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Winter 2011 Market Update...from Don Valantine, Your Real Estate Professional
HOMEOWNERSHIP NOW MORE AFFORDABLE THAN RENTING...
It is now more affordable to buy than to rent a two-bedroom home in 72 percent of America’s 50 largest cities, according to Trulia.com’s latest Rent vs. Buy Index. One sign that it's time to buy is when you can buy for about the same or less than renting.
For example, to rent a 2+2 condo in Santa Clarita or San Fernando Valleys you would be spending $1400-1800 a month, minimum. To buy a similar condo in the same area your mortgage payment would be $790-$925 a month*, plus property taxes, insurance and HOA dues. And you don't need alot of cash for a down-payment.....borrowers can get an approved FHA loan with only 3.5% down at the lowest fixed interest rates since the end of WWII, which are now in the 4's! That's a fixed rate!
This is not limited to condos because FHA will loan up to 629K! Don't be among the people who sit on the sidelines and do nothing....interest rates will not stay this low forever. So, contact me asap if you or someone you know might want to take advantage of these lower prices and extremely low interest rates.
(*Based on a purchase price of $150,000-$175,000 and a 4.5% interest rate, fixed for 30 years.)
INTEREST RATES LOWEST SINCE WWII...
Interest rates are now in the 4's for 30 year fixed loans! (Didn't I already say that??) They haven't been this low since 1947! These rates have been set artificially low by the Federal Reserve to jump start the market, but this will not last forever. Take advantage of the low rates to either purchase or refinance while you can. We never know how long these historic low rates will be with us. Rates can change literally overnight.
HOMEOWNERS BEWARE OF SCAMMERS!!...
If you are in trouble and are considering short-selling or foreclosure, be very careful...there are scammers out there trying to take advantage of you for their own personal gain. Many charge upfront fees or ask you to sign over the property to them in exchange for 'helping' you...don't do it! There is free help available through real estate professionals, so call me. If you're considering a loan modification, know that HUD, the Dept. of Housing and Urban Development offers FREE info on that. For info go to www.makinghomeaffordable.gov.
SHORT SALE VS. FORECLOSURE...
Many folks are hurting financially with possible threat of job losses and are thus considering walking away from their property, which means a foreclosure on their credit report. I don't recommend this as a first choice because there are ways to avoid it. You should always try to at least short-sell the property first. Reason: a successful short-sale will lower your credit score 50-100 points while a foreclosure will lower it 200-300 points, which is very damaging to you for years. Check with me first, I can likely help you. I do not charge for consultations.
PRICES AND INTEREST RATES ARE WAY DOWN...
Prices have fallen 30-50%, depending on the area. This might be the time for you to take advantage of the current low prices and historic low interest rates....currently in the 4's for fixed loans. This may be the opportunity you've been waiting for.....lower prices with low interest rates, which is a 'win,win' situation. There's a lot of competition for homes, so you must prepare yourself. Rates can go up at any time, so don't wait!
MULTIPLE OFFERS RE-APPEAR...
While many prospective home buyers are still waiting in hopes of catching the bottom, others are jumping into the residential real estate market feet first. In a growing number of instances, they wind up competing with a swelling legion eager to capture a bargain. "It's happening in all price ranges and in all communities," according to a Southland Association of Realtors survey. Offers are coming in near the asking price or in many cases, above the asking price. Multiple offers create a 'buying frenzie' and higher sale prices.
Example: I recently represented a buyer who wanted to buy a foreclosure. It was in excellent condition in a good area and location. I told my buyer there would be a lot of competition for this property based on my research and experience. He decided to offer 10K above asking price, which was already artificially low to begin with. Out of 29 total offers my client's came in in 24th place even though offering above the listed price. The property sold for 30K above asking price! This is what is can happen, and buyer's need to be ready for this.
Here's what goes on....many listing agents will DELIBERATELY list the property too low in order to generate multiple offers! That's why it's important for your agent to show you all recent sales activity in the area you are looking so you will KNOW how much they are actually selling for. Adjust your offer accordingly.
