Blog
Once again I had a chance to speak to students at the University of Washington School of Law regarding solo and small firm practice. Topics included career paths, business plans, and how to maintain the health of law firms over time. One of the things that impressed me the most during this presentation was the number of multilingual law school students who are participating in the class. Language skills are quite helpful for understanding and communicating with the world around us.
By Hal Bundrick and edited by Laura Grace Tarpley
from Yahoo Finance
After two and a half years of slogging through higher interest rates in an effort to throttle back inflation, the cycle is reversing. The Federal Reserve lowered its key interest rate by 0.50% at its meeting on Sept. 18.
However, the federal funds rate is not the only driver of mortgage rates. Will home loan rates finally drop significantly? If so, how fast and how far?
The bottom line for homeowners: Is now a good time to refinance your mortgage?
The Fed effect on mortgage rates
The Fed uses shorter-term interest rates to influence bond markets and steer the economy. By hiking the federal funds rate, it aims to reverse high prices by tamping down consumer demand. Now that inflation is moderating, the central bank has begun lowering interest rates to cushion the nation’s slowdown.
The lower interest rates will soak through the economy over a period of time, resulting in lower yields on Treasury bonds. And that’s key. The 10-year Treasury moves mirror mortgage rates. It’s not a one-to-one interest rate relationship; there can be a 2% to 3% difference between Treasurys and mortgage rates. But the directional moves are coordinated.
All of that is to say, as the Fed lowers short-term rates, longer-term rates eventually follow.
So, how low will mortgage rates go?
Most mortgage market observers are looking for home loan rates to possibly slip below 6% by the end of 2025 — but mortgage rates are likely to bubble above and below that level in the meantime.
Was that a groan? Did you want to hear the magic 3% number?
Think of it this way: 6% is a good interest rate when you consider that the 50+ year average for mortgage rates is over 7.5%. Rates were in the 7% range way back in 1971 when Freddie Mac began keeping records.
The rule of thumb for refis
In financial matters, people often search for easy answers. That’s often where “rule of thumb” guidance comes into play. How much money do you need to retire? What percentage of your retirement portfolio can you safely spend annually?
It’s the same for mortgage rates. The question often is: How much do interest rates need to drop before I should refinance into a new mortgage loan?
In the past, the easy estimate was 2%. Then, as rates fell, it was 1%. We’ve seen mortgage lenders say that a half-point — or even a quarter-point — drop in interest rates can make a refi worthwhile.
Every easy answer is mostly just noise. Like all rules of thumb, a quick solution is not often the correct answer. Any financial decision needs an answer derived from actual math.
Is now a good time to refinance? 5 steps to knowing the answer
Here’s the five-step process to making a good decision when it comes to refinancing your mortgage:
Know your current interest rate, your monthly payment, and your credit score.
Determine if you’ll refinance your loan balance, or would rather a cash-out refinance.
Will you refinance for a loan term that equals or is shorter than the time remaining on your existing mortgage? (Preferred.) Or will you extend your debt? (Not preferred, but a worthwhile option in certain circumstances.)
Get an estimate of your refinance closing costs from a mortgage lender (or preferably two or more).
Determine how long it will take to recoup those new loan costs with your monthly savings on a lower interest rate. That’s your break-even point. Is it equal or less than the time you plan on remaining in your current house? Good. Longer? Not good.
Now you have the answer to the question: Is it a good time to refinance your current mortgage?
A refinance backlog is looming
Rates won’t have to move much lower to trigger a small wave of refinancing.
As of June 2024, real estate tech company CoreLogic estimated there were $579 billion in mortgage balances carrying an interest rate in the 6.75% to 7.5% range. Another $157 billion were at or above 7.5%.
That’s a total of $736 billion of mortgages that could soon get rate relief with a refinance.
Is now a good time to refinance your mortgage? FAQs
Will the Fed’s rate cut cause mortgage rates to move even lower?
Analysts believe the first rate cut in the Fed’s new cycle of lowering interest rates has already been baked into mortgage rates, though rates could continue to inch down after the Sept. 18 meeting. It will take a series of lower rate moves, which are expected through the end of the year, to significantly impact mortgage rates.
Is it a good idea to refinance a house right now?
