November 15, 2007
Horn of plenty, cornucopia, feast, buffet… if you are a buyer sitting on the fence, the conditions are ideal; it is TIME to gobble up a home. There are many buyers out there who are thinking that the inventory is high, demand is low and there is still a lot of pressure on pricing; so, why buy now? Thus, many buyers are sitting on the proverbial fence waiting for some sort of sign that “today” is the perfect time to buy, the “bottom of the market.” Just as nobody predicted the financial credit crunch that hit the world in August, nobody will be able to isolate THE bottom of the market without quite a bit of luck. Instead let’s take a closer look at the current market condition. Yes, the fence sitting buyers are correct: the inventory is high, demand is low and there is pressure on pricing. But, many are missing the often overlooked OTHER conditions of the current market: historically low interest rates that will not remain at these low levels forever, a cornucopia of choices not seen in over a decade, the wonderful tax advantages of owning a home, and, historically, real estate as a super long term investment.
RATES: You can put good money on the fact that Bernanke and the Federal Reserve will not leave rates at artificially low levels for as long as they did throughout the 2000’s. We will have to wait and see how the history books are written, but Alan Greenspan (the prior Federal Reserve Chairman) and the Federal Reserve, under his guidance, may share quite a bit of the blame for artificially fueling the excesses in the past housing boom. Just as everybody grew accustomed to housing appreciation for years, everybody has also grown accustomed to these historically low interest rates. At the beginning of 2000, rates were at about 8%. At the beginning of 1990, rates were at 10%. Buyer’s are just looking at pricing but are overlooking the fact that an increase in rates affects affordability substantially. If you bought a home for the current detached median price, $650,000, with 20% down, at the current jumbo rate of approximately 6.5% (6% for conventional loans which are loan amounts less than $417,000), the mortgage payment would be $3,280. Even if values were to decline by 10%, bringing the $650,000 home to $585,000, if rates were to increase to 7.5%, the payment would be $3,272 per month, a savings of $8. If rates were to increase to 8%, that payment would rise to $3,434, or $154 more. If inflation was out of control and rates popped up to 10% (they were much higher than that in the late 1970’s and early 1980’s), the payment would be $4,107 per month, $827 more every single month. As you can imagine, the higher the purchase price, the higher the loan amount, the greater the affect on the payment as interest rates rise.
CHOICES: With a large inventory and low demand, buyers have a lot of choices in their search to find their home. Just a few years ago buyers were writing offer after offer on one home after another, only to settle for their third or fourth choice and pay above the asking price, competing with several other buyers every step of the way. Many agents were reluctant to work with a buyer unless they were realistic in their expectations of the market. Sellers ruled the real estate kingdom and called the shots (within reason of course). The current market is polar opposite, this time with sellers competing for the attention of a much smaller buyer pool. Today, agents are reluctant to work with sellers unless they are realistic in their expectations of the current market and are motivated to do what it takes to procure an offer. Now, buyers rule the real estate kingdom and call the shots (within reason). A buyer has the luxury of patiently isolating their home of choice, knowing that all the cards are stacked in their favor. Why wait for the market to change before making a strike? Often times, buyers that wait too long end up competing with other buyers and have to settle for a second or third choice.
TAX BREAK: I would be remiss if I did not remind everybody of the wonderful tax write offs that Uncle Sam has so generously provided to all home owners; the larger the loan, the bigger the tax break. Homeowners are able to write off their interest and tax payments, a gift from our uncle.
LONG TERM INVESTMENT: It’s quite simple, over time, real estate along the golden coast of California has and always will do well. There aren’t that many areas in the United States that match the weather, plenty of sun and low humidity, the close proximity to some of the best beaches in the world, and year round outdoor activities where one can ski one day or work on a tan reclined in a favorite beach chair the very next day. In 1972, 35 years ago, the median price was at $28,400 in Orange County. In 1977, 30 years ago, the median price was at $70,100. In 1982, 25 years ago, the median sales price was at $129,641 in Orange County. In 1997, the median price was at $229,840 in Orange County. People from around the world aspire to live in Orange County. That will not change. Throw in the fact that builders are running out of raw, buildable land, and there is considerable upward pressure on price for the long term. Buy for the long term, it’s not only “home,” it’s an excellent investment.
