How the Federal Reserve’s Next Move Could Impact the Housing Market

 
 

Now that it’s September, all eyes are on the Federal Reserve (the Fed).

The overwhelming expectation is that they’ll cut the Federal Funds Rate at their upcoming meeting, driven primarily by recent signs that inflation is cooling, and the job market is slowing down. Mark Zandi, Chief Economist at Moody’s Analytics, said:

“They’re ready to cut, just as long as we don’t get an inflation surprise between now and September, which we won’t.”

But what does this mean for the housing market, and more importantly, for you as a potential homebuyer or seller?

Why a Federal Funds Rate Cut Matters

The Federal Funds Rate is one of the key factors that influences mortgage rates – things like the economy, geopolitical uncertainty, and more also have an impact.

When the Fed cuts the Federal Funds Rate, it signals what’s happening in the broader economy, and mortgage rates tend to respond. While a single rate cut might not lead to a dramatic drop in mortgage rates, it could contribute to the gradual decline that’s already happening.

As Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), points out:

“Once the Fed kicks off a rate-cutting cycle, we do expect that mortgage rates will move somewhat lower.”

And any upcoming Federal Funds Rate cut likely won’t be a one-time event. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“Generally, the rate-cutting cycle is not one-and-done. Six to eight rounds of rate cuts all through 2025 look likely.”

The Projected Impact on Mortgage Rates

Here’s what experts in the industry project for mortgage rates through 2025. One contributing factor to this ongoing gradual decline is the anticipated cuts from the Fed. The graph below shows the latest forecasts from Fannie Mae, MBA, NAR, and Wells Fargo (see graph below):

 
 

So, with recent improvements in inflation and signs of a cooling job market, a Federal Funds Rate cut is likely to lead to a moderate decline in mortgage rates (shown in the dotted lines). Here are two big reasons why that’s good news for both buyers and sellers:

1. It Helps Alleviate the Lock-In Effect

For current homeowners, lower mortgage rates could help ease the lock-in effect. That’s where people feel stuck within their current home because today’s rates are higher than what they locked in when they bought their current house.

If the fear of losing your low-rate mortgage and facing higher costs has kept you out of the market, a slight reduction in rates could make selling a bit more attractive again. However, this isn’t expected to bring a flood of sellers to the market, as many homeowners may still be cautious about giving up their existing mortgage rate.

2. It Should Boost Buyer Activity

For potential homebuyers, any drop in mortgage rates will provide a more inviting housing market. Lower mortgage rates can reduce the overall cost of homeownership, making it more feasible for you if you’ve been waiting to make a move.

What Should You Do?

While a Federal Funds Rate cut is not expected to lead to drastically lower mortgage rates, it will likely contribute to the gradual decrease that’s already happening.

And while the anticipated rate cut represents a positive shift for the future of the housing market, it’s important to consider your options right now. Jacob Channel, Senior Economist at LendingTree, sums it up well:

“Timing the market is basically impossible. If you’re always waiting for perfect market conditions, you’re going to be waiting forever. Buy now only if it’s a good idea for you.”

Bottom Line

The expected Federal Funds Rate cut, driven by improving inflation and slower job growth, is likely to have a positive, albeit gradual, impact on mortgage rates. That could help unlock opportunities for you. When you’re ready, connect with a local real estate agent so you’re prepared to take action.

Read more at KeepingCurrentMatters.com

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11 Colorful Autumn Drives in Colorado

 
 

Come September the aspens begin to glow!

Fall is one of the best times to tour the Rockies. The leaves usually begin changing in early September and last no longer than mid-October. It all depends on the weather, so be flexible and ready to travel.

The display begins high up in the mountains and works its way down in elevation as the temperature gets colder. Splashes of yellow, orange, and red all mingle along rolling alpine roads. Each year the timing of the fall colors changes by a little bit, either sooner or later, based on when the cold temperatures first strike. Learn more about when autumn foliage starts in Colorado.

 
 

Best Places to See Colorado’s Fall Colors

The best places to go are almost anywhere in the mountains. Some scenic drives are better than others, but even a little fall gold will brighten your day. Make sure you take an annual trip into the mountains to witness unmatched autumn in the Rockies.

The following autumn drives are all excellent, but there are only a handful of fall pilgrimages available. These offer camping nearby and a chance to see a vast amount of colorful trees.