It can be. Even if you’re on the margin for a mortgage rate improvement, there are many good reasons to refinance. For one thing, Americans are sitting on a record $33 trillion of home equity, so many may choose a cash-out refinance — or a HELOC or home equity loan — to access that value for home improvements or other cash needs.
What is the negative side of mortgage refinancing?
The cost of refinancing isn’t cheap. You’ll pay from 2% to 6% of the total loan in origination fees and closing costs. And if you extend your loan term when you refinance, you’ll pay way more interest over the life of the loan. Even no-closing-cost refinances have their pros and cons. Consider all of your options before jumping into a refi.
I recently presented to students in the University of Washington School of Law Small And Solo Practice Class again regarding developing business plans and marketing, among other topics. It was encouraging to hear the plans of future lawyers.
I spoke once again at the University of Washington School of Law (my alma mater) regarding small and solo firm practice. The focus of the presentation was on development of a business plan and networking as an attorney.
By Dani Romero
From Yahoo Finance
The for-rent housing market is starting to come down, with rent growth dropping in recent months.
After four quarters of supply additions outpacing demand, the market is shifting with national asking rents declining over the last 90 days by 0.4%, Jay Lybik, National Director of Multifamily Analytics, CoStar Group, stated in a press release.
CoStar Group Inc., through its Apartments.com platform, found rents declined 0.4% between August and September as the U.S. median rental price declined from $1,641 in August to $1,634 last month.
We’ve just hit a very significant point in the current multi-family cycle, Lybik told Yahoo Finance in a phone interview. We have now seen rents decline quarter over quarter by $7, comparing the second quarter of 2022 to the third quarter of 2022. That’s a significant change in what we were seeing just even six months ago.”
On an annual basis, asking rents remained at 5.8% through September, the latest deceleration in rent growth after the market hit its peak earlier this year.
The same report also found that the national vacancy rose 5.4% at the end of September as the pace of newly delivered units nearly doubled to 120,000 units, signaling a shift in market conditions from just a year ago when demand significantly outpaced supply.
This is the fourth quarter in a row in which new supply additions just significantly outpaced the demand. We’re still seeing a lack of cluster demand and the new supply is not getting absorbed. It’s putting upward pressure on the vacancy rate, Lybik said.
As a result, landlords are really desperate to get tenants to occupy their units, Lybik explained, which is leading to rents nationally declining on a nominal basis as more tenants stay in their current apartments.
The uncertainty in the economy right now has put so many potential households holding off making that decision about going out and renting an apartment, and they’re just continuing to stay to sit pat in whatever their current situation is, Lybik said.
Rents are an important measure of inflation given their outsize share in most household budgets. Housing comprises about 30% of the headline consumer price index, and about 40% of the core index.
The consumer price index posted an annual rate of 8.3% in August, the highest figure in nearly 40 years, the Labor Department said, as shelter costs rose 0.7%.
Market rents are cooling,” Realtor.com Chief Economist Danielle Hale told Yahoo Finance in a phone interview. “The growth rate is cooling.”
At the same time, given the surge in rents last year, many tenants are still paying relatively high amounts each month in their current leases.
Sadly, there’s not a lot of relief on the horizon,” Hale added. “On a month to month basis, rents are coming down. They tend to do that in the fall. So there is a little bit of a seasonal relief this year.”
I was recently afforded the opportunity to again speak at U.W. Law School Small and Solo Firm Practice Class. I am consistently amazed by the quality of new law students, as well as the strength and insight of their questions. Law students tend to be very process oriented. Being long-winded (which I can definitely laugh about), I did not get to all of the topics I wanted to address.
Artificial intelligence is something that I believe will definitely impact the future of the legal profession, as it will many other industries. Videoconferencing usage is something which will probably continue to expand. On a more humanitarian note, my hope is that law students and attorneys will think outside the box in terms of their usage of dispute resolution mechanisms, in recognition of the fact that there is often more than one way to solve a problem.
There was also an inchoate discussion of the Zen concept of “beginner’s mind” and its application and potential application to legal disputes.
Nothing to buy, nothing to rent:’ Some Americans are stuck in housing limbo
By Vera Gibbons
From Yahoo Money
When Rebecca DiLorenzo’s landlord of 14 months informed her that he would be raising the rent by $300 a month on the apartment in East Greenwich, Rhode Island, she shares with her fiance, Kyle, she started to look around for a place to buy.
