I don’t think many buyers realize that in today’s very low interest rate climate they can purchase a $1 million dollar home for less than $2,000 per month. No really, as one does the math associated with purchasing a $1 million dollar home with 20% down and taking into consideration property taxes and insurance in addition to principal and interest, the tax-adjusted total is less than $2,000 per month. And how about the fact that it’s not just about low mortgage rates, but the fact that the amount of principal repaid on loans today is 30% MORE than what it was just three years ago.
And anyone in real estate sees that Spring 2012 may set a record associated with closed sales. Which begs the questions, “Why are all of the economists forecasting a rather flat year for 2012 as it relates to closed transactions?” My answer is that the forecasts are very conservative, and I am very confident that expectations will be exceeded.
So what’s happening with mortgage rates? How about the fact that 5/1 ARMS are running BELOW 3% and the 30-year fixed is runing BELOW 4%! Of course rates applicable to any individual client are based on a variety of factors, but the highest-qualified borrowers are closing on these rates. Those who aren’t as well qualified are still receiving great rates, even when debt ratios are high and down payments are low. The main concern about rates is the fact that there are more and more fees being attached to loans, which will force rates higher.
This is a great time to think about selling or buying as we appear to be in an optimal period.
Happy New Year! As 2011 fades away and we start to embrace 2012 with hope and optimism I, too, feel the stirrings of better things to come. Although a bit anemic the economy is showing signs of improvement. Employment numbers are improving, manufacturing is picking up, car sells had the best showing in three years and, generally, consumer sentiment is turning more positive. The one dark cloud is still housing; however I feel that a corner has been turned. There has been so much bad, negative news on this front that I feel there is an intangible fatigue with all the bad news and a desire to end the negative feedback loop.
In the Bay Area housing has stablized in many areas and there is a mindset that a housing rebound is beginning to fall into place. The catalysts to recovery are mostly the same: residential rents have now risen enough to consider buying; existing housing inventory is the lowest in five years, while that of new homes is at a 40 year low; affordability is good; delinquencies have peaked; consumer confidence is on the rise; and job growth is improving. My experience has been that in many micro markets on the Peninsula, a buyer needs to be prepared to compete for the choicest properties. Silicon Valley is shaping up to be a hot market!
“We believe there is a sizable housing demand that could be released into the market,” says Lawrence Yun, chief economist of the National Association of Realtors, NAR. The NAR is forecasting existing home sales will rise 5 percent in both 2012 and 2013; prices will edge up 2 percent in each of those two years and 4 percent in 2014.
You can be sure if the country starts to experience a housing rebound this year it will have already happened in the Bay Area as we never felt the extreme pain of the Central Valley, Las Vegas, Detroit, Florida or many other of the zombie housing markets. Our suffering has been real enough however, but the Bay Area has always been perceived as a desirable place to work and live and that will help fuel the demand this Spring and throughout the year.