Currently, as more and more homeowners who really don’t have to sell are pulling their homes off of the market, the active inventory continues its descent, falling by 221 homes to 17,233 homes. Over the past four weeks, the active inventory has dropped 526 homes. Demand, the number of homes placed into escrow within the prior month, has increased by 182 homes to 1,295 new escrows since bottoming out at its lowest level of the year on October 4th. It looks as if the Orange County real estate market is starting to shake off the affects of the financial crunch. With another increase in demand and another drop in the inventory, market time continues its decrease from the 2007 height, 15.96 months, reached on October 4th, to 13.31 months today. Last year at this time there were an additional 692 escrows within the prior month, the active inventory was at 14,165, or 3,068 fewer homes, and market time was at 7.13 months. Two years ago, there were 8,850 fewer homes on the market, 1,352 more escrows within the prior month, and the market time was at 3.17 months.
Currently, short sales and foreclosures in Orange County account for 19% of the active inventory and 21% of all escrows opened within the prior month. Of all the short sales and foreclosures currently on the market, 62% are below $500,000, up from 59% two weeks ago and 57% four weeks ago. 93% of all short sales and foreclosures currently on the market are below $750,000, unchanged over the past two weeks and up slightly from 92% posted four weeks ago. 32.9% of the all homes under $500,000 are either a short sale or a foreclosure. For the 1,662 detached homes in Orange County priced below $500,000, 48.3% are either a short sale or a foreclosure, a staggering statistic.
There is almost no difference between the detached home market, a market time of 13.37 months, and the condominium market, a 13.20 month market. Until the financial crunch is completely in the rear view mirror, these numbers should remain close.
What can we expect for the remainder of the year and the beginning of 2008? We can probably expect demand to continue to rise slightly, after of course taking a brief hiatus for Thanksgiving, as there is nowhere but up from the lows stemming from the financial crunch. September and October promise to be lows for closed sales for 2007. The active inventory will continue its march downward as more and more sellers pull their homes off of the market. Yes, there are homeowners who don’t really have to sell and who no longer have the stomach to do what it will take to successfully sell in this market. We should start the New Year with a current inventory of about 15,000 homes, almost 4,000 more homes than the beginning of this year. Market Time will continue to drop through the end of the year. We will most likely start the New Year with an expected market time of 12.5 months. Towards the end of January, demand will rise and market time should drop to about 10 months. But, as many homeowners with flawed expectations of a good Spring place their homes on the market, the inventory will once again rise. If too many overzealous homeowners opt to enter the market, the inventory will easily reach the 20,000 home mark. Demand in the Spring could be off by about 10% compared to this year.
What if you are a seller, how should you respond to the market? WARNING: do NOT place your home on the market unless you absolutely, unequivocally MUST sell NOW. The only exception to this rule is the high end, homes above the $2 million mark. Contrary to what many think, if all of a sudden every seller on the market priced their home below the last comparable sale or escrow, the fence-sitting buyers would not jump off of their perches in droves and there would be very little affect on demand. So, be careful in navigating the tough waters of the current real estate market. Now more than ever, sellers really need an experienced, tuned-in real estate agent to guide them. “For Sale By Owner” and discount brokerages are a thing of the past. With so many short sales in the marketplace, it is tough to determine price. Many buyers are learning quickly, if a price is too good to be true and “subject to lender approval” (a short sale) it is too good to be true. After waiting a very long time for an answer, sometimes weeks, buyers are realizing that the artificially low prices may be priced to entice a buyer, but they are too low for a lender to accept. The price affixed to a short sale is NOT a value provided by the lender; rather, it is a value determined by the agent and seller. A few short sales are priced appropriately and are already approved by the bank. However, this requires everybody, the seller and their agent, to do all of their homework up front. Just as in school, very few like to do their homework early; but, that is what it takes to successfully represent a short sale. So, as a seller, most short sales that surround their home are artificially priced. An experienced agent can help ascertain the real values from the artificial. The bottom line, be careful in pricing. It is still imperative to price a home at or slightly below the last comparable sale or escrow, but a drastic drop is not necessary. Stay in close contact with all changes in the marketplace. Sellers should address all cosmetic repairs inside and out. With so many choices, the better the condition, the better the odds of success. If a roof is leaking, fix it or replace it. Chances are there are plenty of homes with a roof that does not leak. The home should be in showing condition ALWAYS. If a seller needs a break from selling their home for months on end, then they can place their home on “hold do not show” for a week or two of rest. A seller never knows the precise date when the buyer that is going to fall in love with their home walks in. A seller wants the impression to be the absolute best impression; so, the home must be staged day in and day out.