In Northern Colorado

1. Trail Ridge Road

Trail Ridge Road winds high through the alpine countryside in Rocky Mountain National Park. Colors fill the hillsides and valleys nearly the whole way.

While not soaking up the scenery, there are numerous things to do in the park and around Estes Park and Grand Lake. Both towns offer charming historic districts lined with shops and restaurants.

Another perk to the park is the fall elk rut, which generally lasts from mid-September to mid-October. Hundreds of elk gather in one spot, with bullbugling heard from afar.

There’s an entry fee on this one, but on September 24th, 2022 it’s free since that’s National Public Lands Day.

  • Trip: Estes Park to Grand Lake, 48 miles, 2WD, car fee good for 7 days.

  • Camping: Numerous campgrounds on both sides of the park.

  • Nearby Drive: Peak To Peak Byway, from Black Hawk to Estes Park, combines well with this route.

2. Buffalo Pass

Situated in Steamboat’s backyard, Buffalo Pass offers remarkable views of the rolling Routt National Forest. It begins winding through aspen groves almost immediately on its way up to 10,400 feet at Summit Lake.

The road begins as a 2WD dirt road but gets progressively more bumpy as you near the top. If going all the way to Walden, it’s best to have higher clearance and 4WD, but you could probably manage with 2WD if you go slow.

Steamboat Springs is loaded with year-round recreation, including two hot springs, Old Town and Strawberry Park, as well as several state parks located in the county. Fish Creek Falls is only a ten-minute hike, and another chance to experience the season close-up.

  • Trip: Steamboat Springs to Walden, 15 miles (~40 miles to Walden), 2WD/4WD

  • Camping: Free camping is permitted on Buffalo Pass, just look for preexisting sites. There are also two campgrounds on the pass, one at the bottom and top. Each is first-come, first-serve. They’re open until mid-October.

  • Nearby Drive: If you make it all the way to Walden, you can continue east on the Cache La Poudre North Park Byway. It winds 101 miles back to Fort Collins.

3. Flat Tops Trail

Get away from the crowd on the Flat Tops Byway. This long stretch of remote highway passes through two national forests on its way from Yampa to Meeker. During the journey, you’ll pass by lake after lake, and have ample chances to see the leaves.

Trappers Lake is a short detour from the byway and a worthwhile stop, though there won’t be too much color due to past forest fires. Open through October, Trappers Lake Lodge has cabins for rent, horseback riding, and a restaurant/bar.

  • Trip: Yampa to Meeker, 82 miles, 2WD

  • Camping: You can camp nearly anywhere on the byway. Campgrounds can be found at most of the nearby lakes and dispersed campsites are everywhere.

  • Nearby Drive: Take CO 13 south toward Rifle for 38 miles, then left onto CO 325 N. From here you’ll shortly reach three state parks, Rifle Gap, Rifle Falls, and Harvey Gap. The drive between them leads through beautiful landscapes, with a chance to circle back to I-70.

In Central Colorado

4. Independence Pass

A seasonal shortcut to Aspen, Independence Pass climbs to 12,095 feet, providing stunning vistas around every turn. It’s the second-highest pass with an improved road in Colorado (behind Cottonwood). It generally closes in early November.

Tucked almost halfway between Leadville and Buena Vista, the tiny village of Twin Lakes is home to two giant lakes and an old ghost town. There’s not much commercialization, just a general store, restaurant, and some lodging.

Aspen, on the other hand, is teeming with activity, especially around this time. Maroon Bells is a must-stop in the fall, as well as a great place to camp. On the Aspen side of the pass, the ghost town of Independence is a perfect place to stretch your legs.

  • Trip: Twin Lakes to Aspen, 36 miles, 2WD

  • Camping: There are campgrounds near Twin Lakes and on the Aspen side. Dispersed camping is easy to find in the San Isabel National Forest by Twin Lakes.

  • Nearby Drive: The pass is on the Top Of The Rockies Byway, which heads north past Leadville, over Tennessee Pass, and onto Minturn, by I-70.

5. Kebler Pass

Secluded in the center of the Rockies, Kebler Pass features lush hillsides of color. You’ll find the most fall foliage on the Paonia side of the pass, although Crested Butte is a town known for its natural beauty. The pass is part of the West Elk Loop, a 205-mile journey through the heart of Colorado.