“Our mindset last spring was, Were getting married, we need to buy a house and for a while we were going to open houses every weekend, but the market was just getting crazier and crazier, she said.
After getting outbid on four houses by as much as $50,000 DiLorenzo knew they needed a Plan B. We didnt want to stay in our rental because it would have cost almost double what a mortgage would have been, but we also didnt want to buy a house we really couldnt afford, she said.
Priced out of both the sales and rental market, the soon-to-be newlyweds are now living with family until things settle down.
This scenario is becoming increasingly familiar, said Rick Sharga, executive vice president of RealtyTrac, a real estate information company.
“First there was nothing to buy and now there’s nothing to rent,” he said. “The eviction ban has also frozen a lot of inventory that would have otherwise come to market.
Availability is limited across the board, said Jay Parsons, deputy chief economist for RealPage, a leading provider of home rental analytics. “Apartment occupancy is now at the highest level in at least three decades, and it’s a similar story in single-family rentals, Parsons said.
“There’s a great reshuffling under way and everyone’s moving all at once,said Nicole Bachaud, an economic data analyst with Zillow. This includes workers moving out of shared situations and transitioning back to the office, digital nomads exploring new locations now that they have more guidance from their employers, and new grads moving for their first jobs.
Competition is pushing rents higher in places like Phoenix, Riverside in California, Tampa, South Florida (especially West Palm Beach and Fort Lauderdale, but even Miami as well), Atlanta, Memphis, as well as Texas, the Carolinas, and most of the Sun Belt and Mountain regions, according to Parsons.
It’s bonkers, said Jeff Andrews, data journalist at Zumper, a national rental listing platform. In normal times you see steady growth in any given market, but the rent increases that are happening now and the intensity and pace of it is unprecedented. It’s not something we’ve ever seen in the U.S.
In some markets, prices are increasing daily. Nowhere is this more apparent than in markets that were hit the hardest and are now rebounding quickly, such as New York City.
“Things started turning around in April as the city reopened, and now everything’s going in a New York minute, said Brown Harris Stevens Justine Bray, who has worked in real estate in city for 27 years. It’s insane.
Recently, Bray was working with a client in Thailand who was eyeing an apartment in New York City’s Murray Hill.
“This apartment went from $5,164 to $5,559, then $5,715, $5,882, $5,929,” she recalled. “So every day my client was waking up and seeing it was costing more. We ended up getting it in July for a little over $6,200.”
Prices are escalating even after contracts have been signed.
Pam Crocker recently experienced this firsthand when she put in an offer at full asking price for a luxury two-bedroom rental apartment on Manhattan’s Upper East Side. After making a deposit (including first months rent plus security), and signing the lease, she waited patiently for the owner who had accepted the offer to countersign.
“There was one delay after the next and they kept telling me there were all these other higher offers,” Crocker said. “I was getting annoyed to the point where I almost backed out, but I had my heart set on this apartment.
It ended up costing her $1,200 more per month than the initially accepted offer. I’ve done a lot of real estate transactions and owned villas in Jamaica, but had never been jerked around like this, said Crocker.
When will things simmer down? Soon, Parsons said.
“What we’re seeing right now in the for-sale housing market is likely a sign of things to come in rental housing later this year,” Parsons said, “where the market goes from really, really hot to just hot.
By Dhara Singh
From Yahoo Money
Mortgage rates dropped to a new low for the 13th time this year, allowing a record number of homeowners to refinance, according to Freddie Mac, a government-sponsored agency that backs millions of mortgages.
The rate on the 30-year fixed mortgage fell to 2.72%, exceeding the previous low of 2.78% recorded the week of November 5. This is the lowest on records dating back to 1971 when the agency first began tracking rates. A year ago, the rate stood at 3.66%.
The new low would allow 19.4 million Americans to refinance their mortgages, a record high, according to exclusive data provided to Yahoo Money by Black Knight, a mortgage data and analytics firm. These homeowners could save a total of $5.98 billion on aggregate monthly payments.
Investors had to weight the promising news of another vaccine contender against this week’s disappointing retail report and still-rising COVID cases, which drove the Freddie Mac interest rate for a 30-year loan down 12 basis points to another record low,said Georgie Raitu, senior economist at Realtor.com, a real estate listing website.
Buyers and owners may see different rates
Not everyone will be able to tap into the record low rates.