This new buying trend is a significant shift in the market where buyers, for the past 2 years, hesitated to make any offers. Now more buyers are entering the market because of lower prices, interest rates and government assisted programs, making home loans more available and affordable.
Obtaining a loan is a bit more difficult now, but not impossible... requiring proof of income and down payment money, but as little as 3.5% down. For example, FHA, a govt. insured loan program, has just decreased the maximum loan amount to $625,500 (as of 10-1-11) with just 3.5% down. This is an attempt to stablize the housing market, and people are beginning to take advantage of programs like this. Conventional loans often require buyers to put 10, 15, or even 20% down depending on the lender.
GETTING A LOAN IS A BIT MORE DIFFICULT THESE DAYS...
But again, NOT impossible....the days of easy mortgage loans is past. Borrowers should be aware that there will be tighter standards for most loan programs. Interest rates have recently been impacted by the lower bond market and soaring oil prices. 30 year fixed rates are in the 4's...a historic low rate! You can also 'buy down' your rate even more, if you have additional cash. Rates can vary from lender to lender depending on each person's qualifications and FICO* score. The Fed has reduced interest rates to help the housing market and overall economy. Don't stare a gift horse in the mouth! It won't last forever...
Homeowners looking to purchase or refinance must accept the new market reality that has made the loan process more difficult for some borrowers. Two realities now exist: 1) credit is now tighter than in recent years. 2) home values have been falling in most areas.
Borrowers should be ready to face certain issues when seeking a loan. They may be asked to document all income, including debts and assets. Loans may take longer to process than before. If your loan officer asks for specific info, provide it as soon as possible. Borrowers with credit (FICO*) scores of 660 or higher should have no problem qualifying. A loan officer needs your FICO* score to be able to quote you an accurate interest rate. Your FICO* score is based on your credit history.
Don can recommend a good lender to you if you don't already have one. You must be pre-approved to make an offer on a home or your offer won't be taken seriously. Reason: the seller doesn't know you or your financial situation. But a bank/lender who pre-approves you is certifying that they've checked you out and that you qualify.
Click here for latest interest rate update, and other helpful info on getting a loan. http://www.bankrate.com/brm/default.asp.
*FICO = Fair Isaac Corporation, who sets the standards for credit scores.
SHOULD WE BUY NOW OR WAIT?...
Many home buyers are asking if they should take advantage of the lower prices or should they wait for the market to drop even further. Answer: You have to look at the overall picture. Will prices go down even more? It is possible. But, timing the market is extremely difficult. There are many factors to consider...your credit history, current employment, how much cash you have, etc....A good lender can perform miracles often, however! Bottom line: no one really knows the future, just current trends.
NOTE: Even if prices go down more, if interest rates go up (and they will), it could offset any perceived savings. Meanwhile, you are still paying rent with no tax benefits and building no equity. If you wait a year or 2, there is no guarantee that you will still have your job and income at the same level that you have now. With a job loss, you will not qualify at all. So, you have to weigh in all the factors.
Another buying strategy is....if you believe prices will fall another 3-5%, for example, you could make an offer 3-5% lower than asking price. Many sellers are entertaining lower offers right now, especially if they've been on the market for a while. Note: This will not work if you are competing with other buyers for the same house, which is often the case especially on a desirable home in a nice neighborhood. Experienced agents know this.
For more info click here http://www.bankrate.com/brm/news/realestateguide2008/first-time-home-buyers-a1.asp?prodtype=mtg
SHORT SALES, NOT FORECLOSURES, DOMINATE THE MARKET...
A high percentage of the total homes on the market (around 1600-1800 at the moment in SCV) are either a short-sale or a foreclosure of some kind. A short-sale is when the seller is asking the bank's permission to sell while oweing more than the property is worth...sometimes called 'upside down' or 'under water'. Short-sales can take 3-6 months to even get a response from the bank. That's a long time to wait just to find out if you get the property! Then the escrow period after that, usually 30-45 days. This is why I recommend avoiding short sales. Exception: if the short sale has already been approved by the lender.