Considered “Colorado’s last great ski town”, Crested Butte is an impeccable place to spend a few nights. The town is surrounded by some of the most stunning peaks in the state and offers a plethora of dining, shopping, and lodging.

On the western end of Kebler Pass lies Paonia State Park. It’s a quiet park, with access to a 337-acre reservoir open to motor boats. The picturesque town of Paonia is hidden about fifteen miles south of the park, a mile off CO 133.

  • Trip: Crested Butte to Paonia, 33 miles, 2WD

  • Camping: Lost Lake CG (non-reservable) and Lake Irwin CG (reservable and open through September) are located on forest roads just off Kebler Pass Road. Free dispersed camping is available throughout.

  • Nearby Drive: Either before or after Kebler, take Cottonwood Pass, which features wonderful color and both dispersed camping and designated campgrounds. It connects Buena Vista with Almont, just south of Crested Butte.

  • Nearby Drive: From Paonia, you can head north on CO 133 over McClure Pass to Carbondale and back to I-70. Also part of the West Elk Loop, this alpine road winds through a canyon forged by the Crystal River. A good detour before Carbondale is the town of Marble, a mining village stashed a few miles off the highway. There’s a solid BBQ joint in town, and a winding road through the aspens up to the marble quarry.

6. Grand Mesa Byway

The largest flat-topped mountain in the world looks great in the fall. One of the best drives on the Western Slope, Grand Mesa Byway rises quickly to around 11,000 feet above sea level, where it then meanders past lakes and forests. A detour west to Land’s End Overlook, (take Forest Road 100 to 105 for 10 miles/40 minutes) offers expansive views of the colorful valley floor.

Cedaredge has a few nice places to eat and stay and it’s also not too far from Delta, one of the region’s bigger towns. Mesa, to the north, is a sleepy mountain town with another few places to dine and slumber. From Mesa, you can reach Vega State Park in twenty miles.

  • Trip: Mesa to Cedaredge, 63 miles, 2WD

  • Camping: Free and paid campsites can be found on the byway.

  • Nearby Drive: If you have another night to spend on the road, take the West Elk Loop, south of Cedaredge. Highway 92 passes Crawford (maybe detour at the North Rim of the Black Canyon of the Gunnison) and snakes through the Curecanti National Recreation Area, home of Blue Mesa Reservoir. This will lead you to Gunnison where you can continue east.

In Southern Colorado

7. Highway Of Legends

Highways Of Legends rolls through the southern foothills of Colorado. It’s an often overlooked destination for those up north, but it’s one of the most scenic and welcoming parts of the state. At its peak on the Cuchara Pass, it reaches 9,938 feet, offering fantastic views of the Sangre de Cristos and Spanish Peaks.

Make a point to stroll through all the historic towns on the way. Situated by I-25, Walsenburg is considered a gateway to the Southwest. In La Veta, you can catch a ride aboard the Rio Grande Scenic Railroad, which has stops in Alamosa, Fort Garland, and La Veta. Catch fall colors by train that you’d not see from your car.

Cuchara is a delightful mountain village, with a picturesque center of town. You’ll find a couple of good restaurants, a coffee shop, a general store, an inn, and mini golf. At the tale end of the drive, Trinidad’s hillside streets are waiting to be explored.

  • Trip: Walsenburg to Trinidad, 82 miles, 2WD

  • Camping: There are plenty of campgrounds on the drive, starting in Walsenburg at Lathrop State Park. Heading south on the byway, you’ll pass Bear Lake and Blue Lake campgrounds, Monument Lake, a private resort with cabins and campsites for rent, a couple of state wildlife areas with campgrounds, and lastly Trinidad Lake.

  • Nearby Drive: For those looking to complete the whole byway, you can take a detour over the Cordova Pass (peak 11,243 feet). It breaks off east from the Cuchara Pass on its way to I-25 and the town of Aguilar. There’s a campground near the beginning of this rocky, dirt road. Afterward, take I-25 south to Trinidad and take the byway back up to Walsenburg (to get the full tour).

  • Nearby Drive: Frontier Pathways Byway goes west from Pueblo and runs beside the Wet Mountains, before looping back southeast to Colorado City. It lies only a little bit north of Walsenburg, so it’s a good drive to tack on before or after the Highway of Legends.

