The Ghost of Interest Rates Past – We’ve Got It Good, Y’all

Just a few months after I was born in 1982, my parents moved from Baton Rouge, Louisiana to Cheshire, Connecticut, a Pleasantville-like town that at the time maybe had 10,000 people in it.  After weeks of searching and my mom not being happy with anything, they finally purchased the “home on a hill” – literally.  Weatherside Rd was a big hill and our house was at the top of it.  Looking back today, it’s not nearly the cliff that I remember it being, however the abject fear of sledding down the icy driveway will haunt me forever.


(My brother drove by the house just a couple of weeks ago)

Since my Dad retired 10 years ago, he has been slooowwwlly de-inventorying old stuff out of the attic, file cabinets, storage, etc.  Recently, he came across their old home purchase and mortgage documents from that house.  And with rumblings from clients and the market in general talking about how interest rates are “too high”, I’m here to give the ultimate reality check.

In order to even purchase this $115,000 home back in 1982, my Dad had to get creative (by the standards at the time) just to even get into it:

1.) Adjustable rate first mortgage – $62,500
2.) Owner Financed 2nd mortgage for $30,000
3.) Down Payment of $22,500

Here’s where the reality check sets in.  My Dad’s initial interest rate on the first mortgage was 13%!!

It gets better though…it was an adjustable rate mortgage (ARM), so every year it adjusted based on the index at the time.  Today, a typical ARM has a cap on the maximum rate that can be charged.  Not in 1982. This thing was scheduled to change by 4% FLAT every year.

Then my Dad needed the seller to owner finance another $30,000.  No biggie, just do it for 13% over 30 years like the first right? Nope!  See, sellers then as now want their money fast, and need extra incentive to even consider this in the first place, so this was what really happened…

$30,000 at 16%, 5 year balloon payment.

They say that madness and genius are separated by a fine line, or rather a murky gray area.  For my Dad to put this deal together and shell out another $22,500 from the sale of their house on Shadeland Dr, he must have known something no one else did. I’m sure his real estate agent thought he was crazy.

Whether it was genius, timing the market or luck, my parents fortunately did not have to actually LIVE through a rate adjustment or the insane second mortgage payments.  By the middle of 1983, they were able to refinance EVERYTHING under a single fixed rate mortgage around 11-12% (still high!) and then a few years later around 8%.

So what is the lesson here?  There are 2 really:

1.) You must have a plan.  My Dad did whatever it took to get into that house to make my Mom happy, and knowing him he had no intention of ever keeping this situation long term.  Banking on his understanding of markets and his own financial strategy he was able to set things up for a better deal in the future.  Even if rates went up, he likely had a plan to consolidate both loans into one.

2.) Today’s rates are STILL amazing. Keeping in mind that the historically low rates in the 3% range from 2012 to 2017 were caused by a semi-historical market crash (aka, an anomaly in overall market history), the fact that our booming economy is still doling out rates right at 5% is amazing.  5 year fixed ARM rates are still in the mid 4s, so if you have a 5 year plan you can take advantage of those as well.

:: CAUTION: OBLIGATORY CALL TO ACTION AHEAD ::

You need a real estate agent who understands a home purchase is not JUST a moment in time – it’s an investment, which TAKES time.  Let me help you make that plan, no matter what market we are experiencing and ensure that you stay on track towards your goals.

David Madaffari

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Battle Over CFPB About to get Interesting

The National Real Estate Post’s topics are always so interesting and fascinating that when they are good I must share them, like the one yesterday about Section 8 housing. Today, there is a classic partisan battle brewing over the direction and possibly the entire existence of the Consumer Financial Protection Board.  Make no mistake, I have never been in favor of this agency, mainly because (even as stated in the video) the U.S. has a plethora of financial oversight agencies – why the need for another?  Especially one that is solely funded by fines?

The average consumer probably has no idea about this agency and how it has affected their own transactions with banks and their mortgages, however my industry friends should watch.

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This will be an interesting move one way or another.

David Madaffari, Realtor
225-772-3283
David@DavidMadaffari.com

Section 8 – Fix it or Leave it?

Section 8 has always been a political football for politicians, and a debating point among working people.  The issue is simple: should those receiving government funds for housing have time limits and work requirements attached to the vouchers?

In the video below, Frank and Gary at the National Real Estate Post discuss the comments made by both outgoing HUD Director Julian Castro and incoming director Ben Carson, and the details surrounding this debate really changed my perception as to the government’s obligations with the program.

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Watch the video and give me your thoughts.  What do you think about Section 8?

David Madaffari
225-772-3283
david@davidmadaffari.com

 

Pelican Point Home – $354,900

The value here is incredible – 4 bedrooms, 3 baths PLUS bonus room with 9′ ceilings , open concept living area, and a huge master closet. Large lot and yard makes this a great new home the in first filing of Pelican Point.   Hwy 44 will be a hub of activity in the coming years, so get into this home now and have a prime spot in the middle of it all.

6300 Beau Douglas Ave
Pelican Point Golf Community
$354,900

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David Madaffari, Realtor

Mobile: (225) 772-3283
Email: David@DavidMadaffari.com

Jonathan Diez, Realtor

Mobile: (225) 938-4653
Email: Jonathan@GrassrootsTeam.com

17111 Commerce Centre Dr.
Prairieville, LA 70769
(225) 744-0044

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2016 Sales in Review!

2016 has been a terrific year – we sold 39 homes and over $7.3 Million in volume, making 2016 our best year to date.  I thought it would be fun to catalog every home we sold this year – listings and buyers –  and after doing so it really runs the gamut of properties.  From traditional to contemporary, new construction to “vintage” to multi-family and investment/renovation projects.   Not shown here are the lots and land sales, mainly because no one wants to look at shots of grass, trees or plat maps, lol.


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And last but not least, the home we purchased for our family in Baton Rouge.

Let’s make 2017 even better!  Call me at 225-772-3283 for your home selling and buying needs.  and of course I always appreciate referrals!

– David Madaffari

6300 Beau Douglas – $364,900

This home is now complete! This floor plan has been successful in other areas, and we are sure you will love it as well.   4 bedrooms, 3 baths PLUS bonus room with 9′ ceilings , open concept living area, and a huge master closet. Large backyard – a great new home the in first filing of Pelican Point!

6300 Beau Douglas Ave
Pelican Point Golf Community
$364,900

001002003004005006007008009

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David Madaffari, Realtor

Mobile: (225) 772-3283
Email: David@GrassrootsTeam.com

Jonathan Diez, Realtor

Mobile: (225) 938-4653
Email: Jonathan@GrassrootsTeam.com

17111 Commerce Centre Dr.
Prairieville, LA 70769
(225) 744-0044