June 2022 - Cat's Real Estate Newsletter
- catherinerobinson8
- Jun 15, 2022
- 6 min read
Updated: Jul 6, 2022
In this month's newsletter, read about...
solar panels...are they worth it?
the slightly cooling housing market
Adjustable Rate Mortgages (ARMs), an alternative to fixed-rate loans
growing your own food
But first, thanks to all who stopped by my display at Petworth PorchFest! My daughter had a blast handing out swag and water, and it was great catching up with old neighbors as well as meeting new ones!
Solar Panels: Are They Worth It?
It’s sunny season! And while I personally gain energy from time outdoors, I wasn’t sure if solar panels were as efficient at converting the sun’s rays into power for our homes. So I did some research that I’ll share with you here.
I have been considering going solar for a number of years, but frankly, the whole process was daunting, so I never took action. Recently though, I started talking to a few friends that have installed solar panels and quickly realized that DC offers a significant benefit that most cities and states don't. Not only will solar lower your monthly utility bill, but it will literally generate income each month for the energy you produce. We are talking serious money – likely several thousands a year! Now if that isn’t an incentive, I don't know what is. So I’m going SOLAR!
Buying vs Renting
In DC, purchasing is a better investment than renting due to the generous Solar Renewable Energy Certificates program. How does the SREC program work?
In a nutshell, the solar electricity your panels produce in excess of your home’s consumption can be sold back to the SREC market. Luckily, you don’t have to peddle your extra electricity on Facebook Marketplace because your utility company manages the process for you. To give you an idea of the actual numbers, one megawatt-hour (MWh) is good for one SREC. In 2021, SRECs in DC sold for $365 - $435.
My Use Case
In my case, my production will be a little over 7,000kw per year. Based on that, the DC SREC program will pay out $233/month. That will be a total of around $28,000 in just the first 10 years. Additionally, the federal incentive will pay another $9,800 (26% of the cost) towards the system.
But what if my system doesn’t produce as much as predicted? In that case, the company I went with includes a production guarantee. If output is lagging due to any reason (such as strange weather), they will pay me double for any production lost!
Other Considerations
Based on the above, going solar is definitely worth it for me. However, since every home is unique, each homeowner needs to carefully consider all of the elements. Do you have a roof that gets several hours of sunlight per day or are trees or other buildings creating shade? How much space is available on your roof, and does it face south, east, or west (north isn’t ideal)? The more panels you install, the more electricity they’ll produce. Consider the lifespan of the panels (25-30 years) and how long you’re planning on staying in your current home. Typically, studies indicate that solar increases home value. If you’re outside of the DC limits, check with your city and state for incentive programs not discussed here.
A few months after I get my panels installed, I’ll send out an update with some real-time numbers from my home!
DC Metro Market Analysis
Things have finally slowed down for the DMV area…so what does that mean? Many buyers have stopped settling for anything they can get their hands on and are no longer content with waiving contingencies or paying over asking price. It continues to be a seller’s market, but we’re finding that pre-sale prep is more important than ever for attracting the right buyer ready to pay top dollar.
Inventory is still lower than demand, which typically results in rising prices. However, last month, the 30-year fixed interest rates on mortgages reached a decade-high of an average of 5.27% and are likely to increase even further with the Federal Reserve expected to announce a three-quarters of a percentage point increase on borrowing rates later today (June 15, 2022).
If you’ve been holding off on buying in the hopes that interest rates would fall again, that may not be the best strategy as rates are unlikely to dip significantly anytime soon, and 5% is still historically low. That said, lenders are also encouraging buyers to consider other financing options such as adjustable rate mortgages. But what is an ARM and does it make sense for you? Below is some information to help potential buyers understand.
What’s an ARM?
Rising interest rates doesn't have to mean buying a home is out of ARM’s reach 😉
Most of us are familiar with fixed rate mortgages, the most common type of mortgage. However, with the rates the highest they’ve been in 10 years, it may be time to explore other options.
Adjustable Rate Mortgages (ARMs) are beginning to get more and more coverage in mainstream media as the market shifts. It’s important to understand who could benefit from ARMs and how they work. ARMs can be a great option for some borrowers, especially in today’s market, where the fixed rate portions of the ARMs can be considerably lower than current 30-year fixed rates.
An ARM is a product that offers a fixed rate for a set period of time, then adjusts after that in relation to the market. The fixed-rate portion of an ARM is typically 5, 7, or 10 years.
For example, a 7/1 ARM would have a fixed rate for the first 7 years and could then adjust for the remaining life of the loan, depending upon market conditions. Similarly, a 10/1 ARM would have a fixed rate for the first 10 years and could then adjust for the remaining life of the loan.
How do ARM rates adjust?
ARM loans have 3 caps:
Initial adjustment cap – this is how much the rate can adjust in the very first adjustment period following the fixed-rate portion of the mortgage.
Subsequent adjustment caps – this is how much the rate can adjust in every subsequent adjustment period.
Lifetime cap – this is the maximum amount the rate can adjust over the life of the loan.
To help you decode the jargon, here’s an example. In a 7/1 ARM with 5/2/5 caps:
The 7 means that the initial rate is fixed for the first 7 years.
The 1 means that the rate can only adjust once every 12 months.
The first 5 is the Initial Adjustment Cap, meaning the rate can adjust a maximum of 5% during that period.
The 2 is the Subsequent Adjustment Cap, which denotes that the rate can adjust a maximum of 2% on each subsequent adjustment, in this case every year.
The second 5 is the Lifetime Cap, indicating that the rate can only adjust a maximum of 5% over the life of the loan.
Is an ARM a good product?
The reality is an ARM can be a great product for many people, especially in today’s market when the rates are becoming lower than the 30-year fixed rates. The lower initial rate can save borrowers hundreds of dollars per month over current 30-year fixed rates, which means that even if the ARM adjusts after the fixed rate period is over, they still would have saved quite a bit upfront.
Historically, many people sell or refinance their home within 7-10 years, so they never end up having to worry about the adjustment period because they are no longer locked into that mortgage.
As we navigate a changing market, please know I am here to help you understand the mortgage landscape and provide as much information as possible. If you’d like to chat about your options, get in touch!
Homegrown Veggies & Herbs
Now onto the less mathematical, equally rewarding stuff…growing your own food!
Serious gardeners have already planted, but with above freezing temps through early November, you still have plenty of time to plant many kitchen staples. From perennial herbs like oregano, thyme, and mint to salad greens and summer favorites such as tomatoes, zucchini, and cucumbers, there are endless possibilities even for the beginner gardener with limited space!
At my house, we planted a variety of tomato plants, peppers, cucumbers, squash, zucchini, and all kinds of herbs this year. Can’t wait to make a fresh tomato salad with basil!!
Here’s a great article to get you started, but if you prefer learning in person, we also have an abundance of amazing resources throughout DC Metro. Find a hands-on class here.
Need an Agent Outside of DC Metro or Delaware?
If you’re moving out of the area and are looking for an agent, let me tap into my Compass network to find you the perfect match! Send me an email with a few details on the location, budget, and what type of property you’re looking for, and I’ll connect you.
Can I Ask for a Favor?
As I'm getting my new real estate gig off the ground, I'd be forever grateful for any referrals you send my way. If you, a family member, or a friend are looking to buy or sell a home, please reach out!
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