Josh Flagg, a real estate broker who stars in Bravo’s “Million Dollar Listing Los Angeles,” warns potential buyers to sign deals before interest rates rise.
Last week, the Federal Reserve raised its benchmark interest rate by 75 basis points for the third consecutive month as part of an aggressive effort to rein in searing inflation. The move set the benchmark federal funds rate from 3% to 3.25%, the highest since before the 2008 financial crisis.
New economic projections released by the central bank show policymakers expect interest rates to reach 4.4% by the end of the year, suggesting another three-quarter point hike percentage is on the table. CME’s FedWatch tool shows about a 60% chance of a 75 basis point hike and a 40% chance of a 50 basis point hike at the Fed’s next meeting in November. A basis point is one hundredth of one percent.
The Fed’s measures are having an impact on mortgage rates. Mortgage conditioner Freddie Mac said 30-year fixed rates averaged 6.7%, down from 6.29% a week ago.
“I think if people can still buy right now, it’s a good time because interest rates are going to keep going up,” Flagg told FOX Business in an interview.
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Flagg, who is set to publish a new book Oct. 4 called “The Deal: Secrets for Mastering the Art of Negotiation,” has sold more than $2 billion in property and is among the top five real estate agents in Los Angeles. .
His clientele includes Adam Levine of Maroon 5, “Gray’s Anatomy” producer Shonda Rhimes and DJ Steve Aoki. Flagg’s record accomplishments include selling late fashion icon and socialite Besty Bloomingdale’s Holmby Hills estate to fashion designer Tom Ford for nearly $40 million. He also sold the two most expensive lots in the 500 block of Beverly Hills.
Flagg argues that the biggest mistake homebuyers make is getting too priced and nickel and dim.
“If you do this every time you’re going to lose all the business and you’ll never get the house you want because no house is perfect unless you have an infinite budget and can afford it. “Buy anything you want. And even when you have an infinite budget, no house is still perfect,” he explains. So you really have to look at what’s most important to you.”
UNEXPECTED INCREASE IN US NEW HOME SALES IN AUGUST
According to Redfin, sales of luxury homes fell 28.1% year-over-year in the three months ending August 31, 2022, the steepest drop on record since at least 2012. The Economist Redfin chief Daryl Fairweather attributed the decline to rising interest rates, inflation, a tepid stock market and economic uncertainty.
“High-end home hunters are shocked when they see the impact of rising mortgage rates on paper. For a luxury buyer, a higher interest rate can equal a monthly housing bill that costs millions. thousands more,” Fairweather said in a statement. “Someone who was looking for a $1.5 million home last year can now afford a maximum budget of $800,000 thanks to higher mortgage rates.”
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The median selling price of luxury homes rose 10.5% year-over-year to $1.1 million in the three months ending August 31, compared with a 20-year increase 3% a year earlier and a record gain of 27.8% in the three months ending June 30. , 2021.
Luxury home prices are rising at a slower pace than non-luxury homes, which rose 15.5% year-over-year to $335,000 in the three months ending Aug. 31, down slightly from an annual increase of 17.2% a year earlier and a record gain of 19.7% in the three months ending March 31.
Although high-end buyers are more likely to pay cash, Redfin notes that many still take out mortgages, sometimes as part of an investment strategy.
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While Flagg acknowledged that house prices will eventually come down, he pointed out that the real estate market is cyclical and another price increase should follow.
“Wouldn’t you rather lock in a rate for 30 years and have that easy payment every month than wait until next year and have a bigger payment every month, even if you have a little better business on the property?”, he wonders.
He advises anyone interested in investing in real estate to do so immediately and to hold onto that investment for as long as possible.
“Nobody has ever become poor by owning real estate. You keep it and hold it for as long as you can and you try to get as much of it as you can because everything always increases over time,” Flagg said. . “You can’t say the same about other investments.”