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Waiting for home prices to drop? But what about increasing interest rates?

Where I sell real estate, in and around Auburn, CA, home buyers are hesitating. Though rates are the best they have been for 50 years, and prices are at a 10-year low, they are waiting…waiting for what? 

This is a common theme in the greater Sacramento area–the neighborhoods of Rocklin, Roseville, Loomis, Newcastle & Penryn. When asked why, many home buyers have said they believe home prices have still a ways to fall. But according to home sale  statistics over the past 12 months in the Auburn, CA and greater Sacramento areas, prices have stabilized. Whether or not prices do drop, the bigger question is what impact will a 1% increase in interest rates have on a monthly payment for the same property?

The table below was prepared by Eric Frizell at our Keller Williams office in Auburn, CA to demonstrate how interest rate affects monthly payment. The first tab–Fixed Price, Variable Rate–shows the effect of an interest rate increase on a $200,000 home purchase. With a 3.5% (or $7,000) down payment, and so a loan amount of $193,000, notice how the monthly payment increases with the interest rate.

A widely held truth is when home prices fall, interest rates increase. The second tab–Variable Price and Rates–demonstrates what would happen if the price of a home were to drop by 7%, while the interest rate increased by 1%. The payment is $22.41 per month higher, and becomes more significant as the price increases.

For an analysis of your personal scenario, call or email me! Noel – 530-305-8409, email: ncrider@kw.com.

Homes have never been more affordable.

For individual home buyers, there are only a few facts that really matter:

• Can I afford this home?
• Is it a good investment?
• Does it meet my family’s needs?

So it’s a bit surprising that the most important housing statistic has gone largely unreported: homes have never been more affordable. Affordability, measured by the median mortgage payment on the current median priced home ($182,400) as a percentage of the median household income ($64,400), is lower than it’s been in a generation.

The chart below, which tracks housing affordability for the past 10 years, shows incredible improvements in affordability since the height of the real estate boom in 2006.

 

 

 

 

 

 

 

 

 

It’s important to recognize an opportunity when we see one! Contact me today to find out how to get started.

This information was taken from the recently published report from Keller Williams Realty: Reasons Why Now is a Great Time to Buy a Home!

Contact me to find out how to get started in this great market!

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7 Reasons why NOW is the Prime Time to Buy.

At a Glance: Why NOW is the Prime Time to Buy!

As a realtor representing home buyers and sellers in Auburn, CA, I have noticed a lull in buyer activity. How can that be, when all indicators point to this being the best time in history for buying real estate? This information is from a brand new report from Keller Williams Realty called: Reasons Why Now is the Right Time to Buy a Home: A Smart Buyer’s Guide to Seizing the Market.

Home affordability is at an all-time high. The median mortgage payment on the median priced home as a percentage of the median household income is lower than it’s been in a generation. Read more…

Mortgage rates are at rock bottom. It’s hard to imagine interest rates going much lower, and when they start to inch back upwards, monthly payments and total loan costs will spike upwards.

Home prices are back on the rise. After declining for 30 months, home prices are trending back upward. The time get in to the market is NOW!

Sellers are motivated. This means that buyers have the upper hand! From banks looking to dispose of foreclosed properties to homeowners who are fiercely competing among an  excess of housing inventory, buyers have untold choices and negotiating power.

Financing is readily available! Banks are back in the game and ready to lend to well-qualified buyers.

Owning vs. renting is increasingly favorable. Since 2009, the average principal and interest payment has fallen below the average rental rates, and the gap is now wider than it’s been in the past 22 years.

Homeownership is still at the core of the American Dream! Owning a home is critical to financial stability and wealth building. It’s a forced savings account, a place to live and a fabulous tax deduction.

9 reasons you should buy your first home now.

It’s a scary thing, buying your first home. You wonder if you’re doing the right thing. It’s funny that first time home buyers had little chance of buying a home at the peak of the market. And now that homes are affordable, they fear jumping in. Here are some things to consider that could help you decide if the time is right for you.

