Is it time to refinance?

In this season of thanksgiving, there may be something to be grateful for that you hadn’t thought of: refinancing. 
 
Refi is something we haven’t heard much about over the past couple of years. But this year, mortgage rates have been slowly, steadily dropping, and the conversation has begun. 
 
Since January, rates have been drifting downward from a high of 7%+, and are now coming very close to 6%. That doesn’t help at all if you have a mortgage from the pandemic 3% days. But if you are locked in at an upper-6% to 7% rate, it could make a difference.
 
So, is it time to refi? As usual in this business, the answer starts with “It all depends.” 

First some background. The traditional rule of thumb has been that for a refi to make economic sense, your new rate had to be at least 1% point lower than your old rate. Refi costs money. There are charges attached to obtaining a mortgage, and your new payment had to be enough smaller than your old payment to pay you back for the up-front cost. 
 
But that calculation has shifted. The proper calculation depends on two things: your monthly savings with the new rate, and how long you plan to stay in the house. 
 
Total amounts borrowed to buy a house have grown considerably in recent years due to significant inflation of real estate values. But there has not been similar inflation of loan origination and other closing expenses. The result: a relatively smaller percentage of reduction in your big monthly payment can have the potential to pay you back for your loan origination costs within a reasonable time frame.

An example: It cost $3,500 to obtain your refi mortgage, and your payment is $290 a month less than before. Dividing the $3,500 by $290 means you will pay yourself back for the loan origination cost in 12 months. If you plan to keep the house longer than a year, you are dollars ahead. 
 
Of course, you need to look before you leap, and for once in this space, I’m not going to recommend you talk first to your full-service realtor. Talk first to your mortgage lender to help you with the calculations. And if you don’t have a lender you trust, talk to your realtor. I can help with that.
 
If you’re paying on a high-rate mortgage from even a few months ago, have a look at a refi. You might be thankful you did!

Spooky Season

Like most realtors, I’m often asked, “How’s the real estate market?” There’s never been a one-sentence answer to this question, but these days it’s harder than usual to be succinct. 
 
I usually say something like, “Interesting,” or “A little weird right now,” before launching into a longer explanation if they seem like they want more. 
 
But what is this “weirdness?” What’s causing it? Properties are still selling – but everything seems to be happening in dream-like slow motion. And the horizon is distinctly murky. I blame uncertainty. Buyers and sellers both are feeling uncertain about the future, and that’s not good for business.
 
A statistic: Beginning this January, mortgage applications have been rising month after month all year. Yet, the number of bound contracts and closings has remained static. There are lots of buyers out there, waking around with pre-approval letters in hand, who aren’t buying. It’s not an inventory problem – inventory well above last year. Apparently, people aren’t making offers. 
 
Uncertainly breeds fear, and fear breeds paralysis.
 
So, really, what do we have to fear? Actually, there are a couple of things …

Overpricing
A lot of sellers and potential sellers are still enjoying mortgage interest in the 3% - 4% range, with vivid memories of the snatch and grab market of 4+ years ago. They tend to have a “make me move” mindset, and price their properties that way. That is not going to work. The properties that sell these days are … priced to sell. The ones that sit for months without an offer are not. If the idea of waiting months for an offer – an offer that’s almost always going to be well under asking price – doesn’t scare you, go ahead and price it like it’s 2021. Otherwise, run away screaming from that temptation.

Underbidding
Conversely, there are sellers who are serious about moving things along, and price their property accordingly. Buyers, if you see something you like, and you can afford it, and the comps support the price – make a strong offer and get the deal! Someone else will get it if you don’t. So, if the temptation to lowball on a reasonably priced house strikes, treat it like that intriguing door in the haunted house. Don’t open it! 

Fear Itself
Channeling Franklin D. Roosevelt here … We have nothing to fear but fear itself. We are indeed living in unsettled times. Tariffs, no tariffs, some tariffs? Inflation, maybe? Fed rate cut, maybe … or not ... who knows … ? But curling into the fetal position and doing nothing is rarely the best approach. If you need or want to do a real estate deal, now is almost always the best time. Waiting and trying to game the market can blow up in your face – another thing to be scared of!

Buyers, make your move!

When I am asked by clients and potential clients contemplating a buy or a sale, “Is this the right time?” my answer is usually an unqualified, “Yes.” If you need or want to buy or sell a house, now is always the right time. 
 
Interest rates change. Inventory, and other market conditions change. The general economic outlook changes. But trying to game that out waiting for THE ideal moment almost never works. The only thing we can always expect is the unexpected.
 
All that notwithstanding, there may be a bit of nuance here …
 
Best Week to Buy a House? A recent realtor.com article points to localized market trends that indicate there is, on average, a prime week in the fall when inventory peaks and demand remains steady, making it the best time for buyers to make a move. According to the article, the week varies from one metro area to another, and here in Nashville it seems to be October 12-18.
 
So, buyers, let’s jump on it!

Are you ready to buy?
 
Get pre-approved
Several years ago, during the snatch and grab era, beginning with this step was absolutely essential. No one would even look at an offer that didn’t come with a pre-approval letter. But, it’s still a good idea to start here. Sending a pre-approval along with an offer gives the offer instant credibility, and it may allow you to beat out a rival buyer. Furthermore, it tells you how much house you can afford – a vital piece of the puzzle! 
 
Scan the market – know what you want
I’ve never worked with a buyer – including myself! – who didn’t learn things, shift opinions, and modify desires somewhat during a search. On-line tools are wonderful, but nothing will ever replace an in-person visit to the property to see and feel it for yourself. That said, narrowing things down as much as you can before trekking all over Middle Tennessee looking at all sorts of properties, will make things easier, clearer, and successful sooner.
 
