The Delta Effect

When home prices increase in an area, the highest percentage increases happen for the lowest priced homes. The greatest demand in any market is for the most affordable homes. For example, 711 Nobility in South West Medford sold for $223,000 in December of 2015 and then sold again five years later in December of 2020 for $320,000. This is a 45% increase in just five years which is a higher percentage increase than homes selling at higher price points. The “Delta Effect” is the effect that makes is easier for owners of lower priced homes to upgrade and afford a higher priced home, sometimes upgrading without increasing their monthly mortgage cost.

The other major factor that affects home affordability is the interest rate. Most of us thought we had seen the end to the lowest interest rates since the great depression, but then came the pandemic and interest rates plunged again! As of January, 2021, the average 30-year fixed interest rate, per is 2.88%, which is an all-time low during my lifetime.

When you add these two factors together, the “Delta Effect” and all-time low interest rates, many buyers can upgrade and get a much nicer home without increasing their monthly mortgage payment. Let’s look at the numbers for an actual client of ours. She bought her first home in March of 2019 on Sharon Way in White city – a 2 bedroom, 2 bath, 922 square foot townhouse with a small backyard and a one-car garage for $190,000. Her loan covered 100% of the purchase price, with zero down, with an interest rate of 4.625%. She wants to know what she can spend on a new home without increasing her monthly mortgage payment. So, if she sold her home, used her equity and took advantage of the lower interest rate, what can she spend on a new home?

Recap of the Sharon Way purchase:
• $190,000 Purchase price
• $186,428 Current Balance of the loan
• 4.625% USDA 100% loan – Zero down
• $220,000 Current value of the property
• $986 Monthly mortgage payment

Recap of what she can purchase now with the same mostly mortgage:
• $220,000 current value of her home
• $33,500 Down Payment, derived from her home equity
• 2.88% Interest Rate
• $996 monthly mortgage – $240,000 financed at 2.88%
• $273,500 is her budget for a new home. $240,000 financed at 2.88% and $33,500 down payment coming from her equity.

With a budget of $273,500 she can move to a nicer neighborhood, afford a larger house with a larger backyard and hopefully a 2-car garage.

The Delta effect, low interest rates, and the loss of homes in Phoenix and Talent by fires have all caused the hottest sellers’ market in years. When she is ready to sell her townhome, she will most likely have multiple offers exceeding her $220,000 expectation. The lowest priced home listed for sale in White City is currently $259,000. Conversely, when she goes to buy her new home, she will have to keep in mind that she will have lots of competition and most likely have to give the seller more than they are asking for.

How could the Delta Effect impact you? Contact Us.

12 + 7 =

8026 Upper Applegate Road Jacksonville, OR 97530

Cozy Mountain Home Nestled in the Heart of the Applegate | $469,000 | MLS# 3009287 | Step in on the ground level of this 1839 sq ft home where you will find the master suite complete with soaking tub & shower. The open floor plan lets the highly functional kitchen flow right into the great room with a centrally located wood stove to keep you warm all winter. With two rooms upstairs and a bonus room this is a perfect place for having the kids or grandkids. The all natural fir doors and trim throughout the house give it a mountain lodge look and feel. Right out the front door you will find a spacious covered porch with river rock front that matches the chimney, a wonderful place to relax year round. When last tested, well was 8 gpm. 3.5+ of usable acres ready for your barnyard friends, with 2 spacious stalls off the large shop, which also has a 450 sq ft cottage upstairs complete with half bath. A wood shed, hay barn, chicken coop, & plenty of parking this is the perfect place for true country livin’.

450 Midway Road #14 Medford, OR 97501

Attention buyers! Fantastic Price on This Clean Condo in a Great Area | MLS 3000320 | $135,000 | This 2 bedroom 1.5 bathroom townhome style condo is the perfect investment for someone wanting to get into real estate affordably! Clean kitchen with granite counters, large bedrooms, and over 1000 square feet. These units are currently undergoing excellent exterior upgrades that will include new paint very soon (some units are already completed). Comes with a numbered parking spot, covered back patio, and all appliances included! HOA covers water, sewer, garbage, exterior maintenance, insurance, and landscaping! Owner occupied only with the exception of the ability to rent to verified family members. Located within proximity to Costco, the Rogue Valley Mall, Trader Joes and more!