1. First-time buyers aren’t investors. They’re buying to own a home for themselves to live in and enjoy. If the home falls in market value a little, so what? They aren’t planning to sell.
2. Money paid for rent buys a house for someone else to own.
3. Rents do rise with supply and demand.
4. Homes in most areas are now so inexpensive that first-time buyers may be able to make their payments and set aside a few dollars for maintenance for less than their current rent.
5. Interest rates are still low, making inexpensive homes even more affordable.
6. With interest rates so low, a few extra dollars per month on a 30-year mortgage could mean a first-time buyer could own the house free and clear within 15-20 years.
7. Hesitation could cost big dollars. Just a 1% rise in interest rates will add several hundred dollars per year to even a moderately-priced home. And interest rates are expected to rise.
8. This tide will turn, and homes will begin appreciating in value. That trend has already begun in some markets and will begin in others as the foreclosures and short sales are sold.
9. Over time, first-time buyers will be earning more while their house payment will remain stable.

Contact me if you have questions about how to get started buying your first home!

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Real Estate Roundtable – How to get your offer accepted.

So you’re prequalified, your down payment is in the bank, your credit is up to snuff. You are ready to buy a house. You find the perfect home, and an investor comes in with cash and snatches it out of your grasp. Frustrating? Definitely. So what can you do differently to increase your chances of getting your offer accepted?

Today I talked to Scott Cooper at Big Valley Mortgage who has some great tips on how to do just that! Take a look:

If you are thinking about buying or selling a home, or just need questions answered, call:

Noel Crider
Keller Williams Realty
(530) 305-8409
email: ncrider@kw.com

To get prequalified or learn more about the latest loan programs, call:

Scott Cooper
Big Valley Mortgage
(916) 412-9530
email: scooper@apmortgage.com

Stupid or broke?

A recent article in BusinessWeek made this bold statement in reference to fence-sitters in the current real estate market. Marc Roth’s statement makes us stop and take notice.

In 1986, my husband and I purchased a home just south of Tucson, Arizona, in the small rural town of Sahuarita. It was a purchase necessitated by a job transfer, and at that time, we paid right around 17% interested on our $90,000 home.

Why is now the right time to buy?

1. Interest rates are historically low, right around 5%.
2. Home prices have taken huge discounts, and are now showing signs of steadying. 
3. It is expected that interest rates will increase as the economy begins so stabilize.

I want to wait until prices drop further.

Let’s say you decide to wait for another 10% drop in home prices. Just a 1 point rise in interest rate on a typical 30-year-fixed loan will negate any benefit from that 10% price drop.

Roth states that for every quarter-point rise in interest, expect an increase of debt in the amount of $6,000 over the life of the loan for every $100,000 borrowed.

Here’s an example: You want to buy a $200,000 home with 20% (or $40,000) down. Over the course of this loan, each quarter-point increase in interest rate will cost you $12,000 over the life of the loan.

The bottom line is that if you are planning to buy a home now or in the near future, it’s wise to pay more attention to the interest rates than the price of the home.

Read more about the benefits of buying a home.

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Buy a Home in 2010

Are you a first-time homebuyer? Are you a homeowner considering purchasing an investment property? Either way, you are among a large group who are planning to buy a home in 2010.

A recent Move.com survey revealed that many Americans have “buying a home” as one of their top New Year’s Resolutions! 17.7% of Americans want to be come First Time Home Buyers and 15.7% are planning to purchase an Investment Property.

Here are the Top Four Reasons to buy now!

1. Record Low Interest Rates.

2. Record Low Home Prices.

3. Tax Credits for Home Buyers – through April 30, 2010.

4. Tax Benefits of Home Ownership over the long term.

Read more about the benefits of buying a home.

If you like what you’re reading here at View From the Foothills, why not subscribe to receive automatic updates!

Why you should buy a home now.

