The Fall issue of Inside Irvine is available online now, and Irvine residents will see Inside Irvine in their mailboxes soon.
The 30-year fixed-rate mortgage increased an average of 1.2% since the beginning of the year, (from 3.22% to 4.42%), and just last week it leaped a quarter of a percent. Look at this chart to see how the movement of home-loan rates last year were not bad at all, compared to the rapid increase in rates this year:
I've read that many mortgage experts expect rates to continue to increase throughout the rest of this year. Let me know if you’d like me to send you some reading material.
What does this mean for you if you're looking to buy a home?
Well, because both home values and rates are going to increase for the rest of the year, if you’re able to buy, it would be better to do so sooner rather than later. That's because the longer you wait, the more it will cost you.
But there is some good news if you buy now. Yes, you will be paying more for a home now than you would have if you had bought last year, and you’ll be paying a higher mortgage rate than you would have last year, rising prices do have a long-term benefit once you buy.
If you purchase a home today valued at $800,000 and put 10% down, you would be taking out a $720,000 mortgage. That means at a 4.42% fixed mortgage rate, your mortgage payment would be $3,614 a month (this does not include insurance, taxes, and other fees because those vary by location). You can see a Mortgage Calculator on my website, HomesForSaleinIrvine.com
Now think about the huge growth in equity that you’ll see, due to rising home prices. Last week, Pulsenomics released their latest Home Price Expectation Survey.
The survey shows that the experts expect a 9% increase in home values in 2022.
So although paying a higher price for a home in Irvine, (or anywhere actually!), and paying a higher mortgage rate, can be difficult pills to swallow, waiting will just cost you more. If you're ready, willing, and able to buy a home, now will be a better time than a year, or even six months from now.
Let's connect to begin the process today. Call or text 949-537-2079 or send me a message!
If you were thinking about buying a home this year, but already pressed pause on your plans due to rising home prices in Irvine and the surrounding cities, and increasing mortgage rates, there's something you should consider.
According to the latest report from ATTOM Data, owning a home is more affordable than renting in the majority of the country. The 2022 Rental Affordability Report says:
. . . Owning a median-priced home is more affordable than the average rent on a three-bedroom property in 666, or 58 percent, of the 1,154 U.S. counties analyzed for the report. That means major home ownership expenses consume a smaller portion of average local wages than renting.
Other experts in the industry offer additional perspectives on renting today. In the latest Single-Family Rent Index from CoreLogic, single-family rent saw the fastest year-over-year growth in over 16 years when comparing data for November each year (see graph below):
While it’s true home prices and mortgage rates are rising, so are monthly rents. As a prospective buyer, rising rates and prices shouldn’t be enough to keep you on the sideline, though. As the chart above shows, rents are skyrocketing. The big difference is, when you rent, that rising cost benefits your landlord’s investment strategy, but it doesn’t deliver any sort of return for you.
In contrast, when you buy a home, your monthly mortgage payment serves as a form of forced savings. Over time, as you pay down your loan and as home values rise, you’re building equity (and by extension, your own net worth). Not to mention, you’ll lock in your mortgage payment for the duration of your loan (typically 15 to 30 years) and give yourself a stable and reliable monthly payment. We all know that landlords will increase the rental amounts from time to time.
When asking yourself if you should keep renting or if it’s time to buy, think about what Todd Teta, Chief Product Officer at ATTOM Data, says:
“. . . Home ownership still remains the more affordable option for average workers in a majority of the country because it still takes up a smaller portion of their pay.”
If buying takes up a smaller portion of your pay and has benefits renting can’t provide, the question really becomes: is renting really worth it?
If you’re weighing your options between renting and buying, it’s important to look at the full picture. While buying a home can feel like a daunting process, having a trusted advisor on your side is key. Let’s connect to explore your options so you can learn more about the benefits of homeownership today.
Unless you've been living under a rock, by now you know that our local Irvine real estate market is going absolutely bananas. We know that we’re currently in an aggressive sellers market, and the numbers from the past couple months this year compared to those of last year prove it.
Historically low rates have led to the Expected Market Time dropping to 23 days, the lowest level for this time of year since tracking began in 2004.
For buyers waiting for the market to slow and turn more favorably towards the home shopper, there seems to be no light at the end of tunnel.
Housing has been lining up in favor of sellers since 2012. Many thought that the pandemic would slow housing, create a deep recession, and erode home values, giving buyers that much desired edge. Instead, rates plummeted to record lows, demand escalated, the inventory of homes available plummeted to unfathomable depths, and home values soared to unbelievable heights.
The pandemic led economic recession lasted only two months, and it did not touch the Orange County housing industry, and certainly not Irvine's housing industry!
Values have climbed more than 20% year-over-year and the pace of Orange County housing has not slowed much at all this year. The Expected Market Time (the amount of time between hammering in the FOR-SALE sign and opening escrow) is not measured in months any more - it is measured in days, and often in hours!