8. Alpine Loop 4×4

The rugged Alpine Loop climbs over two 12,000-foot passes, Engineer and Cinnamon, as well as numerous ghost towns and mining camps, including Capitol City and Animas Forks. The one-of-a-kind route was originally used by 19th-century miners working in the remote San Juans.

It’s the only drive on the list that’s designated for high-clearance 4x4s. You can begin in either Lake City, Silverton, or Ouray, and you can also rent a Jeep in any of those places. The whole trip takes between four and six hours.

All three towns make a great base camp, each with numerous restaurants, hotels, and attractions. Ouray is known for its giant hot springs swimming pool. The Durango & Silverton Railroad departs Silverton daily through late October. Lake City is home to one of the largest historic districts in the state.

  • Trip: Lake City to Ouray to Silverton to Lake City, 63 miles, high clearance 4WD

  • Camping: Ample camping opportunities exist around all three towns.

  • Nearby Drive: If beginning in Lake City, you’ll have the pleasure of driving the Silver Thread Byway, which passes by Slumgullion Pass (11,361 feet) and Spring Creek Pass on the way to Creede.

9. Last Dollar Road

A remote backroad from Ridgway to Telluride, Last Dollar Road is the perfect choice for the adventure seeker. It peaks at 10,600 feet on a bumpy, narrow, dirt route through the majestic San Juan Mountains.

The drive takes between two and three hours and can be impassable when wet (so avoid it if rain is forecasted). A 2WD drive vehicle with high clearance would be okay if it’s dry. It’s also open to unlicensed vehicles, so bring an ATV or dirt bike if you have one.

While in Ridgway, be sure to relax at Orvis Hot Springs, or trek ten miles south to Ouray and soak there. After reaching Telluride, you can ride a free gondola high above the valley floor for incredible aerial views of Telluride’s box canyon.

  • Trip: Ridgway to Telluride, 21 miles, high clearance 2WD

  • Camping: Free primitive campsites can be found at various points on the drive. Campgrounds can be found in Ridgway, at Ridgway State Park, or around Telluride.

  • Nearby Drive: The standard route from Ridgway to Telluride is on the San Juan Skyway, a 236-mile excursion around the Southwest. The main route is to take Highway 62 from Ridgway to Highway 145, and then onto Telluride. On Highway 62 you’ll pass over Dallas Divide, a phenomenal pass for seeing color and if you keep going south on Highway 145 past Telluride, you’ll climb over Lizard Head Pass, and eventually onto Dolores and Cortez. Drive back east to Durango and you can venture north on US 550, a stretch known as the Million Dollar Highway.

Close To Denver

10. Mestaa’Ėhehe Pass

Previously called Squaw Pass, Mestaa’Ėhehe is ideal for those Denverites short on time. You can begin in either Idaho Springs or Evergreen, via CO 103 and Mestaa’Ėhehe (Squaw Pass) Road, respectively. The road is likely still called Squaw Pass Rd.

The drive passes by Echo Lake and Mount Evans Byway (which usually closes in October). Evergreen and Idaho Springs both have nice downtowns with plenty of places to relax and eat during your trip.

  • Trip: Evergreen to Idaho Springs, 30 miles, 2WD

  • Camping: Echo Lake Campground closes in early September, but West Chicago Creek Campground stays open through late September. Dispersed camping can be found on both W. Chicago Creek Rd and ​Hefferman Gulch Rd, north of Echo Lake on CO 103 near Idaho Springs.

  • Nearby Drive: The Lariat Loop connects Golden, Evergreen, and Morrison. From Evergreen take CO 74 either north to Golden or east to Morrison. If you end up in Idaho Springs and still want more, you can head up to Georgetown for Guanella Pass, or over to Black Hawk for the Peak To Peak Byway.

11. Guanella Pass

Guanella Pass is full of autumn color on its hour-long journey from I-70 to US 285. It peaks at 11,670 feet, where Mount Evans and Mount Bierstadt hover in the distance.

Historic Georgetown has numerous restaurants and is home to the Georgetown Loop Railroad, a memorable way to see the sights. In Grant, there’s usually a BBQ stand open at the start of the pass and a seasonal cafe to grab a bite at.

  • Camping: Campgrounds and dispersed campsites exist on both sides of the pass.