“If you wait until you see the robin, spring is over.” Warren Buffet

You may be sitting on the sidelines waiting for the right time to buy a home. Here are some reasons you shouldn’t wait.

1. Interest Rates. Today’s record low rates are under 5% for most loan types, with jumbo loans and those for investment properties slightly higher. We haven’t seen rates this low since Freddie Mac started tracking them in 1971. The federal government has been injecting $1.25 trillion into mortgage-backed securities to push down mortgage rates, but that money is set to run out next spring, and rates are expected to go up.
2. Home Prices. With median home prices bouncing around all-time lows, there is no reason to wait. Think about this: even a 10% decrease in home prices is immediately nullified by a mere 1 percent increase in interest rates on a 30-year loan.
3. Tax Credits. The government has extended the $8,000 first-time home buyer credit through April 30, 2010, and has added a $6,500 credit for repeat buyers. Read about it here.
4. Tax Benefits.  When you purchase a home, in most cases, loan discount points and origination fees are tax deductible to the buyer, regardless of who pays them. In addition, you can deduct mortgage interest charged on a loan used to acquire or improve your principal residence in the year that it is paid. In the early years of a loan, most of your monthly payment is interest, so this can really add up. Finally, when you sell the home, as an individual you can earn up to $250,000 and pay no taxes on it, and as a couple, it’s $500,000. Learn more.  
5. Timing the Market. It’s ironic that when prices were escalating in the seller’s market a few years ago, buyers were clammoring to buy! No one can time the market, but statistics show that the worst is over, and we are bouncing around the bottom. The time is now to purchase a great value.

For more information about buying a home in today’s market, contact me.

4 Important Tips for Repairing Your Credit

Credit repair does not have to be complex and can be boiled down two basic ideas: First, positive accounts will counteract the negative accounts. Second, time heals all credit. 

1. If you have positive accounts, keep them.  Do not close any accounts that have good payment histories as they will help balance the negative.  In addition, older, unused accounts with a zero balance may help improve your score.
2. If some of your positive accounts are credit cards, keep the balances below 50% by paying them down, or transfer part of the balance to another card so the balance does not exceed 50% of the limit.
3. If you do not have at least 3 accounts that report to the credit reporting agencies, open up more accounts.  With negative credit, opening new accounts may be difficult, so open a “secured” credit card.  With a “secured” credit card you will need to send the credit card company a specific amount of money, and then you will receive a credit card in that amount.  The new accounts will help you establish a positive credit history. 
4. WAIT.  While this may not seem like a plan packed with insider secrets, the fact of the matter is…time heals credit.  Remember, this is a marathon not a sprint.  If you maintain at least 3 accounts with perfect payments, your credit will progressively improve.

So, now you are 2 to 3 years in the future and what is the payoff for sticking to the plan?  Your credit will be good enough to buy a home again.  Don’t let the setback of a short sale or foreclosure make you feel hopeless.  You have options, and with the proper course of action, you may become a homeowner again much sooner than you thought possible.

If you need further information, or would like assistance with credit repair, contact me:

Scott Cooper

Buying a home after a Short Sale or Foreclosure???

by Scott Cooper, Big Valley Mortgage

Many people believe they won’t be able to purchase a home for at least 7-10 years after a short sale or foreclosure, however, I am happy to inform you that is not the case. 

Although your credit will be affected, you will be surprised how quickly you can buy again.  The following are some commonly asked questions and answers you may find useful:

Q. How long after a short sale before I can buy another home?

A. New FHA guidelines state there is no minimum wait period after a short sale before you can buy another home if you do not have late payments on your mortgage and your credit history is acceptable.

Q. If I have late payments along with a short sale, how long before I can buy again?

A. The current guidelines require a two-year waiting period.

Q. How long after a foreclosure before I can buy again?

A. With an FHA loan, the minimum wait period is 3 years after a foreclosure.

If you need further information, or would like assistance with credit repair, contact me:

Scott Cooper