I don’t know about anyone else, but following last night’s Halloween festivities, it feels like there’s not enough coffee in the world to get me going this morning. Being British, Halloween has never been a big deal for me, but as they say ‘When in Rome’. After 10 years living stateside I have to confess it’s my least favorite celebration of the year – especially as a parent. My kids are just so overexcited for so long, there’s always costume drama, it’s a late night (always fun on a week night) and then there’s the candy hangover to deal with. To say I’m feeling sluggish today is an understatement.
But here’s a little Hump Day Trivia that certainly shocked me – and made me oh so grateful for today’s low interest rates.
It was about this time in 1981 that interest rates reached their all time high – of a shocking 18.65%. Today’s buyers balk at it going above 4%, having seen lows in the high 3’s for much of the year. Can you imagine 18%!! Here’s some numbers that will force you throw down your left over Milky Ways in horror!
Based on today’s median house price of $853,000, and a 20% down payment, you’d be paying $10,646 per month for your mortgage. And that’s not including taxes and insurance. Add those in, and monthly payments would add up to $11,446. Wow – that’s a number I can’t even comprehend. To put it into even greater perspective: Lenders only like to see mortgage payments of approximately one third of your total net monthly income, so we’d all need to be bringing home the bacon to the tune of over $30,000 per month. It’s just not going to happen!
So while there’s much of the 80’s I’m grateful for (Madonna, George Michael and The Eurythmics to name just some of my musical heros), I very happy that we’ve not seen the interest rates that came with the wonderful music and equally shocking fashions.
Fast forward to today: As I said interest rates are currently hovering around 4%. Economists are predicting that to hold steady in the short term, but are expected a rise to closer to 5% in 2018. This has the potential of slowing down the current double digit price growth we are experiencing – which could be a good thing.
Yesterday was the annual Windermere kick off . All Windermere agents, from 17 offices, gathered at the Hyatt Regency to hear some of the industry's most renowned players give their perspective for 2016. Two of the speakers included Matthew Gardner, Windermere's chief economist and Skylar Olson, senior economist from Zillow. Here are their highlights:
- In 2015 home prices in the Seattle Metro area (King, Snohomish and Pierce Counties) rose by 9.2%. Seattle itself saw double digit growth, and Bellevue/Renton 10% growth. If you're a homeowner you certainly got a good return on your investment – likely higher than anything else in your investment portfolio.
- In 2016 they both predict a 6% rise in home values.
- In Seattle, the rent/buy break even point is just 2 years. Rents are now becoming so expensive that in just 2 years, it would be just as cost effective to buy. With rents increasingly accounting for more and more of the monthly expenditure, it's proving impossible for many to get out of the rent trap and buy. As a result they are also putting off other big ticket items in life – marriage, babies etc.
- The current unemployment rate in Seattle is below 4%, effectively meaning that we're have full employment. Good news indeed!
- Expect to see a 2% job growth in 2016. More good news!
- Wage growth is predicted to rise by 4%. This compares to 3% nationally. Even better news! So, don't be too shy about asking for that pay rise come annual review!
- They predict that Mortgage rates will rise to between 4.4 and 4.9% by the end of the year. We finished 2015 at 3.9%. While breaking above 4% will be a huge mental barrier for some, the cost of borrowing remains at an all time low. Anyone remember when they were at a staggering 18%? If you don't chances are your parents do – and not too fondly at that.
The round off the morning, the key note speaker was Ron Culberson. I'd not heard of him before but it turns out that he's a very, very, very funny man. If anyone is lucky enough to be invited to any of his his 'Do It Well, Make It Fun' events throughout the year I strongly encourage you to attend.
In a nutshell, all signs are pointing North for a very strong 2016. Here's to success in whatever you do this year.