Question: “Will you put these recent rate increases into historical perspective for us?
Looking back, starting in the 1980’s by decade, on a Freddie Mac 30. Year fixed mortgage for a primary residence, the rates from the St. Louis Fed Survey looked like this:
1980’s – about 9.00% 1990’s – about 6.75% 2000’s – about 5.25% 2010’s – about 3.50% 2020’s – about 2.75% and we are currently hovering just under 8%
We’ve all gotten accustomed to the lower rates over the last 10 years. We are now entering a period where the rates are normalizing and that rate environment is more in line with historical rates. These current rates are more in line with what the “cost of money” should be based on the last four plus decades.
Question: “What effect has the increase in mortgage rates had on buyers and sellers?
Christie’s Answer:
Here are the three things which have the potential to affect on Buyers:
The cost of homeownership has increased.
It is affecting the ability of some buyers to qualify for a mortgage.
In markets such as this, some lenders tend to become a little more conservative. While we don’t expect them to change guidelines, we do expect that they may become more conservative in their pricing.
Sellers could be affected in these ways:
Second home sales, whether houses or condos, may begin to slow. This is a big part of the St. Croix market.
Investment and speculative buying may also begin to slow. These buyers are likely to search out other investment options which may b more attractive as rates increase.
As the real estate markets and players try to “right size” themselves after a few boom years, we may find that Days on Market will be affected.
Question: “Why don’t so many condo complexes qualify for financing?
Chris’s Answer:
Currently most condos on St. Croix must be purchased for cash since they don’t qualify for financing. A condo complex is warrantable if it operates as closely to a residence as possible and is not seen as a “condo hotel” and complies with Fannie Mae and Freddie Mac Mortgage guidelines. When lenders are considering loans on condos in a specific complex, they look at many factors: some HOAs, while insured, don’t meet the lenders guidelines for coverage, the number of vacation rentals in condo complexes is increasing, and a couple of condo complexes rent office space to agencies that rent condos inside the complex which can appear to lenders that the complex is a condo hotel.
After Hurricane Maria in 2017, insurance companies paid claims which were sometimes substantial. Many insurers decided to raise their premiums in subsequent years. Condo complexes handled those rate increases in different ways. Some passed them along as either increases in the monthly HOA fees or as special one time assessments. Some HOAs reduced their premiums by increasing their deductibles or by lowering the amount of their insurance coverage.
Lenders want the properties they finance to have a certain amount of insurance coverage. Some lenders have become unwilling, in the short term, to lend into some complexes until these issues can be resolved by the insurers and individual HOAs. Many of the Condo Boards on St. Croix are currently reviewing these issues, and working with the insurers to make adjustments to their coverage so that lenders are satisfied.
Do you have other real estate questions, contact us!
Question: “Why does it seem like Home Owner’s Association (HOA) fees are high on condos?”
Christie’s Answer:
Often people compare condo fees on St. Croix to condo fees in the states. A big difference is the HOA fees here usually include windstorm insurance. This is essential to have because it means that each individual condo and the common areas are insured and that the entire complex would be covered for damage from a storm. Those HOA fees cover other things too. While they vary from complex to complex, those other items usually include: maintenance of the exterior of the buildings, professional landscaping, pool maintenance, administrative expenses, monthly pest control, TV, and internet. Basically the complex can’t run and be maintained without the owners sharing in the expenses of the upkeep. When looking at HOA fees, consider what they include, and what they are not including, so that you know your own responsibility for other services.
Do you have other real estate questions, contact us!
Question: “What are some things which add value to a home in a remodel?”
Chris’ Answer: When remodeling a home, consider the different ways you can increase value to the home:
REDECORATING – Redecorating is the most popular home improvement. Changing the paint color is a relatively inexpensive way to improve your living space. Other things like new accent pillows, area rugs, and artwork make big changes!
KITCHEN – Kitchens are often the main focus. You may not be able to afford a whole new kitchen but, for a relatively small budget, painting units or replacing cupboard handles or doors are great alternatives. Good lighting and clutter-free, clean surfaces will also make a big difference.
FRESH BATHROOMS – In the bathroom, re-grouting, eliminating all limescale and replacing fixtures are good options. Bathrooms need to look fresh and hygienic.
GARDEN APPEAL – If you have a front garden, spend a little time sprucing it up. Add plants in the flower beds or pots, and have a clear pathway. In the backyard, a well-designed garden can add a great deal of value. It should feel like an extra space for entertaining or relaxing.
THE FRONT DOOR – First impressions count, and the front door of your home can say a lot about the rest of the house.
LOOK SMART AND BE ENERGY EFFICIENT – Smart home technologies are increasingly important, along with solar or wind systems, to the value of a home. Statement systems like multi-room music platforms can also make a difference.
FIX SUPERFICIAL DEFECTS – Small problems and defects can create an impression of a house being run down or not well cared for. Things to look out for include: peeling paint, dirty walls, dripping taps, squeaky floors, doors or stairs, and moldy sealant in kitchens or bathrooms.
Question: “When renovating a home, what are some ideas to make a home more comfortable?”
Christie’s Answer:
On St. Croix, both indoor and outdoor spaces of a home are crucial in forming a comfortable and welcoming setting. A spacious and open floor plan allows for movement, mingling, and conversation to flow, as well as for comfortable breezes. Here are 7 ideas which will make a more comfortable home:
The heart of a home is its kitchen. Create a space where you like to be while cooking for yourself or your guests. Make sure there’s a place for them to sit while talking with you, and enough room for them to help you cook!
Replace older AC units for energy efficient mini split units.
Shade for comfy outdoor furniture make a wonderful space for you and guests. Have around 150 square feet of shaded space, the size of a small room, if it will fit in your plans, more is always welcome. Use all-weather outdoor furniture which can handle the elements of the tropical climate.
Replace old windows, ceiling fans, and screens as needed for good air flow. You are going to want those breezes!
Think about how you use your home at night. Appropriately recessed lighting, wall sconces, and outdoor lights can make a huge difference in your comfort and tranquility.
If you don’t have the space or resources for a swimming pool, a plunge pool goes a long way to help cool you on those hot sultry days.
How about an outdoor shower? Showering outside while enjoying the view is delightful, especially after a day of snorkeling or diving, and decreases the amount of sand getting into your home!