A Hot Seller’s Market is defined as a market time below 60-days, the lower the level, the hotter the market. Today, Irvine sellers cannot keep their homes on the shelf - they go almost immediately.
Interest rates although still super-low, are rising. As rates rise further, many buyers will put their home-buying plans on hold because as monthly mortgage payments rise, affordability diminishes. As a result, the inventory will rise with fewer buyers in the marketplace, and the Expected Market Time will rise too.
The market will transition first to a Slight Seller’s Market, between 60 and 90 days of inventory, then to a Balanced Market, between 90 and 120 days, next to a Slight Buyer’s Market, between 120 and 150 days, and finally, to a Deep Buyer’s Market, greater than 150 days.
Active, (for sale), inventory dropped 9% in the past two weeks and today there are only 85 homes listed for sale in the whole of Irvine.
The prices of Irvine active listings range from $448,000 to $49,950,000!, (for a 7-bedroom, 12-bath Shady Canyon estate).
A lot of people who are considering selling their home but don’t want to deal with the pressure of buying in this market, what with prices going up, are holding off on selling - for the fear of being homeless or hoping to exit at the top of the market. Who knows when the to of the market will be here?!
Even in this crazy market you need a plan. Let's structure your plan together.
Whether it’s making an offer on a home, or figuring a list price for your present home, it’s important to understand what’s really going on and what the data is showing us.
My team and I are always here to answer any questions. If you or someone you know plans to buy or sell in the next 12 months or so, give me a call, shoot me an email or text, and let’s chat.
2. Prices aren’t soaring out of control.
3. We don’t have a surplus of homes on the market. We have a shortage.
For years I've talked about why it makes financial sense to buy a home, rather than rent one, but more often than not, we’re drawn to the emotional reasons for homeownership.
It doesn't matter if the living space is tiny or huge, whether the home is on the modest type, or one with a lot of wow factors, the feeling of a home means different things to different people. Sometimes it’s a certain pleasant aroma in the air, or the feeling one gets when relaxing in the patio, comfortable and pleasant connections to our own homes are typically more important to us than the financial ones. Here are some of the reasons why.
1. Owning your own home is something you've achieved and is worth celebrating
You’ve probably worked very hard to achieve your dream of homeownership, and it doesn't matter whether it’s your first home or your tenth, congrats to you! You’ve earned it.
2. There’s no place like home
Besides not having a landlord who might ask you to leave one day, you'll own your own place for as long as you like. Security and peace of mind is important to most of us. Owning your own home also offers safety and a comfortable place where you can simply relax and kick-back after a long day. Sometimes, that’s just what people need to feel recharge their batteries and feel truly content.
3. You can find more space to meet whatever needs you have
Whether you want more room in your home for your changing lifestyle, (maybe you're working from home, need space for the kids' virtual school, or you need a spot to work out), or you just would rather have a larger outdoor space for keeping your distance while entertaining in these pandemic times, you can invest in a location that truly works for your changing needs.
4. YOU decide what upgrades and other changes you want
So you want to copy one of those ideas you saw on Pinterest? Well, go for it - remember there's no landlord here, so no need to ask anyone for permission. Thinking of getting a four-legged member of the family? Well, again, there's no permission needed and you certainly won't be paying any pet deposit! of paying an additional pet deposit for your apartment building? You can do a lot more when you own a home, compared to when you're somebody's tenant.
Buying a home for the first time? There are programs for you! Maybe you'll be selling your home and moving up, or downsizing. Relocating to Irvine? Whatever the new chapter in your life is going to read like, now is a great time to think about all the things that turn a home into a HAPPY home.
If you’re like most people, you’ve probably heard that getting pre-approved for a mortgage loan is the first step in the homebuying process. But do you know why this is so important?
It’s so easy to fall in love with a home that is outside your budget when you start looking for a property to buy. That home then becomes the benchmark, and you compare other homes to that one.
You’ll agree that it makes sense know your price range, before you start house-hunting. Then you’ll be comfortable with your monthly payments and there is less chance of any surprises later. You can get a pre-approval letter from the mortgage department at your bank, or perhaps you already know and trust a mortgage loan consultant. If not, ask me to put you in contact with a really smart mortgage consultant who has helped many of my buyer clients.
According to a recent survey from realtor.com a lot of buyers are making the mistake of NOT getting pre-approved at the start of the homebuying process:
“Of over 2,000 active home shoppers who plan to purchase a home in the next 12 months, only 52% obtained a pre-approval letter before beginning their home search, which means nearly half of home buyers are missing this crucial piece of paperwork.”
The pre-approval letter shows sellers that you’re a qualified buyer, and the letter must accompany your offer to buy an Irvine home.
Right now, the Irvine housing market is hot, with inventory being arguably the biggest challenge for today’s buyers. There are a lot more active homebuyers than there are sellers, therefore things are in the sellers’ favor.