An REO (real estate owned) is a 'bank owned' property, also called a foreclosure. The previous owner defaulted on the loan and the house went back to the bank. The house would now be vacant and free of any loans/liens. Many buyers are thinking they can just walk in and make an offer on these one day, and be in escrow the next. This is NOT the case! Since both of these require lender approval, there can be a delay of several weeks just to hear back from the lender on your offer! Buyers need to be very patient during this time.
Often, you are competing with several other buyers on the same property, which will likely mean you have to offer more for the property than it is listed for, crazy as that sounds. Lenders are short-staffed and overloaded with more properties than they can handle. Many lenders are laying off employees. It takes an expert to get your offer into the right hands. This is why you need an experienced agent who can walk you through all of the necessary steps.
I RECOMMEND AVOIDING SHORT SALES, UNLESS...
Short-sales are the most difficult type of sale, especially if there is more than one lender involved (example: BofA on the first loan, and Wells Fargo on the second). It is hard for lenders to agree on who should take the biggest loss....often, they never do agree, resulting in a wasted effort in trying to purchase this home. Buyers are better off looking for a non-short-sale property (standard sale) in my opinion (yes, they are out there), or one that has only one lender and/or has approved the short-sale already. For more details, click here http://homebuying.about.com/od/4closureshortsales/qt/021208_BuyShort.htm
NOTE: Often these properties are deliberately listed VERY LOW just to attract as many buyers as possible. Sometimes it is because the listing agent, hired by the bank, is not from this area and doesn't know our local market. Other listing agents do this because they will select the highest offer to present to the lender to pay off the debt that is owed. Savvy agents who represent buyers realize what is going on and recommend that their buyers increase their offer if they believe the house is deliberately listed low. This is why it is difficult to buy a foreclosure 'cheaply' in this market. Deliberately listing for a low price also misleads people into believing they can get a house for the low list price. This is hardly ever the case! Exception: if the house needs tons of work.
BE PATIENT IF YOU'RE TRYING TO BUY OR SELL IN THIS MARKET...
It's taking an average of 100 days to put a house into escrow, and often much longer. Sellers need to be more accommodating to buyers if they want to sell the house. Things like sellers picking up all or a portion of the buyer's closing costs, doing repairs, allowing buyer contingencies...all of these make it easier for buyers to purchase. And remember.... price is still the MOST important factor when selling your home. Buyers and sellers must work together, and this is of course through their agents.
DON'T RELY ON THE NEWS MEDIA FOR INFORMATION...
Most people watch the evening news 'doom and gloom' about the real estate market, and draw false conclusions. To be sure, things are bad....but remember, the media always look for controversy and negativity. Often the lead story will begin with negative comments like....'Nobody can buy a home right now'...which is FALSE...or, 'No one can get a loan', again FALSE. Sure, it is more difficult to qualify. But, if no one is getting a loan, then how do they explain the increase in sales volume in the last quarter? The problem is that the media tends to broad brush information. You're better off talking to a real estate professional who can show you the real numbers in black and white. Don't fall for the media hype and broad brush. Check things out for yourself, and realtors can help you with that. Real estate professionals know what's really going on, and can provide all the information you need.
ATTENTION HOME BUYERS: Since interest rates are BELOW historic lows....4% fixed!!... now is a good time to take advantage of these rates before they go up. Also, there are less buyers in the market during the late fall and winter months, thus less competition for you as a buyer. Less competition means lower prices. Call your bank to get pre-approved or ask Don to refer you to a qualified mortgage lender for rate quotes and to get pre-approved. It is FREE to do this...and no obligation to buy anything.
This e-news brief is compiled by Don Valantine, Licensed Real Estate Consultant, DRE License #01231198. My purpose is to keep you up-to-date on market conditions and current trends. For available listings, please access 'my featured listings'. Don't hesitate to contact me with all of your real estate questions and needs. I am here to help you when you need it. ~ Don Valantine 661-803-8896.
~Experience You Can Trust~
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