“Low mortgage rates are good for homebuyers as well as those looking to refinance, said Danielle Hale, chief economist at Realtor.com. “But buyers and owners may see different rates offered depending on their credit characteristics, the type of home they are looking to buy or refinance, and whether they are doing a purchase or refinance itself.
As unemployment increased during the pandemic, home loans backed by the Federal Housing Administration and often used by borrowers with blemished credit have increased their minimum credit score requirements up to the mid-600s at some lenders to protect from a higher risk of default.
Many banks also tightened lending standards in the third quarter for most types of mortgages, including for government- sponsored mortgages, which make up the majority of bank mortgage originations, according to a recent report from the Federal Reserve.
Rates Could Dip Lower.
Rates will likely decrease in upcoming weeks, experts said, but the rate is unlikely to reach as low as 2.5%. That is largely due to lenders being unable to keep up with a mortgage refinancing boom during the pandemic.
Mortgage rates have traditionally been aligned with and mirrored the moves of the 10-year Treasury note,Raitu said. With Treasury yields having spent the better part of 2020 under 1%, we could have expected rates to have been in the 2.5% to 2.6% [range], but many lenders have responded to high unemployment and a large wave of refinances by tightening underwriting standards and keeping rates higher.
Today I was afforded the opportunity once again to speak in the Small Or Solo Law Practice Class at the University of Washington School of Law. The best part of my presentation was the break out sessions, where I got to see law students analyze potential ethical issues. The student responses were on target, complex, and strikingly sophisticated. Knowing that the legal profession will be carried on by such great thinkers is really inspiring. Clients of the future will be in good hands.
By Everton Bailey Jr.
From The Oregonian
Portland landlords must pay to move residential tenants who can’t afford any rent increase after the City Council unanimously agreed Wednesday to temporarily modify its renter relocation assistance policy.
The rule goes into effect immediately and applies to any rent increase between September and March 31, 2021. Tenants must provide written notice they can’t afford the higher rate and will need to move.
The previous policy applied only to rent increases of 10% or more. The rule calls for landlords to pay between $2,900 to $4,500 to help tenants move. The City Council plans to discuss later this year whether to keep the temporary revision through March or extend it further.
Portland requires landlords to give tenants at least 90 days’ notice of any rent increase. With the new rules, city leaders said landlords will have the option to rescind any September rent increase and refund any increased rent paid by the tenant. To qualify, tenants must provide written notice that they need assistance either 45 days after being given notice of the rent increase or until Sept. 30, whichever period is longer.
The proposal was announced by Mayor Ted Wheeler last week and the policy change was crafted by members of his office and the Portland Housing Bureau. He said it was necessary to help keep renters in their homes amid the coronavirus pandemic as the statewide eviction moratorium is slated to end Sept. 30.
If the deadline on the moratorium isn’t extended, March 31 marks the end of the six-month grace period for Oregonians to pay all of their outstanding rental payments. Wheeler and other council members acknowledged the new rule could further burden landlords and that even this provision and rent assistance funds from the city won’t be enough to more fully address issues faced by tenants and landlords without more significant state and federal aid.
“I want to be crystal clear about this. We aren’t saving anybody,Wheeler said. We’re temporarily suspending the coming eviction tidal wave and the potential loss of local building owners and landlords.
Rent increases disproportionally impact households of color, city officials said. According to city data of around 264,000 Portland households, 47% are renters and the other 53% are homeowners. But 43% of white households in the Portland area are renters while as many as 74% of Black households rent.
Commissioner Chloe Eudaly, who was the architect behind the original relocation assistance policy, said she was disappointed rent and mortgage forgiveness programs haven’t caught traction among state and federal legislators. She said she felt the city had to prioritize more vulnerable Portlanders, noting that renters typically have fewer financial resources than landlords and rent increases without the option of relocation assistance would be “a recipe for displacement.
“I want to assert that in this moment of crisis, when we know that half of our renters were cost-burdened before COVID, we can’t balance landlord housing pressures on the backs of renters, Eudaly said.
She also noted that the rule change doesn’t ban landlords from raising rent and that increases can still take place in the city for tenants who can afford it.
There was no public testimony on the proposal before the City Council vote. Wednesday marked the first City Council meeting with five members as Commissioner Dan Ryan took part. He was sworn in last week.
Ryan was elected last month to serve the remaining two years on the term of late Commissioner Nick Fish, who died in January of cancer.