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We are right around the corner from the presidential election and many of my clients have asked me how the election will affect interest rates.

Historical archived data from the Primary Mortgage Market Survey from Freddie Mac which dates back to 1971 might shed some light on what usually happens to interest rates after an election.

The numbers below are for 30 year fixed rate mortgages:

 1972 – Richard Nixon won in a landslide victory over George McGovern.
Prior to the election the rate was 7.43% and it increased slightly to 7.44% in December.

1976 – Jimmy Carter won over Gerald Ford.
Prior to the election the rate was 8.81% and it declined a bit to 8.79% in December.

1980 – Ronald Reagan defeated Jimmy Carter.
Prior to the election the rate was 14.21% and it increased to 14.79% in December.

1984 – Ronald Reagan ran for a second time and defeated Walter Mondale.
Prior to the election the rate was 13.64% and in December it declined slightly to 13.18%.

1988 – George H. Bush defeated Michael Dukakis.
Prior to the election the rate was 10.27% and in December it rose to 10.61%.

1992 –  Bill Clinton defeated George H. Bush.
Prior to the election the rate was 8.31% and a month later it decreased to 8.21%.

1996 – Bill Clinton defeated Bob Dole.
Prior to the election the rate was 7.62% and it decreased to 7.60% in December.

2000 – George W. Bush defeated Al Gore.
Prior to the election the rate was 7.75% and it fell slightly to 7.38% in December.

2004 – George W. Bush defeated John Kerry.
Prior to the election the rate was 5.73% and it increased slightly to 5.75% in December.

2008 – Barack Obama defeated John McCain.
Prior to the election the rate was 6.09% and decreased to 5.09% in December.

2012 – Barack Obama defeated Mitt Romney.
Prior to the election the rate was 3.38% and decreased slightly to 3.31% in December.

The fear most people have that rates will take a dramatic hike after an election is truly not warranted.  Its a good reminder that the state of the economy determines the overall change in interest rates.

Buying a home is an exciting and emotional time for many people. To help you buy your home with more confidence, make sure you get owner’s title insurance. Here’s why it’s so important for you.

1. Protects Your Largest Investment

   A home is probably the single largest investment you’ll make in your life. You insure everything else that’s valuable to you—your life, car, personal property, health, pets, jewelry, etc.—so why not your largest investment? For a one-time fee, owner’s title insurance protects your property rights for as long as you or your heirs* own the home.

2. Reduces Your Risk

   If you’re buying a home, there are many hidden issues that may pop up after purchasing it. Getting an owner’s title insurance policy protects you from legal title discrepancies. Don’t think it will happen to you? Think again. Here are just some of the many situations that you’ll be protected from if you have owner’s title insurance.
   
   Unforeseeable title claims, such as:
   • Forgery: making a false document. For example, the seller misrepresents the identity of the person selling the property.
   • Fraud: deception to achieve unfair gain. For example, someone steals your identity and either sells your house without your knowledge or consent, or takes out a second mortgage on the property and walks away with the money.
   • Clerical error: inconsistent paperwork and historical records. For example, an unforeseeable discrepancy in the property or fence line causes confusion in ownership rights.

   Unexpected title claims, such as:
   • Outstanding mortgages and judgments, or liens against the property because the seller didn’t pay required taxes
   • Pending legal action against the property that could affect your ownership
   • An unknown heir of a previous owner who is claiming ownership of the property

3. You Can’t Beat the Value

   Owner’s title insurance is a one-time fee that’s very low relative to the value it provides. It typically costs around 0.5% of a home’s purchase price.

4. Covers Your Heirs*

   As long as you or your heirs* own your home, owner’s title insurance protects your property rights.

5. Nothing Compares

   Home insurance and warranties protect only the inside of the home. Getting owner’s title insurance ensures your family’s property rights stay protected.

6. 8 in 10 Homebuyers Agree

   Each year, more than 80% of America’s homebuyers choose to get owner’s title insurance.

7. Peace of Mind

   If you’re buying a home, owner’s title insurance lets you rest assured, with the knowledge that you won’t be stuck with certain existing debts or legal problems once you’ve closed on your new home.

More Homebuyer Tips & Information

The American Land Title Association helps educate homebuyers like you about title insurance so you can protect your property rights. Check out www.homeclosing101.org to learn more about title insurance and the home closing process.

