Archive for September, 2015

Why Higher Rent Could Mean Higher Interest Rates

said on September 25th, 2015 categorized under: Financing

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Washington, DC - Federal Reserve HeadquartersFederal Reserve Chairwoman Janet Yellen caused a bit of a stir the other day when she indicated the Fed will likely be raising interest rates by the end of the year.

While the Fed’s short term rate (the one that makes the news) has some impact on mortgage rates, it isn’t the only factor. In fact, mortgage rates are just as tied to the rate of inflation, the budget deficit and debt, household savings, how much money is being printed and the government’s willingness to insure mortgages.

In a recent column in Forbes magazine, by National Association of Realtor’s Chief Economist Lawrence Yun, mortgage rates may hit 4.5 percent by the end of 2015, and in the next two to three years, rise to 5.5 or 6 percent.

This may be impacted, however, by a sudden rise in inflation. Things that contribute to inflation are housing shortages, which force rent prices to rise, and owner-equivalent rent, which is a comparison of the cost of owning the property you live in vs. what it would be worth as a rental. Those two factors alone count for 30 percent of what the government uses to calculate the Consumer Price Index.

And unless homebuilders start new construction of housing for the growing population and banks start easing lending criteria, rents are sure to rise.

While rising interest rates may impact duplex investors ability to borrow inexpensively and maximize cash flow, it’s important to remember rising interest rates are also the result of an improving economy. And that’s never a bad thing.

Minneapolis Duplex Sales Head Toward Fall

said on September 17th, 2015 categorized under: Twin Cities Real Est

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Minneapolis Duplex SalesLet’s get back on track this fall by taking a look at what happened in the Minneapolis and St Paul duplex market the last week of August, 2015.

There were 25 duplex, triplex and fourplex sellers who accepted purchase agreements during the week. As you may have heard, our market has decidedly shifted toward traditional sellers, and this was the case here too. Seventy-five percent of the owners have equity in their properties they will take home from closing.

There were just 12 pended sales last year during the same week; most likely as Labor Day fell earlier. Of these, 83.3 percent had equity in their properties.

For buyers, there were 26 new listings during the last week of August in 2015 to choose from. Seventy-six percent of the sellers will not have to consult with a lender in order to receive permission to sell. Last year, there were just 9 new listings. All of those sellers had equity in their properties.

As we get deeper into fall, and past the threat or reality of changing interest rates, we will be able to get a better idea as to where the Minneapolis duplex market stands.