  • Nearby Drive: At Grant take a right on US 285 for a fifteen-minute trip up Kenosha Pass. It offers a tremendous view of the valley. Continue west down the pass and you’ll quickly reach Como, a tiny dot on the map. It’s connected to Breckenridge via Boreas Pass (23 miles), another incredible fall trip.

Thanks for checking out our list of favorite spots to see the fall foliage! Remember you can’t go wrong if you drive west into the Rockies at the right time of year. You’re bound to see extraordinary fall colors that’ll make you pause and savor autumn.

Read more at UncoverColorado.com

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What's the Impact of Presidential Elections on the Housing Market?

 
 

It’s no surprise that the upcoming Presidential election might have you speculating about what’s ahead.

And those unanswered thoughts can quickly spiral, causing fear and uncertainty to swirl through your mind. So, if you’ve been considering buying or selling a home this year, you’re probably curious about what the election might mean for the housing market – and if it’s still a good time to make your move.

Here’s the good news that may surprise you: typically, Presidential elections have only had a small, temporary impact on the housing market. But your questions are definitely worth answering, so you don’t have to pause your plans in the meantime.

Here’s a look at decades of data that shows exactly what’s happened to home sales, prices, and mortgage rates in previous Presidential election cycles, so you can move forward with the facts as you weigh the pros and cons of your homeownership decision.

Home Sales

In the month leading up to a Presidential election, from October to November, there’s typically a slight slowdown in home sales (see graph below):

 
 

Some consumers will simply wait it out before they make their purchase decision. However, it’s important to know this slowdown is small and temporary.

Historically, home sales bounce right back and continue to rise the following year.

In fact, data from the Department of Housing and Urban Development (HUD) and the National Association of Realtors (NAR) shows after 9 of the last 11 Presidential elections, home sales went up the year after the election, and it’s been happening consistently since the early 1990s (see chart below):

 
 

Home Prices

You may also be wondering about home prices. Do prices come down during election years? Not typically. As residential appraiser and housing analyst Ryan Lundquist notes:

“An election year doesn’t alter the price trend that is already happening in the market.”

Home prices generally rise over time, regardless of an election cycle. So, based on what history shows, you can expect the current pricing trend in your local market to likely continue, barring any unusual market or economic circumstances.

The latest data from NAR reveals that after 7 of the last 8 Presidential elections, home prices increased the following year (see chart below):

 
 

The one outlier was from 2008 to 2009, which was during the height of the housing market crash. That was certainly not a typical year. Today’s market, however, is much more resilient. And while prices are moderating nationally, they aren’t on an overall decline.

Mortgage Rates

And the third thing that’s likely on your mind is mortgage rates, since they impact your monthly payment if you’re financing a home. Looking at the last 11 Presidential election years, data from Freddie Mac shows mortgage rates decreased from July to November in 8 of them (see chart below):

 
 

And this year, we’ve already started to see that happen. Most experts also forecast mortgage rates will ease slightly throughout the rest of 2024. If that happens – and all signs right now indicate it should – this year will continue to follow the trend of declining rates. So, if you’re looking to buy a home in the coming months, this could be great news for your purchasing power.

What This Means for You

What’s the big takeaway? While Presidential elections do have some impact on the housing market, the effects are usually minimal. As Lisa Sturtevant, Chief Economist at Bright MLS, says:

“Historically, the housing market doesn’t tend to look very different in presidential election years compared to other years.”

For most buyers and sellers, elections don’t have a major impact on their plans.

Bottom Line

While it’s natural to feel a bit uncertain during an election year, history shows the housing market remains strong and resilient. And this means you don’t have to pause your plans in the meantime. For help navigating the market during this election cycle, reach out to a local real estate agent. 

Read more at KeepingCurrentMatters.com

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How Much Does It Cost To Renovate a House? Average Home Renovation Costs for Bathrooms, Kitchens, and Beyond

 
 

Home renovations and remodeling costs may be a hard pill to swallow after shelling out the purchase price of a new home, but if you’re the proud homeowner of a fixer-upper (or even if you’re the proud owner of an older home that needs some work), you may be itching to make some updates.

And that will get you wondering: How much does it cost to renovate a house? Knowing your numbers ahead of time is crucial, lest you end up with plans that are bigger than your budget.

So, before you so much as take a peek at a tile sample, check out this detailed breakdown on how much your dream home renovation will set you back, plus average home renovation costs and your potential return on investment (ROI).

