Uncertainty + Homes for Sale = Good News

Now there’s a headline that doesn’t seem to make much sense! But here is why I think it does: 

For a long time the ‘the economy’ seemed to be just some distant abstract notion. Talking heads on Sunday shows jabbered about it, made predictions or shied away from making predictions about it, and life went on either way. Certainly San Gabriel Valley homeowners would decide to put up their homes for sale and prospective buyers would look for  homes in Pasadena for sale without first checking on the state of ‘the economy’. Remember those days?

Then the whole thing seemed about to crash (and just missed doing so). People started to pay attention as their own lives became affected. Soon everyone began to pay attention, and to hesitate before making plans.

And now we have a situation where the economy is…headed up? Headed down? In a stall? About to stall? It’s anyone’s guess. It’s no wonder why individuals and families have been waiting for ‘the economy’ to declare itself one way or the other before making major decisions (such as beginning to hunt for homes for sale, especially in Southern California). 

When there’s uncertainty in the air, it does not create a comfortable atmosphere for making large commitments. But there are major reasons – comfort aside –  why the atmosphere this March may be perfect for beginning to seriously investigate homes for sale in The San Gabriel Valley. 

Large inventory

In any market, buyers find options when inventories are strong. The uncertain financial conditions have led to precisely that situation. If supply were the only factor, now would certainly be one of the best times ever to look for homes for sale. It also makes it much more likely that you will be able to find precisely what you desire…and probably at an affordable price.

Low financing rates

One factor about which there is no uncertainty at all is this March’s financing rates. Rates are famously low, and most of the aggressive financial products that were associated with mortgage shenanigans have already been discontinued. First time buyers can check out the FHA to find out what options are available. And if you look at any historical chart, you will see how the squiggle is scraping along the bottom – the ‘good news’ area for homebuyers!

The only thing that is certain about the future is that whatever is happening today, sooner or later it will change. When it’s widely agreed that ‘the economy’ is roaring back, the factors that are so favorable now will change with them. That’s why I believe that for area homebuyers, Uncertainty + Homes for Sale = Good News!

Warren Buffet Now: “Buy!”

Since everyone in the country knows who Billionaire Warren Buffet is, it’s fair to call him the most prominent investment expert around. So, when Mr. Buffet offers his opinion of the housing market as he did during a recent interview, area residents considering whether to buy a home (or sell one) had good reason to pay attention. 

Mr. Buffet is definite in saying that believes now is a good time to enter or re-enter the housing market. It may not mean that it makes sense for everyone in The San Gabriel Valley to go out and buy a home -- but what he does say is more than a little encouraging: 

1. Buffet believes that real estate is a good investment right now because of the undeniable price factor. In an interview with CNBC, he even singled out the single-family home as a good investment opportunity. Would he personally buy a home right now? “…A couple hundred thousand” would be about right…if only he had a way to do it! 

2. According to the Oracle of Omaha, real estate is now a good long-term investment. In addition, with 30-year fixed rate mortgages below 4%, this looks like a particularly propitious time to buy a home for the long term.

3. He also points out that there is a lot of real estate available for sale. With such a large inventory available in all over the country, area buyers join others throughout the country in having an unusually wide number of options available.

Even though Buffet’s prognostications on the housing market have not always been spot-on, his track record as an investor speaks for itself. He points out that while some of these same positives are true of other investments, single-family investors have a built-in advantage over institutional competitors. When we buy a home, it’s likely to be our single largest investment. To institutions, that same purchase is too small to consider. Less competition means more opportunity.

When someone like Warren Buffet says he would invest in hundreds of thousands of homes if only it were feasible, that does have a way of making anyone pause and think.  In other words, in case you have been considering whether now is a good time to buy a home or local income property, go ahead and call me today. Let’s talk over the prospects!

Monica

Mortgage Rates: Getting Right to the Points

The subprime mortgage crisis and the resulting haymaker it dealt the entire housing market has caused noticeable changes in how San Gabriel Valley homeowners look at mortgage rates and the loans they negotiate.

The intense media focus on the residential financing industry has caused everyone to pay closer attention to the form of home loans they arrange. The truth is that borrowers are more wary about the loans they choose. They are insisting on clarity in how their choices will pencil out in dollars and cents in both near and long terms.

One decision that determines what mortgage rates wind up on our bottom lines is whether to ‘buy down’ mortgage rates with points. Points represent interest that buyers pay up front to lower the rates on the remainder – the mortgage rates that show up at the bottom of our monthly statements. 

Increasingly, local buyers are shunning the points option.

There are many reasons for the shift. Some are clearly related to the subprime mess, but others less so. Many of today’s buyers are entering the market for the first time, and they are cash-strapped. They may find it a struggle to come up with money for the down payment and closing costs. Often, these new homeowners simply can’t afford to pay points -- even if they can be rolled into the loan. 

Historically low interest rates are another reason area buyers at all levels are thinking harder about points vs. mortgage rates.  Last week’s national average on 30-year fixed mortgage rates  was a full percentage point lower than a year ago – when it was already visiting the basement! Some buyers just don't see the value in making an advance interest payment – financed or otherwise – when it may only knock a fraction of a percent off an interest rate that's already at such low levels.

First-time homebuyers can also see points as an unnecessary expense if they do not plan to stay in their homes long enough for the lower mortgage rates to return the investment. For them, it just doesn’t pencil out. 

With interest rates at historic lows and lenders competing for the same pieces of a smaller pie, it has never been more important for buyers to take a hard look at the pros and cons of the mortgage rates vs. points decision.  If you are looking for a home to buy in town and would like to discuss your options, give me a call. The time has never been better.  

Monica

Million Dollar Foreclosures Up, Midrange Down

It’s not what you would guess, but there it is: according to CNNMoney, the firm that keeps track of foreclosures has reported that the foreclosures on million dollar properties is growing while foreclosures for midrange properties are beginning to drop.

It’s been five years since the housing market began its precipitous drop. During that time, overall growth in foreclosures has been front and center for headline writers in San Gabriel Valley and throughout the rest of the nation.  But only now are foreclosures among some of the nation’s wealthiest homeowners drawing attention. The foreclosure rate is rapidly increasing in this group --and at a faster rate than for the rest of the United States.  

Surprising also is that many of these wealthy families are doing so voluntarily.

RealtyTrac is the firm quoted by CNNMoney. Its data show that last year upwards of 36,000 homes valued at $1,000,000 or more were foreclosed upon or served with a notice of foreclosure (default). Even though that is fewer than 2% of all foreclosures nationwide, it still represents a greater number of foreclosures than seen in earlier years. For wealthier homeowners who actually could continue to make mortgage payments but decide not to, it can be a business decision. Financial experts call such foreclosures “strategic defaults.” 

RealtyTrac also found that the number of foreclosures on properties valued at $1 million or more has risen by 115% in the last five years, and twice as fast for those worth more than $2 million. However, among mid-range homes – those valued between $500,000 and $1 million -- foreclosures actually dropped by 21% during the same period.

It seems that the housing crisis may be ending from the bottom up, with borrowers who purchased lower-cost homes now beginning to emerge from the storm, even as some of the wealthier families (admittedly a very small percentage of them) go through the same trial.  

The silver lining?  If you are looking to buy a home in the $1,000,000+ range, now could be your window to snag a once-in-a-lifetime value!  Call me if you would like to see a complete picture of all the San Gabriel Valley properties for sale this March.

Monica