Waiting May Cost First Time Home Buyers Real Money

With rental prices continuing their nonstop rise, many renters may be wondering if buying a house with today’s low fixed interest rate may  be a better alternative. But this is a huge step for a first time buyer,and they may hesitate to take that step.  Even though they may see that purchasing a home with the historically low rates that we have right now is their best chance to be able to get a house payment that is less than their rent, and guaranteed to never go up.  The problem is that hesitation is beginning to cost them real money the longer they wait.
 
The simple reason is that prices are rising and interest rates are beginning to go up also.  These both create larger house payments, and both are expected to continue to increase.  The longer they wait, the higher the payment is going to be, costing them real money. 
 
Let me give an example to help show this cost:
 
If you bought a house today and got a loan for $275,000 at the current 3.75% fixed rate your payment would be $1,274 per month.
If you bought a house one year from now and got a loan for $288,750 (remember prices are going up) at the higher projected fixed rate of 5.0% your payment would be $1,550 per month.
That is a real cost of $276 per month for waiting a year to take the step to buy.
 
The bottom line is these rates and prices are both the lowest we will probably see in the foreseeable future, and taking advantage of them now will guarantee they will have an affordable house payment that is not going to continue to rise as rents will.
I look forward to hearing your comments or questions
Mark
MarkManning.Realtor
Century 21 Prestige Properties

More Good News for First Time Buyers

The First Time Home Buyer now has yet another reason to consider that now may be the time to buy.  FHA has just recently announced that starting January 26 the Mortgage Insurance Premium is going to be reduced by more than a third, from 1.35% to 0.85%. The Mortgage Insurance Premium is required on all FHA loans with a small down payment.   This translates into actual dollars saved or greater purchasing power for the First Time Buyer
If you have any questions or comments, please let me know

For First-Time Home Buyers Now May Be the Time

While prices have been going back up for a little while now,  the maximum loan amount has remained the same for the most common loan for first time home buyers. The FHA loan limit for the Inland Empire is $355,350.  The availability and selection of homes within this price range is steadily diminishing, and even disappearing in some areas.  We may be reaching the point where home buyers that are qualified to buy and want to buy, cannot find a home to buy.
I am concerned that FHA will not be in any hurry to increase the loan limits to stay in line with price increases and avert this situation.  I didn’t see them do it during the last housing boom, where houses priced within the FHA limits became non-existent.Nor have I seen anything to make me think they will now.  The difference is that we had more than enough ‘sub-prime’ and ‘stated income’ loans to offer the buyers.  Today we don’t have anything to offer in its place if you don’t qualify for the top of the line ‘Conventional’ loan.
It just might be a good time to consider jumping in while the jumping is still good.
What are your thoughts?

Should I Buy Now or Wait?

Many are still reluctant to enter the market after what we have seen happen to it in recent years.  We saw prices increasing exponentially and seemingly without end. Then we saw chaos as the market crashed with the great recession, and many painful reminders of how many people lost so much, especially in Real Estate.  More recently, at least here in Southern California and more specifically in the Inland Empire, we have watched prices skyrocket again for a year or two. And most recently we have seen a slowdown, and last month (October 2014) even a downturn.  Most see this as an expected correction, as we head to a more normal market. This may actually be the first reason you should Buy Now.

The large increase in prices for more than a year signifies that they have reached the bottom and are their way back up.  Most all indicators point to prices continuing to increase, though at a moderate rate.  This means that you will pay less for a house if you buy it today, as opposed to waiting.  The fact that the increase will be at a smaller rate (7-12 per cent over 5 years) enables it to be sustainable, so it will continue to increase without the fear of another downturn or crash.  This may be the second reason you should Buy Now.

Another reason this is a Good Time to Buy is the price of rent continuing its constant rise (even through the recession), has made it actually cheaper in many cases to make a monthly mortgage payment than rent.  Of course this is also due to the lower home prices and lower interest rates, both of which you can lock in now and guarantee your housing cost will never go higher.  This is something you can not do as a renter. Combined with the tax deduction offered homeowners, along with the ability to make the changes and improvements you desire, there are a handful of good reasons that Buying Now Makes Sense.

Where is that Housing Recovery anyway?

According to the experts, well, they just don’t really agree.  Out of 100 Real Estate Experts and economists surveyed, 40% responded that it would still be another 3 to 5 years before we return to a normal market.  While a third believes it will take a year or two, 20% see the recovery either here already or happening in the next twelve months.

A Challenged Economy was cited as the major reason.  More of the adults today that are renting have roomates to help them afford the rent.  So they cannot afford to qualify to buy a house.  With the low and slow growth of wages, they remain stuck here, unable to enter the housing market.  Because of the economy, many millennials are holding off on things like marriage and home ownership for now.  The housing market itself has kept many retirees in their homes longer, until they have regained the appreciation they need to move on.

That being said, I believe this is a great opportunity for those renters that can afford to pay the rent themselves.  In many cases they will also afford to qualify to buy a house.  With the extremely low interest rates now, the house payment may very well be less than the rent they are paying.  Many sellers are also willing to help pay their closing costs and make it even more affordable.

Renting verses Buying

In many areas of Southern California the cost to own a home becomes less than the cost to rent in less than two years in that home.  This is taking into account all of the costs associated with owning verses renting from closing costs to renovation costs, along with monthly rental and mortgage payments. A buyers home equity is also factored in, as is the renters ability to invest the money they would have used to purchase a home.  
 
Many renters are recognizing the financial upside of buying now, with the mortgage interest rates remaining low, as rents just continue to increase.  For some, renting may still be more viable as they have not been able to save up for the down payment to purchase or qualify for a mortgage.
 
There are even some areas, such as Riverside, where the break even time for buying over renting is less than a year.

Rent Vs. Buy

Buying a house is still 38% cheaper than renting, according to the newest edition of a respected  ‘Rent Vs Buy’ nationwide report. Though the gap has actually narrowed from last year (44%) it still appears to be a compelling reason to purchase.  The degree of the advantage of home ownership depends on the area, and varies substantially.  Nonetheless, the combination of increase in inventory and still historically low interest rates equate to this being a good time to buy.

First Time Home Buyers want to buy, but will they be able to?

With as many as 4 million first-time buyers wanting to enter the market, many will encounter some issues as not all market conditions are favorable to to new buyers.  

 

Current renters aspiration for homeownership is particularly strong, with about 10% nationwide saying they would like to buy in the next 12 months.

 

BUT…. the combination of rising interest rates coupled with low inventory could push homes out of reach for many would be first-time home buyers. Overall, the inventory has increased slightly from a year ago, but remain substantially below optimal levels.  Interest rates, while still historically low, have risen at least 1% from their record low.

 

For the housing market to continue its recovery, availability and affordability to meet the demand for this group is critical.  We are beginning to see these factors waning in some area markets.

Short Sale Relocation Assistance.

For those that are pursuing a Short Sale due to no longer being able to afford their home, there is at least a little help available to them for moving and relocation expenses. The funds come from the State of California through the Transition Assistance Program (TAP). The State of California is providing up to $5000 in transition assistance to qualified homeowners who can no longer afford to stay in their homes. Those interested do need to apply for the assistance, and do need to maintain their home. I can provide further information for anyone interested.