Average home renovation costs

Your exact cost to renovate a house will depend on its square feet, the region you live in, and just how much of a face-lift your home needs. But to get a rough idea, Than Merrill, founder of FortuneBuilders.com, gave us an estimate of what the average costs associated with different remodels look like:

  • Low ($25,000 to $45,000): A small remodel would likely include interior and exterior painting, small repairs (like refinishing cabinets) and new landscaping.

  • Medium ($46,000 to $75,000): A more involved remodel would include the low-cost upgrades above, plus a total kitchen remodel (depending on appliances) and minor bathroom remodel.

  • High ($76,000 and up): Low- and medium-cost upgrades, plus fixing any foundation issues, and roof and sewer line problems.

The largest home renovation costs

Sure, paint can play a big part in a remodel, but gallons of semi-gloss will be a drop in the bucket compared with big-ticket items for certain rooms (we’re looking at you, kitchen and bathroom).

Remember, it’s the appliances and cabinets in those rooms that eat up the biggest chunk of money. Here’s what homeowners can expect to pay in terms of the national average of home renovation costs, according to Remodeling.com and HomeAdvisor.com.

  • Kitchen: The national average cost of a kitchen remodel is $27,492. If a kitchen only needs minor upgrades, renovations should start at around $10,000. A full gut can reach more than $79,982, depending on the quality of materials and appliances installed.

  • Bathroom: A mid-range bathroom remodel typically costs about $25,251 and tops out at $78,840 for an upscale reno. (Of course, you could spend more by adding such spalike touches as a steam shower.)

  • New roof: The cost of protecting all your upgrades from the elements will run you around $30,680.

  • New floors: You might want to top off your renovation by taking up that old carpet. Installing new wood floors will cost between $2,474 and $7,031, while laminate, which is less expensive, will set you back about between $1,472 and $4,638. Of course, exact cost will depend on how many square feet you have in the kitchen.

  • Electrical updates: If you’re replacing an old panel (and a home’s worth of outdated wiring) as a part of your remodel, expect to spend $3,000 to $5,000.

  • Replacement siding: Any great remodel includes an exterior upgrade. Putting new exterior siding on your home runs to an average of $20,619.

  • Replacement windows: If you plan to replace windows and frames to save on your energy bill (you might need the savings after this renovation), the cost will range between $21,264 (vinyl) and $25,799 (wood).

  • The contractor: Unless you plan to oversee the renovation yourself, a budget should include the cost of a general contractor. They usually charge 10% to 15% of the project’s total budget. So for a $50,000 renovation, expect to pay a contractor $5,000 to $7,500.

One easy way for homeowners to save money on home renovations is to negotiate to pay actual builder costs on finish materials, says Jesse Fowler, president of Tellus Build, a green custom-build firm in Los Angeles and Santa Barbara counties.

The contractor you choose should be getting a discount on retail prices, and Fowler says that this can benefit you, too, in that you can “capture some or all of those savings.”

Home renovation costs and return on investment (ROI)

Ah, the magic words that make homeowner’s pain of parting with thousands of dollars more palatable, as those big checks you write for home renovation costs today may pay dividends if you ever sell your home.

A typical mid-range kitchen remodel typically yields an 96% return on investment. If you plan to go big with a major, upscale remodel however, you can only expect a 49% ROI.

Meanwhile, a mid-range bathroom renovation boasts an ROI of 74.%, with that figure dropping to 45% for an upscale remodel. Check here for the home additions that offer the best return on investment.

With the help of the Renovation Calculator at My Home, you can determine and prioritize the improvements that would yield the maximum return on investment (ROI), improve the marketability of your house, draw in potential buyers, and potentially command a higher selling price. Follow a few steps to get your remodel, addition, or expansion cost in minutes.

Read more at Realtor.com

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Tired of Waiting for Lower Mortgage Rates? 4 Steps That Could Slash Your Rate Right Away

 
 

Homebuyers who are tired of waiting for lower mortgage rates can take concrete steps now to get a better deal on their own, according to a new report from the Realtor.com® economic research team.

Altogether, the four steps examined in the report can lower a borrower’s mortgage rate by nearly 150 basis points, or 1.5 percentage points. On a $500,000 home purchase with 20% down, that equates to a savings of $400 per month, or $4,800 annually.

