I. Readers Told Me How Wrong I Was On Monday
At my first job at an investment bank, I worked for two former state-level bureaucrats who were extraordinarily talented at every level and far more talented than I ever was or will be.
They both unsurprisingly used their talents to build extraordinarily successful careers.
I share that because of the emails I got in response to Monday’s blog – in which I explained how governments can never perform adequately because they do not respond to market pressures (or Yelp reviews).
The responses were effectively reminding me to be a bit more gracious and less critical when it comes to all things government.
Several readers reminded me that there are many extremely talented government employees – who do in fact respond to feedback and do phenomenal work.
Those readers were former government employees who are likely far more talented than I ever was or will be.
Other readers reminded me that, despite my criticisms, we do in fact need government for many things, including healthy regulations – to ensure, among other things, that we do not end up eating E. coli and Roundup for dinner every night.
In any case, I don’t disagree with either point (although I do love the taste of Roundup in my broccoli) – which is why I added this section today.
II. Can Someone Buy Half A Duplex?
In CA, no. In TX, yes. But let me explain.
A buyer cannot buy half of a duplex – if it is defined as a two-unit property on one lot.
A buyer can, however, buy a “duet” or a “half-plex” – or a single attached unit on its own lot, despite being attached to another unit with the lot line running under the attached wall.
In CA, they are typically called “duets,” while in TX, they are typically called “half-plexes.”
Other names for these units include twin-home, twin-house, townhome, or semi-detached house.
More importantly: “Duet” or “half-plex” status does not create any financing limitations; Duets and half-plexes are treated like a single-family residence, with the same rates and loan options.
III. Hybrid (Seller AND Lender Paid) Buydowns To Save The Day!
The average mortgage rate is just under 7.0% today – almost a full 1% higher than the pre-Iran war average. And, once again, if the “spread” between Treasuries and mortgages were back to 2023 levels, rates would be over 8.0%!
So – we remain lucky.
But, despite our “luck,” borrowers are very concerned about both rates and payments. To address this concern, lenders are aggressively pushing “temporary buydowns.”
With a 3-2-1 buydown, a buyer can get a 3.875% rate in year one, 4.875% in year two, 5.875% in year three, and 6.875% thereafter (years 4-30).
Woohoo, 3.875%! Right? Not really…
3.875% is GREAT for marketing listings.
But the problem is the cost! Over $20,000 for a $500,000 loan!
Buyers can’t foot the cost, and sellers don’t want to.
Lenders can pay the cost, but that comes with higher rates – to generate enough rebate or yield premium to cover the cost.
SOLUTION: SPLIT THE COST BETWEEN THE SELLER AND THE LENDER!
This is much more palatable for sellers, and it eliminates much of the required rate increase that comes with 100% lender-paid buydowns.
