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.
Homeownership: Making Forward Progress in the Short Run
According to a current release by the California Association of REALTORS®, following the Great Recession, homeownership in California is down. After peaking at more than 60% at the height of the last cycle, it now sits below 55%. Notably, the Census Bureau estimates that Los Angeles and Orange County have dipped below 50% homeownership, meaning that it’s a majority-renter region now.
Much of the decline is cyclical: many homeowners lost their previous home to short sale or foreclosure during the downturn. However, there is also a structural component to homeownership, as evidenced by a particularly low homeownership rate amongst minorities. This will have an increasing impact on overall homeownership as California becomes more diverse. This is a long-term challenge, but also a potential opportunity for the housing market and the California economy over the short run.
Currently, there are over 1 million households that earn more than the minimum qualifying income, yet continue to rent. Even without addressing the larger structural issues, simply getting more of the income-qualified households into homes would largely erase California’s gap with the rest of the U.S. – boosting ownership to more than 60% again. The effects would be especially important for Hispanic and black households. For example, roughly 277,000 additional Hispanic renters who earn enough to purchase the median priced home in their county would be enough to push Hispanic homeownership to almost 50%. Black households would see homeownership rise from the low 30s to more than 40% as well.
This would be good for the buyers, who could take advantage of today’s low interest rates, enjoy the tax benefits of homeownership, and begin accumulating wealth for themselves and future generations. It would also be good for the state’s economy by generating all the consequent economic activity that comes with a new home purchase. The housing market would obviously benefit as well – a win-win-win.
Of course, some “income-eligible” renters may not qualify for a mortgage because of bad credit, no credit, previous bankruptcy or foreclosure, no formal documentation of income, or a myriad of other reasons. However, many may just lack the knowledge about the buying process. Others may be unaware of FHA and other low-down payment loans. New programs have ever sprung up to help finance buyers who do not have traditional credit profiles. Still others may have simply never considered the benefits or thought homeownership was possible for them. Thus, some sizeable portion of that 1+ million households could become owners. For those families, education, marketing, and effort could play a big role in making the difference on the homeownership decision.
This is still a ton of work to do with respect to boosting incomes and providing equality of opportunity for Californians over the long haul. However, there is a lot that can be done in the interim, with rates still incredibly low by historical standards, let’s help more of our neighbors take advantage of the current environment and the benefits of becoming a homeowner. (Article courtesy of California Association of REALTORS®, Market Snapshot, July, 2017)
My Market Stats
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.