A recent article from US News talks about the things you should consider before paying off your mortgage early.

http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2015/12/03/6-things-to-consider-before-paying-off-a-mortgage-early

To me knowledge is power and to having options as you plan for the next stage in life is comforting.  

Understanding the purpose of earnest money – what it does and what is does not do is an important part of the home purchase and selling process.  Earnest money simply funds the liquidated damages provision of the purchase and sale agreement between the Buyer and Seller.  Basically, if Buyer defaults, Seller is damaged.  Seller had the property off the market during the pendancy of the agreement; Seller may have vacated the property in anticipation of closing, Seller may have made repairs or improvements to accomodate Buyer or as required by Buyer's lender, etc.  As a result, per the purchase and sale agreement when a Buyer defaults, Seller is entitled to a remedy.

An earnest money provision is a liquidated damages clause entitling Seller to the earnest money in the face of the Buyer's default.  So, what is the right amount of earnest money or Buyer's "skin in the game"?  !%-2% of the purchase price is pretty standard If the sale is scheduled to close in 20 days, all cash and the house is already vacant, the earnest money could be a low amount as Seller's maximum loss is 20 days of marketing time.  However, if the sale is scheduled to close in 60 days and the Seller must install a new roof or vacate early to replace flooring throughout the house, then Seller should demand a substantial amount of earnest money.  Seller risks losing 2 months of market time and, the expense of make repairs or vacating prior to closing, if the Buyer fails to close..

If Seller's remedies are limited to forfeiture of earnest money and if the earnest money is insignificant, there is no risk to Buyer for defaulting.  Calculating the :right" amount of earnest moneyshould take into account the Seller's anticipated losses in the event the Buyer defaults prior to closing.

Naturally the Buyer wants their earnest money to be the smallest amount possible.  For Buyers earnest money should be set .  in the confomty with the competetiveness of the market.  If Buyer writes a low offer, Buyer may want to increase the earnest money to make Buyer's offer more desireable and to compel the Seller to believe the Buyer fully intends to close the sale. In a strong Seller's market which we have today, Buyer may want to increase earnest money to distinquish Buyer's offer from the expected competing offers.

Earnest money is a negotiation tool to be used by both parties.  A Buyer who puts down less earnest money may be signaling less commitment in the purchase.

Setting the right amount of earnest money is alwasy fact-dependent and the client alwasy has the final sayas to the right amount of earnest money. 

Yesterday, FHFA released their housing price index data for November which showed that house prices rose 0.8 percent from October on a seasonally adjusted basis.

That rate of growth is the highest one-month growth rate reported by FHFA since December 2013; it would translate into an annual price growth of 10 percent.

 While month to month data can be somewhat volatile, looking at the year over year data, we see a similar acceleration though not yet that strong.  From one year ago, home prices were up by 5.3 percent, according to the FHFA, very close to the 5.6 percent change reported in NAR’s median price in November.

Both FHFA and NAR data showed that the November annual growth rate in prices was higher than that observed in previous months.  Today, NAR will release December price and sales data, and we’ll get a first look at whether the acceleration in home price growth will continue.  As long as tight housing inventory persists, which we expect to see as long as housing starts remain at a subpar level, we expect to see upward pressure on home prices which adds an additional challenge to potential first-time buyers.

In addition to national data, FHFA releases data at the Census division level.  The most robust gains in FHFA data from a year ago were still in the West though other Census divisions were stronger than the Mountain division.  NAR data showed less strength in prices in the West.

According to FHFA year over year prices rose 7.5 percent in the Pacific division which includes Hawaii, Alaska, Washington, Oregon, and California and 5.6 percent in the Mountain division which includes Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, and New Mexico.  But divisions that make up the South region actually had growth in excess of 6 percent from a year ago.

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Effective with loan closings after January 1^st, 2015 the conventional loan limits for King, Pierce, and Snohomish counties will increase from $506,000 to $517,500.  This is good news for folks who are looking to purchase with only 10% down as many Jumbo options require 20% down to get the best rates.  We expect FHA and VA to follow suit, but they have not made a formal announcement yet.

The National Association of Realtors’ most recent Existing Home Sales Report revealed that home sales were up rather dramatically over the past year.