Despite the fact that 30 year mortgage interest rates are currently averaging just a hair over 7%, we have had a very active start to the New Year. There seems to be more than enough buyers for the few homes that are currently on the market, which is a good sign for the coming spring. Of course, there’s typically not much inventory out there this time of year. Take Terra Linda for example, where as of mid-week we had 4 properties on the market and two of them were pending. The only choices buyers had right were 823 Tamarack Dr for $1,675,000 which had been on the market for 82 days, and 20 Esmeyer Dr which is asking $1,799,999 after an unsuccessful sales run before the holidays. To say the market is starving for inventory would be an understatement.
Regarding my Terra Linda listings, today I closed escrow on 335 Las Colindas Rd. I also closed 91 Forest Lane on 1/15/25 and I’ve got 555 Tamarack Dr coming on the market in a couple of weeks. 100 Marin Center Dr #71 is a darling townhouse which is amazingly still available. I could have sold the townhouse twice already if the HOA hadn’t reached its cap on non owner occupied units. We can only sell it to someone who plans on living there, and not rent it out. Just south of Terra Linda I’ve got a duplex at 233 Glen Park Ave on the market and it’s been getting a lot of attention. I’ve got a few more properties that I’m getting ready to sell this spring as well.
That’s the real estate business for you. Things really start to ramp up as we go into the year, and this year is no exception. I have a feeling the industry is going to be pretty busy throughout the spring. It seems that today’s home buyers have gotten used to the current interest rate environment, and they see the value in building equity and wealth through home ownership.
This week I sat down with an agent in my office who has been selling real estate over 50 years. I look up to him and I value his perspective. He told me something very interesting that resonates with me. His father was an appraiser who encouraged him to buy a house as soon as he was able. At the time he made his first purchase for $75,000, his mortgage was three times the cost of renting a comparable house (I think he may have been exaggerating a little)! He ended up selling that home at a profit, then buying a larger one as his family expanded.
When I bought my current house in 2017 the mortgage, property tax and insurance were probably about $1,000 more than it would have been to rent a comparable home. I’ve been here 8 years and in that time the property has appreciated significantly, plus I was able to refinance near a historically low rate. With the upgrades I’ve made the house is worth about 66% more than when I bought it. Of course, this gain is not realized until I actually sell the house, which I have no intention of doing anytime soon.
I enjoy financial analysis and investing, and while 66% in 8 years doesn’t beat the S&P 500 on the face of it, you need to look a little deeper at the equation to see the true growth in my investment. My downpayment was only 10% of the purchase price. The return on my 10% down payment is actually 667%! Sure, I’m paying a mortgage, but the alternative is to pay rent and help someone else build wealth. Plus, I’ve had a tax advantage from the write-offs on the house. That’s why buying a home at today’s interest rate is still a great investment.