Buyers should Pay attention to the New drop in Mortgage rates

I have an admission to make.  I just refinanced my house in December at 4.125%.  I thought
that I was getting a very good rate, especially since many economists were predicting that the Fed
would raise rates at some point this year. 

Then OIL rates dropped!  That has now been followed by interest rates for 30 year mortgages
going down to 3.5%.  This is over a 10% decrease!  I'm not a mortgage broker, but it seems logical to think that if the rates go down 10%, a buyer should be able to afford homes that are 10% more expensive. 

The signs seem to be trending in that direction.  Despite the cold and the snow homes in the lower price ranges are being shown at a healthy rate, and homes in the $million range are getting offers
within a week if they are in excellent locations or in excellent condition. 

The Superbowl is often the start of our spring season when the weather cooperates.  This year,
we seem to be going in that direction despite the snow.

I don't think that I'll be refinancing, but tell your friends who are looking for a home that they should take advantage of these rates before we start seeing price increases-a likely result if these rates stay
so low.

Great Time to Sell and Buy

While inventory has been coming to the market slowly we are still at lower levels than we've seen in the past several years.  There have already been signs of movement in some of the new listings that have come to the market since the beginning of the year, an indication of the pent up demand and buyers that have already started to look at homes.

In the meantime, in the past month or so, there has been a shift in the mortgage market as already low rates have come down to truly historic lows. 30 year fixed loans, even Jumbo loans up to $2 million are now well below 4%-I've seen rates of 3.625% today from Skip Wasserman at Atlantic Residential for these fixed rates, and rates as low as 2.625% for 5/1 fixed Adjustable Rate Mortgages.

So what does this mean to the buyer and seller?   For the buyer this is a market where prices have recently been holding steady or even declining slightly in some markets.  Prices, therefore, are at reasonable levels.  There has been talk about the Fed raising the interest rates on mortgages at some point this year.  It's hard to say how much this increase will be, but let's just imagine what that would
mean for someone looking to purchase a home with a $800,000 mortgage (putting 20% down for a purchase of a home selling at $1 million).  At current rates the monthly cost would be $3648 per
month for a 30 year mortgage.  If the rates go back to the levels that we saw only one month ago, at 4.125%, the cost differential would be $229 per month, or $2,748 a year. Looked at in a slightly
different way, this type of change would represent a 12% increase.  Seen in a different way,
if home prices were to go up 12%, a home now selling for $800,000 would be the equivalent of a home selling for $896,000 if the rate was at 4.125%.

For the seller, the fact that rates are so low means that buyers can now afford more than they could even one month ago (see above).  This will increase the buyer pool in different price points, and should therefore may it easier to sell their homes (especially if inventory levels remain low). 

Current State of New Construction in Mid-Fairfield

I usually speak about Westport as the locomotive that drives Mid-Fairfield.  This is particularly true of the new construction segment of the market.  There were 53 new homes that have sold in the past 12 months in Westport at a median price of approximately $2,600,000.  In addition, there are currently 22 additional properties which are under contract and under construction (in various phases of completion).  These figures are based on Multiple Listing Service figures.  There is also a smaller number of homes either being built from scratch from the aftereffects of Sandy, or simply custom built homes that do not enter into those figures. 
There are now 69 active single family homes proposed as new construction in Westport. If we take the homes sold and those under contract and consider that figure, 75, to represent a year's worth of new homes sold, then we currently have close to a year's supply of inventory.  There is clearly an affinity by many buyers for new construction, and based on the median price, is attracting many well-heeled buyers.
 Based on the CMLS figures, there were only 14 new spec homes built in Greenwich in the past 12 months. While not privy to Greenwich MLS figures, I would not be surprised if these are fairly accurate figures for spec homes, as the once 'closed' Greenwich market
has opened up considerably to the Consolidated Multiple Listing Service for its homes, including
new construction.  Also worth noting is that there are currently 20 new spec homes listing for sale
in Greenwich, so it appears that the builders are returning to that market. The median asking price of
those homes is $4.5 million.
Fairfield has also had an active market with 45 new homes sold in the past 12 months and an additional 12 homes under contract.  The median price for those sold homes was approximately $999,000.There are currently 62 new homes being offered, which would be approximately equal to a year's worth of inventory, but with a median asking price of about $1,170,000 is less likely that this
market would be affected by economic downturns than say the Westport or Greenwich markets, since
there is a much larger buyer pool for these homes.
Weston & Wilton had a very modest number of new construction offerings, with only 3 having sold in Weston and 6 in Wilton.  The median prices of those homes was similar, $1,399,000 in Weston and $1,350,000 in Wilton.  The builders who work in these towns also seem to be optimistic with
10 new homes being offered in Wilton and 8 in Weston.