Steven Thomas
President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Sunday, November 18, 2007
Thursday, November 15, 2007
Welcome home to San Rafael in Talega
118 Via Monte Picayo, San ClementeFall in love with this gracious home as you step through the gates and turret entry. Upstairs includes 3 bedrooms, built-in computer niche and laundry room. Downstairs offers an additional (or 4th) bedroom and full bath. Complete with a three car tandem garage. Spacious kitchen opens to an eating area and family room. Richard Marshall Olde Boards wood flooring, marble and newer carpet throughout. Master suite with recently remodeled bath. Built-in computer niche, speaker system, wood shutters, crown molding, high baseboards and window and door casings. Located on a cul de sac in the heart of Talega. Stroll to the Village, schools and golf club. Low mello roos and association dues.
For a private showing call Brian @ 949-370-2652.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Monday, November 5, 2007
Market Time Report: The Holiday Market is Here, Time to Buy
November 1, 2007
Good Afternoon!
Now that the kids are coming off of their sugar rushes and Halloween 2007 is in the past, it is time for us to move into the Holiday Market, cyclically the slowest time of the year… but, not this year. We already experienced the slowest demand of the year due to the financial market crunch, September and October. November is already showing signs of improvement and December promises to be even better. Bernanke and the Federal Reserve lowered the short term rate by another quarter percent, but are beginning to warn that their cuts may be coming to an end. Yet, the financial crisis is not over, so we can expect at least one more cut. Rates have been dropping and so have jumbo loans (loans above $417,000). The discrepancy between conforming loans (loans at $417,000 or less) and jumbo loans is beginning to finally narrow. It really is a great time to be a buyer with tons of choices, low interest rates, plenty of motivated sellers and not a lot of competitions among buyers. It looks as if Congress has not properly heeded Bernanke’s feedback at Congressional hearings back in September where he stated that the conforming loan limit should be temporarily increased to increase liquidity in the financial market and NOT wait until March when the market will right itself. Sometime in 2008, we can expect the government to step in and correct the giant discrepancy between the current conforming loan limit, $417,000 and the median price for a detached home in the state of California, $531,000.
The bottom of the financial crunch, in terms of demand (escrow activity), was about a month ago. Demand, the number of homes placed into escrow within the prior month, increased from 1,113 homes four weeks ago to 1,241 homes today, that’s an increase of 128 homes, or a 12% increase. With the start to the Holiday market, it looks as if many homeowners are opting to pull their homes off of the market. The active inventory dropped by 305 homes in two weeks to 17,454 homes. With an increase in demand and a drop in the inventory, market time decreased from 15.11 months two weeks ago to 14.06 months today. Last year at this time there were an additional 746 escrows within the prior month, the active inventory was at 14,729, or 2,725 fewer homes, and market time was at 7.41 months. Two years ago, there were 9,195 fewer homes on the market, 1,509 more escrows within the prior month, and the market time was at 3.00 months.
I have created a new chart, the Orange County Foreclosure Report, to help isolate the cities and price ranges that are more or less affected by short sales and foreclosures. Currently, short sales and foreclosures in Orange County account for 17.5% of the active inventory and 18% of all escrows opened within the prior month. Of all the short sales and foreclosures currently on the market, 59% are below $500,000, up from 57% two weeks ago, and 93% are below $750,000, up from 92% two weeks ago. 35% of the active inventory is comprised of homes below $500,000. That range has been impacted the most by the subprime shakeup; 30.1% are either bank owned or short sales. For homes between $500,000 and $750,000, another 35% of the active inventory, 17.1%, are either bank owned or short sales. They account for only 6.7% of the range of homes between $750,000 and $1 million. The higher the range, the lower the percentage.
The financial crunch had a tremendous impact on the market and an even more profound impact on detached homes. Even though the market is still feeling the effects of the financial crunch, it actually bottomed out about four weeks ago. The market time for detached homes dropped from 16.56 four weeks ago to 13.97 months today. Ever since the subprime meltdown in March, the detached home market has been better than the condominium market. But, that all changed in September as the financial crunch took a real bite out of the demand for detached homes. As rates for jumbo loans have dropped in recent weeks, demand is beginning to rise again. The detached market is once again better than the condominium market, slightly, but better. The market time for condominiums dropped from 15.08 months four weeks ago to 14.18 months today.
