Interest Rates: When to Buy

When my parents bought a home in Denver back in 1964, they borrowed money at about 7%.

When I was first licensed to sell real estate in the early 1980’s, rates were in the mid-teens and we were seeing the advent of adjustable-rate mortgages.  ARM’s allowed borrowers to qualify at a lower rate while spreading out the risk for the lender.

Historic Interest Rates

Since 1981, after reaching a high of nearly 19%, rates have steadily declined.  Like all trends, it’s not a straight line.  You may have noticed that when rates spike up a little, pundits (mostly lenders and brokers) will say “hurry up and buy/sell before rates go up further!”  Then, when rates go down you hear “buy/sell now before rates go back up!”

I’m writing this now because people in my business are starting to wring their hands again about interest rates, the Fed, etc.  Stuff nobody can do anything about.  And maybe it doesn’t matter that much.

When to Buy or Sell

In over 30 years and hundreds of transactions, here’s what I’ve learned:  almost nobody buys or sells just because interest rates are a certain way.  Buyers will buy and Sellers will sell regardless of where rates may be.  That’s because the financial benefits of home ownership still outweigh the (temporary) costs of higher rates, and the real reasons people move (changes in family, job, age, etc.) don’t usually allow a buyer to wait until interest rates are perfect.  You can always refinance.

Bottom line:  the right time is whenever you need to do it.  

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Do HOAs Affect Home Values?

Do HOAs Affect Home Values?

Research suggests that HOA’s have an effect on home values – almost always for the better.

“Theory does suggest that  HOAs increase home value. The rights and responsibilities that come with an HOA affect a home’s value, just as do the number of  bedrooms and the quality of the local schools.  A great house in a community with a poorly designed or badly managed HOA is a great house in a bad neighborhood.” – Amanda Agan and Alexander Tabarrok , George Mason University.

The Downside

Since most homes built in America today come with an HOA, the rare negative effect might be where your monthly HOA fees are substantially higher than those for a similar home in another neighborhood.  We sometimes see this where there have not been adequate maintenance reserves collected over the years and they’re having to play “catch up”; or when there has had to be a special assessment (because they didn’t have adequate reserves).  In that case, the price will have to be lower to reflect the additional cost of ownership to the Buyer.  How much lower?  Well, you could take the difference in monthly HOA fees, use that as the payment toward mortgage principal at the prevailing rates, and calculate the amount of mortgage that would pay off over 30 years.  There’s your price difference.

The Upsides

The advantages, although not as clear-cut economically, are

  1. Covenants. Also called Deed Restrictions. These are rules creating standards for quality and appearance of the home and lot. They’re usually enforced by the HOA.  Some people will bristle at the thought of anyone telling them what they can or can’t do with their home, but consider that the characteristic of “conformity” carries only a positive connotation (and value adjustment) in the language of appraisal.  Hence, the fact that neighborhoods where all the homes look nice tend to sell for more.
  2. Local Control.  Part of the premise of having a HOA is that local residents can manage their neighborhood better than the various divisions of city government. That’s why the HOA has control over streets, landscape maintenance, amenities, etc.  In fact, Denver Government even allows non-HOA neighborhoods to be an integral part of planning, development, code enforcement, variances, and other functions through RNOs (Registered Neighborhood Organizations).  In Winston Downs, we really have a RNO which has “HOA” in it’s name.
    Some analysts even point to the rise in “Local Governments” (, noting that HOAs lead the way in providing more individualized, cheaper and better quality services than can be provided by City and State agencies.
  3. Placemaking and Community.  “Placemaking is a quiet movement that reimagines public spaces as the heart of every community, in every city. It’s a transformative approach that inspires people to create and improve their public places. Placemaking strengthens the connection between people and the places they share.”  HOAs are made up of neighbors, neighbors make a community, and communities strengthen and enforce shared values.  Strong communities help drive strong home values.

Winston Downs HOA

With all that said, the HOA (really an RNO) for Winston Downs Neighborhood is entirely voluntary, and at this writing a bargain at $15/year per family. The neighborhood doesn’t carry any deed restrictions, so code enforcement is pretty much up to local government.  But the RNO is an active participant in organizing community activities, weighing in on local issues, schools, development and code variance requests which impact the neighborhood.


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Best Way to Understand Closing Costs

Best Way to Understand Closing Costs

Federal law requires lenders and mortgage brokers to give you a booklet within three days of applying for a mortgage loan.

It’s called Shopping for Your Home Loan, and it’s a well-written guide in plain English.
Download the pdf to your computer or ipad, and consult it as you move through the Homebuying process. It can help you become familiar with a number of important things:

  • how interest rates, points, balloon payments, and prepayment penalties can affect your monthly mortgage payments.
  • Important information about your loan after settlement, including how to resolve loan servicing problems with your lender, and steps you can take to avoid foreclosure.
  • After you have purchased your home, identify issues to consider before getting a home equity loan or
  • refinancing your mortgage. Finally, contact information is provided to answer any
  • questions you may have after reading the booklet.
  • Glossary of Terms in the booklet’s Appendix.

RESPA is a federal law that helps protect consumers from unfair
practices by settlement service providers during the home-buying and loan process.


Read Guide to Settlement Costs

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Buy a House with Your IRA

Buy a House with Your IRA

Self-directed IRA’s — too good to be true?

This is not for everyone, but what it boils down to is that if you have a lot of money in an IRA and want to expand your investments beyond ordinary securities, a self-directed IRA can help you do what you want with your money – including buying real estate.

Difficult times have caused many people to look at alternative ways to save for retirement, and if you like owning real estate and think the long-term returns are likely to beat securities, this could be a good way to invest your IRA.

There are lots of rules, and you should be aware of what you can and can’t do with your IRA’s real estate.  For example, you or any immediate family members can’t live in it or get any rental income from it directly. Additionally, all repairs, management and property tax costs must be paid with the IRA’s funds – you’ll need to use a management company.  You can’t even make repairs by yourself without your own “sweat equity” being considered a contribution to the account.  So get expert tax advice and educate yourself prior to getting started.

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