With limited inventory nationwide, homes are getting an average of 2.9 offers for sellers who negotiate, causing bidding wars.
Danielle Hale, Chief Economist for realtor.com notes:
“For ‘a buyer in a competitive market, it’s typically essential to have pre-approval done in order to submit an offer, so getting it done before you even look at homes is a smart move that will enable a buyer to move fast to put an offer in on the right home.’”
In addition, today’s housing market is also changing from moment to moment. Interest rates are the lowest ever seen.
Banks and other lenders are tightening-up their requirements so don’t delay beginning the pre-approval process – the lender may well be asking for documents you hadn’t thought of. They’ll be looking at your loan application and credit report, as well as info about your debt, work history, down payment and even your residential history.
In a competitive market with low inventory like the Irvine housing market, a pre-approval letter is a game-changing piece of the homebuying process. If you’re getting ready to buy, let’s connect before you start searching for a home.
The health crisis we face as a country has led businesses all over the nation to reduce or discontinue their services altogether. This pause in the economy has greatly impacted the workforce and as a result, many people have been laid off or furloughed. Naturally, that would lead many to believe we might see a rush of foreclosures like we saw in 2008. The market today, however, is very different from 2008.
The concern of more foreclosures based on those that are out of work is one that we need to understand fully. There are two reasons we won't see a rush of foreclosures this fall: forbearance extension options and strong homeowner equity.
1. Forbearance Extension
Forbearance, according to the Consumer Financial Protection Bureau (CFPB), is when your mortgage lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. This is an option for those who need immediate relief. In today's economy, the CFPB has given homeowners a way to extend their forbearance, which will greatly assist those families who need it at this critical time.
Quite a few homeowners opted to pause their mortgage payments but of course they'll have to pay back that amount later. Many banks are saying that they want the paused payments to be repaid in one lump sum but are offering other repayment options.
Under the CARES Act, the CFPB notes:
"If you experience financial hardship due to the coronavirus pandemic, you have a right to request and obtain a forbearance for up to 180 days. You also have the right to request and obtain an extension for up to another 180 days (for a total of up to 360 days)."
2. Strong Homeowner Equity
Equity is also working in favor of today's homeowners. This savings is another reason why we won't see substantial foreclosures in the near future. Today's homeowners who are in forbearance actually have more equity in their homes than what the market experienced in 2008.
The Mortgage Monitor report from Black Knight indicates that of all active forbearances which are past due on their mortgage payment, 77% have at least 20% equity in their homes (See graph below):
"The high level of equity provides options for homeowners, policymakers, mortgage investors and servicers in helping to avoid downstream foreclosure activity and default-related losses."
So while many think that we may see a rush of foreclosures this fall, the facts just don't add up in this case. Today's real estate market is very different from 2008 when we saw many homeowners walk away from their homes when they owed more than their homes were worth. Not many of that happened in Irvine but there were certainly some cases, and many short sales. This time, equity is stronger and plans are in place to help those affected weather the storm.
With a low supply and strong demand, the Irvine real estate market has not been this hot since 2013. This is the situation in Irvine now:
Thankfully my Irvine listings aren't taking long to sell.
Have you been thinking about becoming a property investor, and wondering why you should buy a rental? Here are some signs to look for if you are on the fence about investing in a rental.
“If you don’t own a home, buy one. If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.” John Paulson.
Low Interest Rates
When mortgage rates drop, it is much easier to find a property that will make you income. Mortgage rates just fell below 3% for the first time ever! The best place to figure out what kind of interest rate you will get for an investment property is with a mortgage lender. Check with your bank or ask me who a lot of my buyer clients use to get excellent service and great rates.
A heads-up for you that lenders charge more for “non-owner occupied” transactions than for one where the buyer will actually live in the home.
Let’s discuss how the process of buying an income-producing home is started, and I’ll send you properties to view virtually initially, (3D virtual tours, floor plans, viewing info and photos online and property walk-through videos), and then when you think you’ve seen one you may want to buy, I’ll arrange an actual tour of the property.
Check in with me to see how much your current home is worth! Some investment properties require a high down payment, but low-interest rates, refinancing and knowing your home value can make a difference. For example, if you need to borrow 10%, many homes in good markets can appreciate 10% of their value in just a year, depending on the condition and the location.
Chat with a lender to see if you can qualify, and check in with your current mortgage company to discuss your plan.
Scarcity of Units
You probably know that Irvine rental homes are in high demand. This is because Irvine is growing and the demand for a space to rent is higher than the available properties, unless renters want to live in one of the Irvine Apartment Communities. Therefore now is the best time to find an Irvine property to buy for rental purposes.
Do you know if the rate of return in Irvine is growing? Let’s talk. It’s important to know that if you’re thinking of investing in an Irvine property. There is potential to make significant gains over time.
Ultimately, talking to professionals can help you decide if now is the right time to invest in Irvine rental properties!