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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.

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.

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Pricing your home to sell

Price it right out of the gate!

Pricing your home correctly is the single most important key to getting it sold. Of course location and condition come in a close second. Even if you do find an eager buyer who is willing to overpay for your home, the deal will screech to a halt when the lender’s appraisal comes in under the value of the contracted price.

There is a magic ”window of opportunity” when a property first hits the market. This is when it attracts the most attention from buyers and real estate agents who represent motivated buyers. If your home is priced too high, both buyer and agent will discard it from the prospect list, and probably won’t revisit it. They will assume they are dealing with an unrealistic seller.

Factors that affect the price of a home

Location: You can’t get away from this one. If your house is located in a desirable area that is in demand, you will be able to get a higher price than you can for the same house in a less desirable area. Freeway or road noise, busy corners, train proximity will detract from a home’s desirability, while good schools and convenience to shopping & commuting will add to desirability.

Condition: A house that has been better maintained and shows better will always sell for more than one that has had deferred (neglected) maintenance and needs work. A home that has been properly prepared for sale  home will always show better! A house that has been updated with modern amenities will also command a higher price.

How to set the price

CMA (Comparable Market Analysis): A comparison of similar properties in the same general area that compares actual sold prices. A Real Estate Agent can generate a CMA for you at no charge. A current popular consumer CMA tool is Zillow.com. Do not put too much confidence in the accuracy of this tool as it does not take into effect condition or other amenities of a property.

Current Active & Pending Properties: In our current “Buyer’s Market,” it’s important to analyze the competition. Price your home below the competition (Active properties) to generate an offer. Note at what price point Pending properties received an offer. Don’t try and test the market by starting out with a higher price in hopes that you will get an offer.. You will end up lowering your price, and can often end up chasing the market downward, and getting a lower price than if you had priced it right in the first place.

Buy, sell or hold? Auburn CA homes for sale and real estate trends.

Do you wonder if it’s a good time to buy an Auburn CA home? Real estate mogul Donald Trump said a few months ago in an interview on Good Morning America: “If you want to buy a house there’s probably never been a better time.” Trump also commented that the golden real estate rule of location, location, location still applies. He said to hold off selling if you can, but if you do need to sell, make sure your home is in the best condition possible. He may not have a hair style to emulate, but he seems to have the knack for real estate investing!

We are bombarded daily with negative headlines about the real estate market. I had a conversation with my mother-in-law on Thanksgiving Day about this very subject. She said, “yes, it’s a great time to buy, but there’s no money to lend.” That is a commonly held belief that is absolutely not true! Yes, qualifying is more stringent, but there is money to lend. FOR BUYERS, there has not been a better time to buy in a very, very long time. Some of you may say, “We haven’t hit bottom yet.” The only sure way to know we’ve hit bottom is to be looking back at it.

Isn’t it ironic that when prices were rising a few years ago, buyers were doing everything they could to buy…even when the advantage was to the seller! They were afraid of missing out. Now that the advantage is to the buyer, they’re afraid once again, but this time it’s the fear of possibly paying too much. We have had a 20%-plus decrease in median home price in the greater Auburn area in the past 2 years. This is the point when smart buyers decide it’s time to buy a home. They know they can’t predict the end of a slump, but they know there has been a considerable fall in prices, and it’s time enough to make a sensible purchase.