The Federal Reserve is threatening to reduce rates again, and this one should be a whopper. Sen. Elizabeth Warren has suggested, or, as some write, demanded, a rate cut of 75 basis points. If she is going for that, she might as well ask for the full 100, or a 1-point drop.
The fickle Fed has flirted with reduction and teased the country with proposed rate drops since last year, but since rates rose 5 points from March 2022 to July 2023, there have been no reductions.
That jump was the largest in 40 years. To reflect upon the policy of the Federal Reserve and rate shifts, the rate the Feds charged in April 2022 was 0.33% – up from 0.08 in December 2021 – and rose to 0.77 in in July. The rates then rested at 3.08% on October 2022. By September 2023, they had skyrocketed to the 5.33%, where they are today.
Should the rates drop, some of the practices put into place during the era of high rates will seem attractive and might remain in the borrowers’ playbook.
Veteran high producer Jarod Tanksley of Brentview Realty posted a few months ago that if a seller was willing to drop the price $20,000 at an interest rate of 6% on a $600,000 loan, the buyer would pay $580,000. That $20,000 would reduce his payment by $123 per month.
However, if the buyer had the seller buy down the rate with the $20,000, the buyer could secure a 5% loan, and the monthly payment savings would double to $257 per month. The savings of $124 ($1,488 per year) would allow buyers to purchase a more expensive home and, if rates drop, a refinance could reduce payments further.
Should the Fed actually follow through and reduce rates throughout the remainder of 2024 and into 2025, Tanksley’s model is even more attractive, for the rate that is reduced through the buydown process can be a fixed-rate mortgage.
The late President Ronald Reagan once said the most feared words in the English language are “I’m from the government and I’m here to help.” The Federal Reserve has dangled the carrot before. Perhaps this time the vegetable will be served.
Sale of the Week
There are many in the Midstate area who try to predict what areas are likely to produce the greatest real estate appreciation. In their musings, they consider the current ranges of prices of homes and the distance from where people work and play.
823 Nesbitt Lane
While there has been expansive growth in the urban core of the city, homes in the suburbs bordering the core have experienced such significant price increases that houses to be demolished are selling for more than $1 million in the Belle Meade Highlands, Green Hills, Oak Hill, Forest Hills and all over Williamson County.
A pocket of opportunity for somewhat affordable housing in a vibrant area can be found in Madison, including the house located at 823 Nesbitt Lane in the Bonnie Brae subdivision, with quick access to I-65.
Listing agent Brandon Carver of Bradford Real Estate set the price at $675,000, and Nina Lampley of Compass Tennessee, LLC delivered the buyer within six days.
It’s a bargain as real estate goes at $151 per square foot for the five-bedroom home stretching over 4,482 square feet on an expansive lot that is slightly more than an acre. The home has refinished hardwood floors and a primary suite on the first floor. There is a four-car garage and an upstairs bonus room and home office.
In his description, Carver noted nearby local favorite establishments such as Pinky Ring Pizza, Midtown Coffee and Cedar Hill Park. The new multi-purpose Harken Hall speaks to the advent of wonderment exploding in the area. An enormous event venue that houses a 4K television studio and two sound-recording studios, the main hall has become popular for concerts and weddings.
“Go West, young man” is a phrase attributed to newspaper editor Horace Greeley in 1871 as he suggested that the U.S. population should migrate toward the Pacific. The Hill Center, Hillwood, and all things Hill in Nashville are so named to honor H.G Hill, a grocer, developer and all things Hill who died in 1942. Mr. Hill’s full name was Horace Greeley Hill.
Were they alive today, Horace Greeley, and perhaps H.G. Hill, might encourage the youth of the area to go North.
Richard Courtney is a licensed real estate broker with Fridrich & Clark realty and can be reached at [email protected].