Shopping around for the best rates yields the biggest average rate savings, of 86 basis points. Improving your credit score to at least Very Good (750-plus) can shave off an average of 39 basis points. And increasing your down payment to at least 20% of the purchase price, while keeping a debt-to-income ratio of less than 30%, reduces rates by a combined 22.5 basis points.

These findings come as average rates on 30-year fixed mortgages hover just below 6.5%, according to Freddie Mac. That’s down from the recent peak of 7.79% reached last year, but still more than double the average rates three years ago.

Following a tightening cycle to fight inflation, the Federal Reserve is expected to begin cutting its benchmark rate next month, after Fed Chair Jerome Powell recently announced that “the time has come for policy to adjust.” That will bring down borrowing costs, including mortgage rates, though how far and how quickly they fall remains to be seen.

“Certainly, the 10-year Treasury and Fed’s target policy matter a lot to mortgage rates,” says Realtor.com senior economist Ralph McLaughlin, the author of the new report. “But I think the real big takeaway here is, those aren’t the only things that matter. In fact, there are things that borrowers can do themselves to lower their mortgage rate.”

To calculate the impact on mortgage rates, Realtor.com analyzed more than 2 million mortgage originations between 2022 and 2023 using Freddie Mac’s Single-Family Loan-Level Dataset and statistical methods that allow us to determine what factors most influence a borrower’s mortgage rate at origination, all else being equal.

Here’s more information on four easy ways to secure a lower rate:

1. Shop different mortgage lenders

One of the most impactful ways to lower your mortgage rate may also be the easiest: getting quotes from multiple lenders to find the best deal.

The average difference between the highest rate and lowest rate offered to buyers who sought multiple offers was 86 basis points, the study found.

“It was surprising to see how much shopping around matters,” says McLaughlin. “We’re pushing a full percentage point there just by shopping around.”

It may also be surprising that most homebuyers don’t search for the lowest rate, but rather accept the first offer they receive.

A May study from LendingTree found that 54% of homebuyers who took out a loan for their most recent home purchase received only one offer.

By generation, baby boomers were the least likely to comparison shop, with just 28% doing so compared with 62% of millennials, the study found. According to LendingTree, nearly half of homebuyers who received multiple offers said they were able to secure a lower rate than the first offer they received.

Realtor.com offers a mortgage comparison tool to compare rates and fees from different lenders.

2. Raise your credit score

The average credit score in the U.S. was 705 as of March 2024, according to Equifax. That’s considered Good, but it is lower than the scores needed to secure the best mortgage rates.

Our study found that on average, borrowers with a Very Good or Excellent credit score (above 750) receive mortgages that are 39 basis points lower than borrowers with Bad credit scores (less than 650).

Raising your credit score can be easier said than done, but there are practical ways to boost your score in a relatively short period.

Continuing to make on-time payments is key. Another crucial factor is limiting the share of available credit being used at any given time. Maxing out your credit card can seriously weigh on your credit score, even if you pay off the full statement balance each month.

Keeping your credit utilization ratio below 30%, by either using your credit card less or expanding your line of credit, can lead to rapid improvements in your credit score.

3. Lower your loan-to-value ratio to 80%

In the first quarter of 2024, the average down payment was 13.6% of the total home purchase price, according to the Realtor.com economic research team. The median down payment amount was $26,000.

A down payment of 20% lowers your loan-to-value ratio to 80%, meaning that the loan amount is for 80% of the home’s value. According to the new report, mortgage applicants with a loan-to-value ratio of less than 80% receive mortgage rates that are 18 basis points lower than applicants with a loan-to-value ratio of over 95%.

As well, achieving a loan-to-value ratio of 80% often eliminates the need for private mortgage insurance, further reducing the cost of monthly payments.

4. Keep your debt-to-income ratio below 30%

Finally, the study finds that maintaining a debt-to-income ratio of less than 30% offers marginal improvements in mortgage rates. The figure refers to the share of monthly income devoted to debt payments, including student loans, auto loans, and credit card debt.

On average, mortgage applicants with debt-to-income ratios of less than 30% receive mortgage rates that are 4.5 basis points lower than applicants with a debt-to-income ratio of over 43%, the study found.

Although it offers only marginal direct benefits to obtaining a lower mortgage rate, lowering your debt-to-income ratio can also significantly boost your credit score, providing additional benefits to the mortgage borrower.

Read more at Realtor.com

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