Shasta Association of REALTORS® My Market
The real estate market can be fast paced and ever-changing, like attempting to take a still photograph of a speeding target! With that in mind, we offer My Market! The resources herein are designed to provide you with market information, not just figures, necessary for your home buying or selling decisions. Of course, this information cannot take the place of the knowledge and experience of your REALTOR®, rather it supplements those professional skills to sort through and interpret how those market changes impact you as a buyer or seller.
Renters still want to buy . . . Just out of reach for now
According to the latest release by the California Association of REALTORS®, the combination of high prices and high demand in California have combined to create an environment of record low affordability. With the economy sustaining wage growth and low unemployment rates, households, who have finally saved enough to buy, have rushed to buy homes while long term mortgage rates remain low. This has led to a quickly diminishing supply of homes in many markets, and with low housing production, a future of continuing price increases and low affordability is certain.
But what happens to renters who do not have the down-payments or income to be able to purchase in today’s market environment? In a survey on California renters, we find that views and aspirations for homeownership turn directly along with their relative fortunes and ability to purchase in California.
The run up of prices has meant that many renters, who last year were thinking about buying, have pushed their purchase horizons out: in 2016, 42% of renters planned to purchase within three years, but with rising prices across the state only 32% now say they will. Yet as the economy improves, many people who said that they would never purchase, are now looking again: in 2016, nearly 20% of respondents said that they would never purchase, a number that dropped by half to 10%.
So, there is now a give and take in an environment where the economy is gaining footing, but the housing market is staying out of reach. As homes have become less affordable, the percentage of people who said that homeownership is extremely or very important to them dropped from 65% to 50%, and the percentage of people who said it was “Not at all” or “Slightly important” grew from 11% to 21%.
As homeownership become less possible it makes sense that loses its place as long term achievable goal and aspiration; or even worse, its place as part of the American dream. What is the way out of this? For many people who want to start raising families, the answer is simply to leave the state. For those who are sure that they want to leave California, 43% say housing prices and cost of living are driving them, twice the percentage of those who are moving, but staying in California. For Gen-Xers who are ready to start families that number is over 60%. It is time to seriously ask ourselves what we can do to keep our neighbors and friends in our state. (Article courtesy of California Association of REALTORS®, Market Snapshot, August, 2017)
Is a mortgage with no closing costs right for you?
Yahoo Finance reported that a mortgage isn't free -- there are fees associated with getting the loan. Those closing costs usually total thousands of dollars. Besides writing a check to pay those fees at the closing table, there's another way to pay them when you refinance your mortgage: by adding them to the loan amount. The result is called a no-closing-cost refinance. Many lenders offer them. However, you'll probably have to accept a higher interest rate over the life of the loan.
Making sense of the story:
- No-closing-cost mortgages are attractive to borrowers who don't have the cash to pay fees upfront. Waiving the closing costs may be the ticket to getting a mortgage for a new home or a refinance.
- If you don't plan to stay in your home for more than five years, a no-closing-cost mortgage also makes sense. With a traditional mortgage, it could take more than five years to recoup the closing costs.
- The slightly higher mortgage rate associated with a no-closing-cost mortgage is still likely to be less expensive over five years than what you would pay upfront in closing costs.
- Paying a slightly higher interest rate to forgo closing costs may also make sense if you need the cash to do renovations on your home.
- If you plan to stay in your home more than five years, then a no-closing-cost loan likely will end up costing you more than a loan with closing costs. That's true whether you're taking out a mortgage for a new purchase or refinancing an existing loan.
- Typically, you'll break even on your closing costs in a few years. Going with a no-closing-cost loan saddles you with a higher interest rate over the rest of the home loan. That could end up costing you a lot more than the upfront fees if you keep the mortgage for a long time.
What you should know
The more you know about mortgages, the better prepared you’ll be. Here are some mortgage tips for first-time buyers, including:
- Know your credit score. The credit score can be a big key to knowing how much buyers can afford and how much interest they’ll be paying. Home shoppers should be encouraged to check their credit report and FICO score before even starting the homebuying process.
- Estimate how much can be borrowed. Lenders generally don’t like to see a monthly housing payment—one that includes taxes and insurances—that’s more than 28 percent of a pretax income. The percentage threshold often cited for total debt—which includes the mortgage payment—is then no more than 36 percent. Some lenders will offer differing percentages but these are the most commonly used.
- Gather the docs. Buyers will need documents showing their income, employment situation, identity, and more when applying for a mortgage. Encourage them to start collecting their latest tax returns, bank and brokerage statements, pay stubs, W-2s, Social Security card, marriage license (if applicable), and contact numbers for their employer’s HR department.
- Get pre-approved. A preapproval is similar to a full mortgage approval and can be submitted with an offer on a home. It shows the seller the seriousness of the buyer, who has already secured financing to purchase the house.
- Add up closing costs. Closing costs generally range from 2 to 3 percent of a mortgage principal amount. Make sure your buyers factor in closing costs to their overall homebuying budget. (Article courtesy of California Association of REALTORS®, Beyond the Headlines, July, 2017)
Still have questions? Your REALTOR® is a great resource.