What can we expect for the remainder of the year and the beginning of 2008? Demand has continued its slow, but methodical rise over the past month as jumbo loan rates have dropped and confidence in our financial markets slowly returns. We can look for demand to continue to slowly ascend. Thus, the slowest time of the year is actually already in our rear view mirror, September and October. We can also expect the active inventory to drop as more homes are pulled off the market for the holidays. With demand on the rise and an inventory on the decline, the market time will actually continue to improve through the remainder of the year. With rates dropping, it will become more enticing for buyers to finally make the plunge. With the recent downturn in demand because of the financial crunch, there simply were not enough homes coming off of the market due to successfully placing a home into escrow. Thus, there has been a delay in the reduction of the active inventory. It appears as if we are going to start the New Year off at a very high level, around the 15,000 home level. That’s a lot of homes to start off the year. We started 2007 with a little over 11,000 homes and built up to nearly the 18,000 home mark. Starting the year at 15,000 makes the 20,000 inventory mark almost certain. Spring of this year was extremely slow due to the subprime shakeup. The Spring in 2008 will be even slower, about a 10% decrease in demand as some buyers sit on the fence a little longer and wait.
How should a seller approach the market? There are a lot of people who now have to sell because of economic circumstances where they simply can no longer afford their home because of recent adjustable mortgage rate resets. These sellers, short sale sellers and the banks that are foreclosing on homes really MUST sell. For sellers within areas or ranges with a higher percentage of troubled properties who are contemplating selling, they need to ask themselves if they have the stomach and ability to compete. There is a tremendous amount of competition in almost every city and every price range; thus, do NOT place your home on the market unless you absolutely HAVE to. Live in your home and do not panic, the market will return and surpass the recent highs. To be successful in this market, isolate the most recent comparable sale or escrow and price your home $10,000 below that mark. That still does not guarantee an immediate sale, but it is an attractive lure that will help your property stand out. Condition is also very important. First, address all cosmetic fixes from carpet to paint to repairing a leaking roof. Then, have the property in showing condition day in and day out. That is asking a lot given that homes are on the market for months, but you never know when the buyer that is going to buy your home is going to schedule an appointment and you want your home to be in its best showing condition prior to an offer being written. In a buyers market, keep in mind that the floorplan and location are also important factors in securing a sale. Odd floorplans, backing to power lines or a busy street are just a few examples that do well during a sellers market, but their value is heavily impacted during a slower market when there are so many alternatives. For perspective, there are 17,454 homes on the market and 1,241 new escrows within the prior month. Given current demand, 16,213 homeowners will NOT be successful over the course of the next month. The bottom line: if you are a seller, pack your patience, it will most likely take months to sell your home. Price your home to sell today and do not wait to drop the price or for a better market. This will result in chasing the market down in price.
How should a buyer approach the market? If you plan on owning your home for more than just a few years, rest assured that Southern California is not just a popular worldwide destination, it’s an excellent long term investment. It is important to note that you cannot believe everything you hear or read in the media:
"The prices of houses seem to have reached a plateau, and there is reasonable expectancy that prices will decline." - Time Magazine 1947
"Houses cost too much for the mass market. Today's average price is out of reach for two-thirds of all buyers." - Science Digest 1948 (average price at the time: $8,000)
"The goal of owning a home seems to be getting beyond the reach of more and more Americans." - Business Week 1969 (average price at the time: $28,000)
"Most economists agree... a home will become little more than a roof and a tax deduction, certainly not the lucrative investment it was..." - Money Magazine 1981
"We're starting to go back to the time when you bought a home not for its potential money-making abilities, but rather as a nesting spot." - Los Angeles Times 1993
"Financial planners agree that houses will continue to be a poor investment." - Kiplinger's Personal Finance Magazine 1993
"A home is where the bad investment is." - San Francisco Examiner 1996
Rates are great. Sellers are motivated. There are a lot of choices. It is great to be a buyer. So, look for the home that best fits your family’s needs and write an offer. Keep in mind that the sales to list price ratio is 95%, erasing the necessity to bring in a lowball offer. If you are a buyer, you may be concerned about falling prices, which is understandable. But, if you are going to live in the home for several years, the market will surpass its record levels again. Also, rates are not going to always be this low. As soon as the market is on the mend, Bernanke and the Federal Reserve are going to increase the rates to ease their fears of inflation and monthly mortgage payments for new loans will rise. If you bought a home for the current detached median price, $655,000, with 20% down, at the current jumbo rate of approximately 6.5%, the mortgage payment would be $3,312. Even if values were to decline by 10%, bringing the $655,000 home to $590,000, if rates were to increase to 7.5%, they payment would be $3,298 per month, a savings of $14. If rates were to increase to 8%, that payment would rise to $3,460, or $148 more. Plus, if you bought today, the first year interest tax write off for taxes would be $34,000. So, buy now and have a place to call home knowing that you made a wise decision.
