Phew! M-O-B Doesn't Have to Move…

Looks like Max’s Oyster Bar was able to escape a huge rent increase and will be sticking around West Hartford Center after all. Facing a 50% increase in their rental expense after missing a rental agreement deadline, M-O-B averted eviction when a court ruling went in their favor last Friday. So, grab a bowl of New England Clam chowder and some mussels on the half shell and celebrate…

As an aside, this story highlights the importance of reading the details in all contracts you sign and making note of dates that require you to take an action. The consequences could otherwise be very costly.

All Things Martha…

Ah, Martha. I’ll admit it, I subscibe to Martha Stewart’s Living magazine. When my latest issue came today, I salivated over the hydrangeas on the cover, silently cursing my own for not producing one single “snowball” this year. But my brown thumb is a blog post for another day…

As a Realtor, I’m often consulting Martha-media for ideas. How do we stage a room more appropriately? What cosmetic changes can be done cheaply, but help the homeowner add more value for their house sale? How can we remove that stubborn spot on the carpet from one of Junior’s juice incidents? As we all know, Martha is the domestic goddess. Got a problem? Most likely it can be solved with a hot glue gun, some colorful fabric, and a pair of scissors.

But it seems that Martha has taken her domesticity to another level altogether. She (or someone working for her under her brand) is now designing homes. I guess this shouldn’t really be a surprise, seeing that she is the queen of all things “home.” And even less surprising is the fact that her home designs are still selling briskly, even as new home sales across the country are plunging. Here’s an article from the Wall Street Journal describing the phenomenon…

What’s next? That pesky Rachel Ray peddling coffee? Oh wait…

What's the Deal with Rising Mortgage Rates?

Mortgage rates continue to be in the news and are weighing on the minds of some homebuyers. Earlier in the month we looked at the dollar impact of higher rates (http://www.amybergquist.com/blog/2007/06/14/rising-mortgage-interest-rates/). The final result was that the changes we’ve seen over the course of this year (6.25% to 6.75% on a 30 year fixed) have resulted in monthly payments increasing by about $33 for every $100,000 borrowed.

Since that post, rates have stabilized and even come down a little, though there remains a good deal of uncertainty about which way they move next. Rather than speculate on the direction of future rate changes, let’s talk about how mortgage rates are set and why they are changing.

Mortgage rates are set by global financial markets – millions of investors around the world – and the US government. Investors are constantly evaluating the world economy to determine if buying your mortgage is a good investment in terms of risk and return. Since you lock in your mortgage at the time of purchase (or refinance), the rate you pay is what investors feel is the appropriate return for the risk of lending to you. Investors do the day-to-day pricing, but the US government has a big say in the direction and level of rates as they make periodic adjustments to keep the US economy growing at a consistent pace.

Interest rates go up when investors feel that risks are increasing. This year, there have been two main risks that have investors worried; inflation and mortgage lending practices. Inflation is when stuff gets more expensive (for example gasoline). Some inflation is healthy, but if it gets too high the US government starts to raise the Federal Funds rate, which in turn causes all other rates to rise too. The US economy showed signs of inflation during the first half of the year, so investors are concerned that the government might raise rates after holding them steady for over a year.

Mortgage lending practices are the other source of risk, specifically to subprime borrowers (those with poor credit). A sharp rise in the number of homeowners who are late on their mortgage payments has investors worried that they underestimated the risk of the mortgages over the past few years. This has called into question the trustworthiness of the mortgage brokers who wrote the mortgages and led to concerns that all borrowers are more risky than they originally appeared.

Interest rates have stabilized at current levels because there is a large group of investors who think that US government is more likely to lower interest rates than raise them. These investors believe that the US economy is slowing down and headed towards a recession. The government would try to preempt a recession by lowering interest rates in hopes of generating more economic activity.

So that’s the current situation; some believe that rates should be higher, others that rates should be lower. Trying to guess what will happen next doesn’t seem like a very productive activity since even the professional investors disagree. Homebuyers shouldn’t let mortgage rates stop them from participating in the current real estate market because the dollar impact is modest. Although the cost of borrowing money is no longer historically cheap, it is still very reasonable and fluctuating in a narrow range. We should just be glad that it’s not the 1980s, when mortgage rates were at or above 10% for the entire decade, peaking at over 18% in 1981.

See the historical trends for yourself at http://mortgage-x.com/trends.htm. The historical graphs are near the bottom of the page.

How Do I Calculate My West Hartford Property Taxes?

Now that the West Hartford budget has been amended and the mill rate has been set at 38.63, many are wondering how they will calculate their property taxes. One thing to keep in mind is that they will be based on a 5 year phase in if your assessment from 2005 to 2006 increased by more than 25%. Let’s do a quick example and hopefully this will help…

Let’s say your 2005 property assessment was $100,000 and your 2006 property assessment was $200,000, so a 100% increase. Your taxes for this year will be based on 1.25 times your 2005 assessment. So,

$100,000 x 1.25 = $125,000

then multiply this by the mill rate to get your taxes

$125,000 x .03863 = $4,828.75 = your tax bill for this year

But what happens in the next 4 years? Well, the difference between your 2006 assessment and the 1.25 amount you’re using this year will be dispersed over the next 4 years. So,

$200,000 – $125,000 = $75,000 / 4 = $18,750

In this example, your taxes for 2007 will be based on the assessment amount of

$125,000 + $18,750 = $143,750

Your taxes for 2008 will be based on the assessment amount of

$143,750 + $18,750 = $162,500

Your taxes for 2009 will be based on the assessment amount of

$162,500 + $18,750 = $181,250 and finally

Your taxes for 2010 will be based on the assessment amount of

$181,250 + $18,750 = $200,000

Presumably the mill rate will go DOWN over the next 4 years, so that as your assessment value rises, your taxes don’t go through the roof. Because no one wants to see a mass exodus out of West Hartford.

If you have questions on any of this, please call or email me, I’d be happy to help explain it more thoroughly, (860) 655-2125 or bergquista@raveisre.com.

Simsbury River Oaks

In West Hartford, the prospect of the Blue Back Square development drew a lot of attention from town residents concerned about a variety of issues; traffic, Big Box expansion, the death of other retail centers in town, etc. In the end, the lure of more tax revenue, additional upscale housing, and a revitalization of a blighted area of town won out. As we all know, Blue Back is well under way and over the next few years we will see the results, both positive and negative.

Now it seems that Simsbury is going to have a similar story with the proposed Simsbury River Oaks development, an upscale, mixed-use neighborhood that Konover Development Corporation would like to build on Route 10 near the Avon town line. This development was recently brought to my attention by a flurry of articles in the Hartford Courant and signs that I’ve seen in Simsbury resident’s yards as I’ve been showing buyers around town.

You can learn all about the proposed 60-acre project by visiting Konover’s River Oaks website. I would recommend looking at the PDF files on “The Project” page. They contain some interesting detailed site plans.

At this point, Konover has only submitted their development application to the town of Simsbury. It will obviously take several months to get through the various stages of approval (if it is ultimately approved), but it will be an interesting process to watch. I’ll give updates every now and then. The main questions I have at this point are…

– Will Route 10 be able to handle the additional traffic generated by River Oaks?
– Will this new development cannibalize business in the surrounding retail areas in Avon and Canton?
– Does this additional development in suburbia continue to hurt Hartford’s efforts with revitalization?