And go!
Grab a wonderful, hard-working realtor (I know one I can recommend) and hit the trail. The right one is out there, and according to the stats, your chances of landing it are good this October!

Buyer’s Market? Well … it depends …

The tide has finally turned. After more than a decade of residential real estate markets favoring sellers, we are slowing down and moving into a buyer’s market. 
 
Or are we?
 
The answer? As we say so often in this business, it all depends. It depends on the neighborhood. It depends on the price band you’re looking at. It depends on who you ask. 
 
One thing is true: the market’s not quite as fast as we’ve been used to over the past decade. We can see it in some of the statistics, and as realtors, we can sorta feel it in our bones. But aside from that, the signals are decidedly mixed.

Slowing into a buyer’s market …
 
Inventory is Up Current residential listings in all categories are up 28% from June last year. 
 
Days on the Market Up from 36 days in May last year to 57 days this May (67%). Up from 43 days last June to 60 days this year (39%). Things aren’t exactly flying off the shelf these days.
 
Price reductions The number of active listings with price reductions was up 30% year-over-year in May, and up 24% year-over-year in June. Sellers are wanting prices from a year or two years ago, and they aren’t getting them. 
 
Builders’ Price Reductions The number of new home builders cutting prices rose 29% in April, 34% in May and 37% in June. Good news for buyers.
 
New-build Mortgage Discounts Buyers of newly built houses are getting bigger rate discounts – averaging .5%. that’s up from .25% two years ago.

Steady as she goes …
 
Closings Holding Steady Residential closings are up slightly for June and down only slightly for the first half of 2025.
 
Pending Sales are Up Properties with accepted contracts awaiting closing were up 24% year-over-year in May, and up 35% year-over-year in June. Properties are selling at a fairly crisp pace.
 
Mortgage Rates Steady The brave souls who predict these things aren’t offering much help to buyers. Averaging several sources, the prediction is a slight decline from the 6.7% range, to just under 6.5%. An improvement, sure, but hardly a bonanza.
 
Rents Declining Rents are falling for the second year in a row – 2% below where they were in 2023. With mortgage rates holding steady and rents easing, fewer renters will feel the pressure to leave a lease and buy – putting fewer buyers in the market.
 
New Builds Declining Annual rate of new home starts declined by 8% from January through May of this year. Fewer new houses built leads to tightening of inventory, which eventually disadvantages buyers.
 
So, Like I said, it’s a mix. And I did mention above that the tone of the market depends on where you look … ?
 
Buyers Market Neighborhoods Statistically speaking, it’s said that 6 months of inventory is a balanced market, favoring neither seller nor buyer. As it happens, inventory in most Nashville neighborhoods is still a little under that magic 6-month supply. But, several areas are way over-supplied at present. Starting with 37201 Downtown at 25+ months of inventory, followed by 37219 Downtown at 14 months, Midtown/Gulch/WeHo at 13 months, Germantown North at 13 months, Belmont/12 South at 10 months, and 12 South/Oak and East Nashville at 8 months. 
 
So there may be some relative bargains in some pretty pricey neighborhoods. 
 
Which leads to the question I ask and answer every so often: Is this a good time to buy? Or sell? And the answer, as always, is: Yes! If you need or want to buy or sell a house, now is always the best time. Waiting for the market to shift delays realizing your wants and needs, and it could make things worse …

Sometimes it's all about the money

Many times in this series, I have cautioned readers not to view a real estate transaction – on either side, buy or sell – as simply an investment. 
 
A house is about so much more than dollars and cents. It’s about a place to “do” your life. It’s an investment, yes, and if you play the long game, it can be a spectacularly good one. But it’s an investment that shelters you, your family, your pets, and occasionally your friends. It sets a stage for the events of your life. It becomes part of your history.
 
But there are times – especially when selling – that I advise my clients to set all that aside and think about the money alone. No emotions. Just numbers.

I worked with a couple who owned two investment properties, one of which was the husband’s first house purchase. They wanted to liquidate one property and use the cash for other things. A lot of meaningful events took place in the “first” house, and for sentimental reasons, they preferred to keep it and sell the other one. But the first house was going to be easier to sell, and after 10 years of ownership, the appreciation had been significant. After some necessary soul-searching, and maybe a few tears, the decision was made to sell it – and enjoy the significant ROI.

Another couple was selling a historic house they had owned for 47 years and had renovated largely by themselves. They raised their children there, planted the gardens, and loved their neighbors. They wanted to sell it to a buyer who would live there with family as they had done, and not to an investor who'd flip it and turn it into something grand and flashy. The house represented a big chunk of their net worth and, obviously, they wanted as much as they could get. So, they had to look at the dollars and accept that the buyer who offered the best price and terms was the buyer who would get it – regardless of what happened after closing.
 
Another seller had an architecturally unique house that needed a lot of work he was unable to do himself – so, it was time to move on. It was a very interesting house, but it didn’t appeal to the average buyer. And, as with the couple above, the house represented a significant part of the seller’s net worth. After receiving and accepting a decent offer, some fairly aggressive negotiations ensued over inspection issues. Tempers flared, and at several points, my seller wanted to tell the buyers to take a hike. But, putting emotions aside and looking at the numbers alone helped my seller embrace the fact that he was going to walk away with more than three times his original cash investment after only seven years of ownership. An excellent return!
 
Sometimes, at the end of the day, it really is only about the money.