Pasadena Magazine

UP, UP AND AWAY. With low interest rates soon to be a thing of the past, Pasadena homeowners are encouraged to refi nance and take advantage of the current low-rate mortgages. No More Free Lunch With the expected rise in the fed funds rate, cheap money may soon be a thing of the past. We take a look at some of the implications for Pasadena real estate. STORY BY // MATTHEW FLEISCHER ∫ YOU'VE READ ABOUT IT. YOU'VE SEEN IT ON TELEVISION. REST ASSURED, IT'S GOING TO HAPPEN. THE FEDERAL GOVERNMENT IS GOING TO RAISE INTEREST RATES. Since the fi nancial crisis of 2008, the U.S. Federal Reserve has effectively been hand- ing out money to fi nancial institutions at an interest rate near or at zero percent. Essentially, they have been giving out free money. Financial institutions, in turn, have been giving loans with record low interest rates to folks like you and me. A rise in the federal lending rate means all that cheap money may soon come to an end. So what does that mean for Pasadena? Potentially, quite a bit. Irina Netchaev, the owner of Pasadena Views Real Estate, says that even a tiny increase in interest rates can have a huge impact—particularly on fi rst-time homebuyers. "The rule of thumb is that a one percent rate increase equals a ten percent decrease in affordability," she says. "So that's quite drastic." As areas like Old Pasadena redevelop to court the needs of millennial homebuyers, who put walkability, easy access to hip restaurants, entertainment and public transit at a pre- mium—rising interest rates may price out the exact same buyers the city is trying to lure. Netchaev says if you've been considering buying a home, now is the time to strike. "Talk to a lender fi rst and get pre-approved, to see what you can truly afford," she says. "And do it now. Time is not on your side." Of course buying a home in Pasadena, or anywhere in the Southland, is already easier said than done. Bidding wars are the norm, as there are simply too many buyers and not enough sellers. "The market is very tight," Netchaev admits. The good news, if you already own a home, Netchaev says, is that tightness in the housing stock will likely insulate sellers from the ef- fects of a rate hike. She doesn't expect a huge slowdown in sales. "One in three sales we see in Pasadena are cash buys," she says. "There isn't enough supply on hand." Another boon for existing property owners, Pasadena's booming rental market won't be hurt by rate hikes. Less affordability in home ownership means more families fi ghting for af- fordable rental housing, instead of buying their own homes. With rental rates already sky-high across the Southland, an interest hike could only boost those rental prices higher. Unfortunately, that too could have the effect of pricing out young millennial families that Pasadena's current redevelopment projects are courting. Finally, if you do currently own a home or a rental property, this is your last chance to try to get yourself a better rate on your mortgage—or perhaps cheaply get out of that dangerously adjustable mortgage you may have taken on. "If you have a mortgage right now, I would defi nitely try to refi nance and take advantage of the lower rate," says Netchaev. "Rates just can't stay as low as they are now." "One in three sales we see in Pasadena are cash buys. There isn't enough supply on hand." IRINA NETCHAEV JUNE 2015 43 T R E N D S I N C O M M E R C E A N D C A S H DOLLARS & SENSE

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