Written by Steven Thomas President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
Good Afternoon!
Now that the kids are coming off of their sugar rushes and Halloween 2007 is in the past, it is time for us to move into the Holiday Market, cyclically the slowest time of the year… but, not this year. We already experienced the slowest demand of the year due to the financial market crunch, September and October. November is already showing signs of improvement and December promises to be even better. Bernanke and the Federal Reserve lowered the short term rate by another quarter percent, but are beginning to warn that their cuts may be coming to an end. Yet, the financial crisis is not over, so we can expect at least one more cut. Rates have been dropping and so have jumbo loans (loans above $417,000). The discrepancy between conforming loans (loans at $417,000 or less) and jumbo loans is beginning to finally narrow. It really is a great time to be a buyer with tons of choices, low interest rates, plenty of motivated sellers and not a lot of competitions among buyers. It looks as if Congress has not properly heeded Bernanke’s feedback at Congressional hearings back in September where he stated that the conforming loan limit should be temporarily increased to increase liquidity in the financial market and NOT wait until March when the market will right itself. Sometime in 2008, we can expect the government to step in and correct the giant discrepancy between the current conforming loan limit, $417,000 and the median price for a detached home in the state of California, $531,000.
The bottom of the financial crunch, in terms of demand (escrow activity), was about a month ago. Demand, the number of homes placed into escrow within the prior month, increased from 1,113 homes four weeks ago to 1,241 homes today, that’s an increase of 128 homes, or a 12% increase. With the start to the Holiday market, it looks as if many homeowners are opting to pull their homes off of the market. The active inventory dropped by 305 homes in two weeks to 17,454 homes. With an increase in demand and a drop in the inventory, market time decreased from 15.11 months two weeks ago to 14.06 months today. Last year at this time there were an additional 746 escrows within the prior month, the active inventory was at 14,729, or 2,725 fewer homes, and market time was at 7.41 months. Two years ago, there were 9,195 fewer homes on the market, 1,509 more escrows within the prior month, and the market time was at 3.00 months.
I have created a new chart, the Orange County Foreclosure Report, to help isolate the cities and price ranges that are more or less affected by short sales and foreclosures. Currently, short sales and foreclosures in Orange County account for 17.5% of the active inventory and 18% of all escrows opened within the prior month. Of all the short sales and foreclosures currently on the market, 59% are below $500,000, up from 57% two weeks ago, and 93% are below $750,000, up from 92% two weeks ago. 35% of the active inventory is comprised of homes below $500,000. That range has been impacted the most by the subprime shakeup; 30.1% are either bank owned or short sales. For homes between $500,000 and $750,000, another 35% of the active inventory, 17.1%, are either bank owned or short sales. They account for only 6.7% of the range of homes between $750,000 and $1 million. The higher the range, the lower the percentage.
The financial crunch had a tremendous impact on the market and an even more profound impact on detached homes. Even though the market is still feeling the effects of the financial crunch, it actually bottomed out about four weeks ago. The market time for detached homes dropped from 16.56 four weeks ago to 13.97 months today. Ever since the subprime meltdown in March, the detached home market has been better than the condominium market. But, that all changed in September as the financial crunch took a real bite out of the demand for detached homes. As rates for jumbo loans have dropped in recent weeks, demand is beginning to rise again. The detached market is once again better than the condominium market, slightly, but better. The market time for condominiums dropped from 15.08 months four weeks ago to 14.18 months today.