Las Vegas – The Adult Disneyland

We just got back from a week long real estate conference in Las Vegas. We hadn’t been there in a while and I was quickly reminded of what man has built in the Nevada desert. It’s a strange combination of fantasy hotels, 5-Star restaurants or buffets, carnival rides, gambling, world class productions and live entertainment, all with a slight undertone of sophisticated sleaze. 
After being in class all day, we would choose from dozens of choices as to where to go for dinner. The first night we ate at a French diner out on the sidewalk of a Parisian Café, under a red awning. The next night, we decided to eat by an Italian canal, made to look like Venice, in a building made to look like we were outside. Next we chose an outside patio overlooking a replica of Lake Como in northern Italy, and lastly we ate at a great French diner in the Eiffel Tower about 10 floors up.
After dinner, we would walk the streets which can be as crowded as Manhattan, but instead of business suits, everyone is in shorts drinking foot long “yardsticks” – which is a Slurpee filled with alcohol.  Every other person you pass is trying to hand you a card –usually advertising a vice of some sort. At the same time, there is a stream of helicopters flying around the strip on popular tours.  We walked by high end retail stores, carnival rides, and gambling casinos trying to entice you inside.  There is a Roller Coaster on the side of the New York – New York Hotel and a Ferris wheel that gives you some great views of Vegas at night; of course each of the 20 person cars has its own bar.  If you are adventurous, you can grab a cab and see the old downtown area where the crowded Fremont Street is now covered in millions of lights which go off every hour to rock music.
If all of that is not enough to entertain you, the live shows are everywhere. Cirque Du Soleil has seven different shows they are running in different hotels, and while we were there, Britney Spears and a dozen other famous performers were headlining. On our last night, we saw Cirque Du Soleil’s Love, which is a tribute to the Beatles. I really don’t know how to describe it, but it’s a combination of technology, dance, rock music, gymnastics, acrobatics and a circus – an amazing feast for your eyes.
If you had the day off, which we didn’t, you could indulge in the many pool parties, rent a Ferrari and race it at a track, see the aquarium, shoot machine guns in the desert, swim with a Dolphin for $500 an hour, Ski on Mt Charleston, Golf, rent a dune buggy, hike at Red Rock state park, take a helicopter to the Grand Canyon, see one of many museums or sky dive indoors.
Oh, by the way, the real estate conference was great with lots of information, statistics and trends. Most markets around the country have homes increasing in value and have low vacancy rates for rentals. Real Estate markets are always local but it’s nice to see that most of the US has recovered from the last real estate recession and many markets have gained back all of the losses and more.
We learned that 10,000 baby boomers are retiring per day, which is a rate of 3.65 million a year. The benefactors are all the local markets, like ours, that attract retirees. These markets have seen faster growth in real estate values than other markets. The other interesting trend was how many homes are being built across the country vs. how many need to be built to fulfill demand. In Oregon, they projected that we would need approximately 25,000 home starts in 2016 to keep up with demand but only 2,500 were built, which is one tenth of what is needed.
The demand for rental housing is so strong it’s making it extremely difficult to rent in certain markets, including ours. Because of this, states are changing laws, or trying to change laws, that favor tenants over landlords. Oregon recently passed a law that requires landlords to give 90-day notice of any rent increase, increasing it from a 30 days’ notice. Currently, as you read this article, our State congress is trying to pass rent control laws that would limit certain rent increases.
Lastly, there was a lot of conversation about the direction of interest rates which everyone agreed is only going one direction, and that is up. It is however, a slow climb so we should still have low interest rates for the next couple of years.
Having sat in classes for hours, I did think of how lucky our local real estate market is. We’re doing a great job of attracting retirees, our rental rates don’t make sense so most renters want to buy, and we should have historically low interest rates for a few more years to come.

107 McCully Lane, Jacksonville, OR 97503


Live it up in Jacksonville’s McCully Lane community! Enjoy access to several walking trails, streams, coffee shops, restaurants, boutiques, concerts, and more! This immaculate townhome is delightfully spacious. The rear brick patio with terraced retaining wall allows for planting flowers, plants, and herbs, yet very low maintenance. The kitchen, living room, patio, and 1/2 bath resides on the bottom floor. The second floor includes two-very large bedrooms, two bathrooms, laundry and storage. HOA fees are $106/month. Stop by and see it today!

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