HVCC: Important information regarding Home Values

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Housing Market Prediction for 2009 and beyond...

 Economic guru, Carol Rodoni, predicts several trends for 2009:

 

1)      Foreclosures CA, NV, AZ and FL are going to continue to rise.

2)      Investors and first time buyers will continue moving into these areas with high foreclosure rates.

3)      Vulture funds out of the east coast are now putting $30K-$40K together; looking at things in the $150-$250K range, targeting a 3-5 year hold with no return, to put them back on the market and sell them once the market has bottomed out.

4)      This market creates opportunity in the lower end. People can now buy homes or investment properties for $150K in the San Francisco Bay Area, rent them out for $1100/month and get into a cash flow property.

5)      First time Home buyers are entering and will continue to enter the market this year. Affordability index has gone from 9-10% to 20%.

6)      Higher price points were the ones that went down 10-15-20%. Areas where a great deal of development occurred went down 20-30-40%. Looking back over the last 30 years the market would typically rise 6-8% per year adjusted for inflation. We hit 2000 and suddenly that escalated to 20% to even 60% in some of those areas that were being built in outlining commuter areas (i.e. Watsonville, Salinas and Brentwood). That growth rate was not sustainable. Most inflation was in the areas where the land didn’t have the value. Those markets are going to come down to prices of 1998-2000. Other areas (i.e. Santa Cruz, San Ramon) which are more primary markets, are going to 2000-2002 prices.

7)      After the above occurs, we are likely to see 6-7 months price of stability, not big changes in either direction, then appreciation slowing returning, mild 3-4% at first, then perhaps 5-6%, but nothing like we saw in the housing bubble cycle of 2000-2007.

8)      When will the bottom of the market occur? It will happen when we get back to these price points.

9)      Real estate is going to become the asset of choice because people are afraid of the stock market. People have seen 40-50% of their wealth dissipate in the past 6 months. The stock market is not going to jump back fast, could take 3-4 years.

10)   Underwriting is tough, but those buyers who can do verification of income, with full documentation can get loans. Interest rates are the lowest in 37 years. This is not going to last forever. We will see rates around 7-9% starting at the end of 2010 and by 2011.

11)   Lending is opening up, affordability numbers are increasing, and we have a new president motivated to get the economy going. All bodes well for the opportunity for Real Estate

 

*Notes by Datta Khalsa

 

Real Estate Auctions

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The News is Bad...for a Reason

Quick….which is the more exciting scenario?

 

A man walks slowly down a flight of stairs, sometimes pausing or retracing his steps until he reaches a floor. After trudging along for awhile, he notices another staircase and begins ascending, occasionally pausing or taking a step back before methodically proceeding upward.

 

A second man hurtles down a terrifically high flight of stairs. Ignoring the safety railings, he runs recklessly downward, dodging obstacles in his path as he goes. He suddenly cries out as he loses his footing, sails through the air, tumbles down several flights of stairs in a spectacular crash. The badly injured man is bandaged from head to toe and attached to a variety of beeping, flashing medical devices that monitor his vital signs. Experts debate his condition but agree that the situation is dire and prospects for recovery are uncertain.  

 

…and that’s why more headlines say “Home values off the cliff in Phoenix, Miami and Las Vegas” than “Things aren’t bad in Seattle, Portland and San Francisco.” Most readers just find sensational headlines more interesting. And while they may help sell newspapers, they also scare buyers and sellers to the sidelines, though the news may be very positive for home buyers in particular.

 

 

Market Timing is Far From Perfect!

No one wants to purchase a home only to see its value decline. But should you wait to buy a home until prices bottom out? A quick web search will yield a number of articles and opinions for and against timing the real estate market, but beware of those in favor of market timing who also want to sell you a how-to book or system.

 

Many people who have tried to time the market miss out on the chance to build equity by waiting to buy until prices rise again. The problem? Market cycles only become clear in retrospect. In the midst of a market slowdown, it’s very difficult to predict when housing prices hit their low points. What is the best way to protect against buying at the wrong time? Sell at the right time. In many cases you can’t control when to sell, but you should plan on keeping your home at least six or seven years.

 

The longer you own your home, the better chance you have of building wealth and protecting yourself from the market’s ups and downs.

 

 

Long Term Owning Usually Beats Renting

Typically, a weak housing market corresponds with a strong rental market. If the rental market is strong in your area, it may indicate weakness in the local housing market, which typically favors Buyers over Sellers.

 

When you buy a home with a fixed-rate mortgage, you can lock in a predictable monthly payment for 15 or 30 years. That means the largest part of your housing costs, principle and interest, are fixed. For some people, that stability, along with the sense of community that comes from being a homeowner, is enough to tip the scales toward home ownership.

 

If the monthly cost of buying vs. renting is comparable, you may consider some related factors to help you decide. Use the mortgage calculator under the “Finance Tab” on our website to find out which sales price is equal to what you are currently paying in rent. For example, if you are paying $2600-$2700 in rent per month that is equivalent to the principle and interest payment on a $500,000 Loan (5% 30-year fixed rate). Getting pre-approved for the loan is Step One. Your interest rate may be higher or lower depending on the amount you put down and your credit score. Email or call us and we will connect you with our preferred lenders.

 

When you rent, your landlord receives any appreciation and tax breaks associated with owning the property. If you plan on any significant remodeling, buying may be also preferable to renting. We are here to help you decide which is best for you!