Evergreen Home Loans helps navigate challenging Eastside housing market

Anticipating economic growth, the Federal Reserve last month increased its benchmark interest rate a quarter point, and could do so again later this year.

What that means for homebuyers on the Eastside is similar to what has been said since the economy covered from 2009’s “Great Recession”: Buy now.

Don Zender, vice president of Evergreen Home Loans and branch manager of the Bellevue location, said that — barring a significant economic downturn — this was the best time to be looking for new homes in the crowded Puget Sound area.

“We have lots of employment coming in and inventory is very short,” he said. “We don’t have as many people moving out, so supply and demand is raising home prices.”

Zender said that for every quarter of a percentage point interest rates change, consumer buying power for a $500,000 home also shifts by around $25,000. With the median home price in Bellevue at $897,450 according to real-estate website Zillow.com, this impacts the Eastside to an even greater extent.

In mid-March, the Fed raised its benchmark rate to a range between .75 percent and 1 percent. It was raised by 1 percent on the borrowing rate, increasing it to the 4 percent range.

Zender said as the economy lifts at a moderate rate, the rates are adjusted to avoid inflation and to keep growth within manageable levels. The Fed has raised rates twice in the last three months.

“If we are looking at long-term, it doesn’t always mean that the long-term rates will go up,” he said. “In December 2015, the Fed raised rates and in 2016 the long-term rates actually went lower.”

But what it does mean for borrowers like those looking to purchase a home, the lending rates are going up, changing mortgage futures.

Unlike the mortgage-security crisis which nearly destroyed the world economy in the late “aughts,” banks now are much more particular about whom they will lend money to. For home buying, income-based standards must be met.

Zender said that for first-time homebuyers or those with less equity, adjustable-rate mortgages could be a more affordable option in the short term. A buyer could lock into a seven-year adjustable rate mortgage and pay at lower rates for those seven years before the rates spike. They are a more affordable solution for buyers who want a home but might want to find somewhere to live in a decade.

Fixed mortgages will be more expensive initially, typically, but will remain at a fixed rates, perfect for settling down with families or for the long-term, Zender said.

“If I was a homebuyer, I would be looking sooner rather than later,” he said.

Homebuying remains important to Millennials (those born from 1981-1997) according to a 2014 survey from Fannie Mae but with stagnant wages, first-time home buyers make up just 32 percent of the market, down from a historical 40 percent.

President Donald Trump’s administration made moves in January to make it more expensive for many first-time homebuyers as well, increasing rates on Federal Housing Administration loans.

Zender said that zoning laws in Seattle, Bellevue and surrounding areas make it difficult for development, as well as the Urban Growth Boundary limitations on development meant to preserve green space.

Those two facets keep the character of the region but also artificially limit housing inventory, thus driving up prices region-wide. But Zender said that home ownership is a more financially prudent decision than renting, particularly for the long term.

“Seventy percent of Americans have their wealth in their home,” he said. “And there really are a lot of opportunities for home ownership. Every home built creates 20 other jobs.”

He encouraged interested buyers to focus on what they can afford and not to overreach.

“The long-term lending rates depend on how the economy goes,” Zender said. “Get qualified for a loan by a good, qualified local lender before you shop.”

Evergreen Home Loans is a west coast lender and mortgage banker based in Bellevue and licensed to lend in most western states. It has 56 offices in six different states.

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