow Street apartments at 281 Willow St. in Fort Collins. Purchase price in the Sept. 28 transaction was listed at $65 million. The 281 Willow St. facility includes two, five-story buildings. One has 197 units over 83,567 square feet and the other 88 units over 64,627 square feet.
- 200. The number of new apartments at Alpine Flats, a complex that is currently under construction at 20th Street and 50th Avenue in west Greeley. As planned, the new apartments will be ready for tenants in January.
- 7,200. Commercial square footage that would be part of a proposed new building at 2607 S. Taft Hill Road, the southwest corner of Drake and Taft Hill roads, in southwest Fort Collins. As planned, the new structure would also include 10 housing units.
- 50,000. Square footage of the former Albertsons grocery store building, located at 1636 N. College Ave. in Fort Collins. The store has been vacant since 2014. The Fort Collins Urban Renewal Authority has announced its interest in buying the building and redeveloping the space.
- $40 million. Donation that Cargill Inc. plans to make to help build employee housing in Fort Morgan, where the company operates a meatpacking plant. Cargill, which employs about 2,000 people in Fort Morgan, is working with a real estate developer to build 150 housing units.
- $2.3 million. Office improvements and painting are atop the agenda for Jung Ho Kim, whose YKCO Greeley Inc. purchased the 39-room University Inn in August for $2.3 million. The seller was YJ Greeley Hospitality Inc., which had purchased the motel in 2019 for $1.4 million.
- 101,141. Estimated shortage of housing units in Colorado as of 2021, according to the latest report from Up for Growth, a housing affordability advocacy group. That figure is down from the 127,000 they reported for 2019.