Mortgage & Finance

Taxes and Insurance make homeownership less affordable

Posted on by Teresa Boardman

Coins, moneyHome prices are high and so are interest rates but let’s not forget about taxes (property taxes) and insurance.

In Minnesota, homeowners insurance premiums have seen a significant increase, rising by 39% over the last seven years, with a 15% jump in 2023 alone, according to the Federal Reserve Bank of Minneapolis.  Severe weather and increased construction costs are largely to blame. Those higher insurance costs have contributed to higher association dues of condo owners.  

Over the past five years in Ramsey County, property taxes have seen an increase, with a 4.75% maximum levy increase proposed for 2025, following a 6.75% increase in 2024. Inflation has contributed to this, with costs for county and city programs rising.

Home prices would come down or remain stable if we had more houses. In the US there is a shortage of housing due to the lack of new construction. Construction costs will rise due to tariffs and funding cuts to HUD will also negatively impact housing.

In local news home sales are definitely lower than what we normally see in March.

 

High rates and sluggish home sales

Posted on by Teresa Boardman

Home sales in St. Paul were pretty slow in January and so far February has been about the same. Houses are selling but more slowly than they did a year ago. There are fewer homes on the market as homeowners prefer to stay put instead of moving up to a higher mortgage interest rate.

Mortgage interest rates decreased slightly but the Federal Reserve isn’t interested in rate cuts. Inflation is more likely to go up at this point than down due to tariffs which will drive prices up. I fear we may be headed toward what I will call the “Trump slump” because I don’t like the “R” word. I hope I am wrong.

Mortgage rates

A year ago mortgage interest rates were at 6.64% and went up to 7.22% in May of 2024, according to Freddie Mac. The low for 2024 was in September at 6.04%.

Today is a good day to freeze your credit

Posted on by Teresa Boardman
Coins, moneyNow is a great time to freeze your credit. All US social security numbers have been compromised as people who have not been vetted or have security clearance have been allowed to access the U.S. Treasury payment system.
This is the first time an un-elected foreign national has the power to tamper with, destroy, or turn off the payment system for tax refunds, Social Security checks, Medicare payments and so much more. Think of it as the government checkbook.
You can find numerous news stories about how Elon Musk and his team can access and control the US treasury payment system have access to all of our social security numbers and more.
Our elected representatives in the legislative branch of government are posting about it on social media instead of trying to stop what looks like a hostile takeover of the government.
Why freeze your credit?
Freezing your credit prevents others from opening new lines of credit in your name. Once someone has your social security number they can use it to apply for credit cards and they can even get your tax refund.
To freeze your credit, you can contact each of the three major credit reporting agencies: Equifax, Experian, and TransUnion. You can request a freeze by phone, mail, or online.
How to request a freeze
  1. Contact the credit bureau you want to freeze 
  2. Provide your name, Social Security number, date of birth, and address 
  3. If you’re requesting a freeze online, you may need to create an account and provide additional information to verify your identity 

How to contact the credit bureaus 

Equifax
You can call 1-800-349-9960 or mail a request to PO Box 105788, Atlanta, GA 30348
Experian
You can call 1-888-397-3742 or mail a request to PO Box 9554, Allen, TX 75013
TransUnion
You can call 1-888-909-8872 or mail a request to PO Box 2000, Chester, PA 19016

You can freeze and unfreeze your credit as many times as you want, and it’s free.  You will need to unfreeze it when applying for a mortgage or auto loan. 

Housing prices and interest rates

Posted on by Teresa Boardman

This is a good time to buy a home if you can pay cash. Higher interest rates have slowed home sales and have made housing even more unaffordable. While it is true that rates were higher in the 1980s it is also true that houses were less expensive as compared with household income.

Current rates are more than 7%. If I were a home buyer I would wait until the president reduces interest rates before buying a home. Sure loans can be refinanced but that is an added expense. A change in circumstances, such as a job loss, can mean a borrower won’t qualify for a new home loan.

Interest rate chart
Mortgage Interest Rate Chart – Freddie Mac

Housing market favors cash buyers

Posted on by Teresa Boardman

It is an old cliche “Cash is king, it is true, especially in today’s housing market. While interest rates are close to 7% and home prices are at an all-time high, cash buyers have an advantage. I’ll call it an opportunity advantage.

About 1/3 of all home buyers paid cash last year. I believe this trend will continue into 2025. When interest rates go down more people borrow money when they go up people who can pay cash.

Almost all of the cash sales I have worked with in the past couple of years have involved older home buyers who already own a home free and clear or who have a lot of equity in their home.

Paying cash for a home can mean more opportunities. Cash buyers still pay closing costs and need to factor that in. Typical closing costs will include fees for title work, property taxes, and title insurance.  I highly recommend buying homeowners insurance too. To determine exactly what the closing costs will be contact a title company.

Ideally, a homeowner needs to sell one house and use the cash to buy another but there are workarounds like contingent offers and bridge loans.

graph showing percentage of cash sales
all cash purchases

 

We start 2025 high

Posted on by Teresa Boardman

According to FreddieMac Mortgage interest rates are at 6.91%, which is high.  We started 2024 at about 6.5% which was also high.  While some real estate companies and agents advocate buying now and refinancing later, I believe it is better to wait until rates go down before buying unless you are paying cash.

Refinancing is expensive partly because mortgage interest is front-loaded which means we pay the most interest on the first payments. Refinancing means starting over and paying more interest and less principal. Also, a job loss or change in your finances may make refinancing impossible.

When people don’t buy it slows the economy and rates go down. Do you really want to pay all of that interest to the bank each month?

When will rates go down? I am not making any predictions. I’ll just say that they will go down when they go down. I think 5% or lower is the sweet spot for home buyers.

Mortgage interest rate chart
Mortgage interest rates as of January 2, 2025