2015 sees changes to homebuyer affordability, says Freddie Mac

As 2014 is coming to and end, we’ve seen another year of low interest rates, increased housing affordability and double-digit house appreciation. It seems that the seller’s market conditions that we have become used to in Silicon Valley are becoming the ‘norm.’

How will things shape up for 2015? Here’s a quick prediction by Freddie Mac:

“If you are planning to buy a home in the next year, it’s better to do it sooner rather than later,” Frank Nothaft, Freddie Mac’s chief economist, said in the video commentary embedded here.

Since Freddie Mac sees interest rates increasing, with an average around 4.6% next year, it’s cheaper to purchase a home now with lower mortgage interest rates than when rates begin to rise. An increase of just 1% in rate can mean the difference of spending nearly another $100,000 in total interest over the first 10 years of the loan!

But rising rates don’t necessarily mean that our housing market will cool off; the job market and consumer confidence are up concerning homeownership, and Freddie Mac sees continued appreciation trends through the next few years nationally. Locally in Silicon Valley, we’re probably looking at another year of double-digit, or close to, appreciation for most communities fueled by the high affordability buyers have in our marketplace. And with our local tech-giants continuing to expand and grow their employee-base, housing choices will only continue to slim.

Contact me for a further discussion regarding the 2015 real estate market outlook in your community.

To Sell or Not to Sell During the Holidays

Interested in selling before the end of the year but not sure about the timing over the Holidays? 

staged_for-christmas-home

It used to be a simple answer: In the days of past, home purchases dwindled during the holidays, homebuyer traffic dropped drastically, and it was more worth a seller’s (and a Realtor’s) time to get the sign out of the yard, save on advertising, and enjoy the holidays with their families.

That was then…times have changed; today is a different story. With the use of technology, buyers can now shop for homes at all hours of the day, in all weather, from their laptops or mobile devices and the buying season has become a year-round event. The Internet also cuts down on the amount of time that it takes to buy a home because many buyers do their shopping online. In reality, people are always looking for homes – before, during and after the holidays.

More important to consider is that most sellers prefer not to sell during the holidays, meaning more sellers will put their homes back on the market in January and the supply of homes goes up dramatically, which translates to less demand for your particular home and less money as well.

So, although the Holiday Season, between mid-November to beginning of January, may not be considered the best time to sell, here’s our top reasons why selling over the Holidays can still make sense: 

1. People who look for a home during the Holidays are more serious buyers!

2. Serious buyers have fewer houses to choose from during the Holidays and less competition means more money for you!

3. Buyers have more time to look for a home during the Holidays during the weekdays!

4. January is traditionally the month for employees to begin new jobs. Since transferees cannot wait until Spring to buy, you must be on the market now to capture that market!

5. Some buyers have to buyer before the end of the year for tax reasons.

6. You can still be on the market, but you have the option to restrict showings during the six or seven days during the Holidays!

7. You can sell now for more money and we will provide for a delayed closing or extended occupancy until early next year!

Housing in Recovery? Or Housing Bubble? – Spring 2013 Market Outlook

There’s a lot of growing speculation among first time homebuyers that we may be experiencing another “housing bubble,” but if we are, it surely won’t be of proportion to that seen in 2006. In the not too distant past there was a time when anyone with a pulse could qualify for a home mortgage, purchase financing was available to those with little to no income or down payments, and all premised on the buyer making interest only payments with an adjustable interest rate. No wonder the housing market crashed in 2007…there was no sustainable gain being made.

Now let’s look at today’s market…Today’s engine in the housing recovery is being driven by buyers purchasing with fixed financing options, large down payments, and fully underwitten loan applications. Housing rents are increasing and home affordability hasn’t been this high for a long time…so why wouldn’t we expect a run on housing?

Welcome to the housing recovery…going strong since Spring of 2012. The current levels of appreciation seem very sustainable for the short term, especially given the continual scarce inventory available for sale, the current increased housing affordability and the incredibly low mortgage interest rates. And as long as housing affordability remains at it’s current levels, and potential homebuyers will prefer to own rather then rent, I don’t think we’re going to see a slow down.

This is especially true of Silicon Valley. Not only is our inventory naturally limited due to the geography of the South Bay Area, creating a natural imbalance between supply and demand to begin with, but there is scarce new lands available for any major new housing developments. Sure we have some small scale infill developments scattered throughout the valley, which are seeing unprecedented interest as new releases are selling out in hours rather than weeks, but our inventory for the most part is dependent on the resale of existing homes which is currently around 50% of normal inventory levels.

So let’s look at the major contributing factors that have led to our quick housing recovery. Outside of the governments interactions in our housing market that has shrunk inventory levels, the freezing of foreclosures last year and appearance of large investors purchasing pools of foreclosed homes directly from banks, there were many strong economic gains made as well. Did you know that there were 42,000 new jobs created in SIlicon Valley in 2012 alone? And according to the Index of Silicon Valley for 2012 (published by Joint Venture Silicon Valley) it seems that our innovative “tech-giants” are just getting started as there was a drastic rise in the amount of venture capital seed money available last year, an increase in patent registrations, and of course, release of new IPO’s (Facebook for example).

So, with the already limited supply of inventory and continued increase in qualified buyers entering the housing market, what may be considered to be “overbidding” on a home today could be seen as “a deal” in another few months. Compared to last summer, the “overbidding” in San Jose was close to 2-3% over asking price, while today we’re seeing close between 10-15% or more…

My two-cents…If it makes financial sense for a prospective homebuyer to own versus renting, considering their monthly housing payments and out of pocket expenses, and the purchase will be for long-term holding, then what difference does it make in the long run if they paid an extra $10k, $20k, or more out of pocket…the same opportunities today are not guaranteed to be around tomorrow. I know that I’d personally rather lock in a housing payment for 30 years at a very low rate versus leaving myself open to the ever fluctuating rental market. And if it meant putting more down from savings, again what’s the difference if my savings account is earning 0% anyways?

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