What can we expect for the remainder of the year and the beginning of 2008? Demand has continued its slow, but methodical rise over the past month as jumbo loan rates have dropped and confidence in our financial markets slowly returns. We can look for demand to continue to slowly ascend. Thus, the slowest time of the year is actually already in our rear view mirror, September and October. We can also expect the active inventory to drop as more homes are pulled off the market for the holidays. With demand on the rise and an inventory on the decline, the market time will actually continue to improve through the remainder of the year. With rates dropping, it will become more enticing for buyers to finally make the plunge. With the recent downturn in demand because of the financial crunch, there simply were not enough homes coming off of the market due to successfully placing a home into escrow. Thus, there has been a delay in the reduction of the active inventory. It appears as if we are going to start the New Year off at a very high level, around the 15,000 home level. That’s a lot of homes to start off the year. We started 2007 with a little over 11,000 homes and built up to nearly the 18,000 home mark. Starting the year at 15,000 makes the 20,000 inventory mark almost certain. Spring of this year was extremely slow due to the subprime shakeup. The Spring in 2008 will be even slower, about a 10% decrease in demand as some buyers sit on the fence a little longer and wait.
How should a seller approach the market? There are a lot of people who now have to sell because of economic circumstances where they simply can no longer afford their home because of recent adjustable mortgage rate resets. These sellers, short sale sellers and the banks that are foreclosing on homes really MUST sell. For sellers within areas or ranges with a higher percentage of troubled properties who are contemplating selling, they need to ask themselves if they have the stomach and ability to compete. There is a tremendous amount of competition in almost every city and every price range; thus, do NOT place your home on the market unless you absolutely HAVE to. Live in your home and do not panic, the market will return and surpass the recent highs. To be successful in this market, isolate the most recent comparable sale or escrow and price your home $10,000 below that mark. That still does not guarantee an immediate sale, but it is an attractive lure that will help your property stand out. Condition is also very important. First, address all cosmetic fixes from carpet to paint to repairing a leaking roof. Then, have the property in showing condition day in and day out. That is asking a lot given that homes are on the market for months, but you never know when the buyer that is going to buy your home is going to schedule an appointment and you want your home to be in its best showing condition prior to an offer being written. In a buyers market, keep in mind that the floorplan and location are also important factors in securing a sale. Odd floorplans, backing to power lines or a busy street are just a few examples that do well during a sellers market, but their value is heavily impacted during a slower market when there are so many alternatives. For perspective, there are 17,454 homes on the market and 1,241 new escrows within the prior month. Given current demand, 16,213 homeowners will NOT be successful over the course of the next month. The bottom line: if you are a seller, pack your patience, it will most likely take months to sell your home. Price your home to sell today and do not wait to drop the price or for a better market. This will result in chasing the market down in price.
How should a buyer approach the market? If you plan on owning your home for more than just a few years, rest assured that Southern California is not just a popular worldwide destination, it’s an excellent long term investment. It is important to note that you cannot believe everything you hear or read in the media:
"The prices of houses seem to have reached a plateau, and there is reasonable expectancy that prices will decline." - Time Magazine 1947
"Houses cost too much for the mass market. Today's average price is out of reach for two-thirds of all buyers." - Science Digest 1948 (average price at the time: $8,000)
"The goal of owning a home seems to be getting beyond the reach of more and more Americans." - Business Week 1969 (average price at the time: $28,000)
"Most economists agree... a home will become little more than a roof and a tax deduction, certainly not the lucrative investment it was..." - Money Magazine 1981
"We're starting to go back to the time when you bought a home not for its potential money-making abilities, but rather as a nesting spot." - Los Angeles Times 1993
"Financial planners agree that houses will continue to be a poor investment." - Kiplinger's Personal Finance Magazine 1993
"A home is where the bad investment is." - San Francisco Examiner 1996
Rates are great. Sellers are motivated. There are a lot of choices. It is great to be a buyer. So, look for the home that best fits your family’s needs and write an offer. Keep in mind that the sales to list price ratio is 95%, erasing the necessity to bring in a lowball offer. If you are a buyer, you may be concerned about falling prices, which is understandable. But, if you are going to live in the home for several years, the market will surpass its record levels again. Also, rates are not going to always be this low. As soon as the market is on the mend, Bernanke and the Federal Reserve are going to increase the rates to ease their fears of inflation and monthly mortgage payments for new loans will rise. If you bought a home for the current detached median price, $655,000, with 20% down, at the current jumbo rate of approximately 6.5%, the mortgage payment would be $3,312. Even if values were to decline by 10%, bringing the $655,000 home to $590,000, if rates were to increase to 7.5%, they payment would be $3,298 per month, a savings of $14. If rates were to increase to 8%, that payment would rise to $3,460, or $148 more. Plus, if you bought today, the first year interest tax write off for taxes would be $34,000. So, buy now and have a place to call home knowing that you made a wise decision.
Written by Steven Thomas President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/.
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