When buying an older home

Older homes often have a lot of character and can certainly increase a buyer’s options. However, age can have its detrimental side and there are a number of factors that should be looked into before deciding to purchase.

  • Structural and Foundation: Unevenness and cracks in the foundation can mean trouble down the line and its best to have the building inspected by a licensed structural engineer.
  • Hazardous Materials: The older the home is, the more likely it is to have some hazardous materials. Lead can be found in paint used before 1978 and plumbing before 1985. Asbestos can be found in roofing and insulation installed before 1980.
  • Plumbing and Electrical: Old plumbing and electrical systems can be a safety hazard and may be very costly to replace.
  • Heating and Cooling Systems: Poor efficiency often mars older heating and cooling systems.

Bay Area housing: competitive but fewer bidding wars

While Bay Area housing remains very competitive, bidding wars have declined sharply. July, 2019 saw 13.3 percent of housing sales in the San Jose area with multiple bis compared to 80 percent a year earlier. In the san Francisco area (including Oakland and Hayward) 35 percent of offers had bidding wards compared to 72.4 percent the previous year. Nationally, bidding wars accounted for 11 percent of sales, the lowest rate since 2011.

Analysts believe that uncertainty in the stock market along with a fear of overpaying is reducing the sense of urgency to make an offer.

San Francisco remains the most competitive market in the country and bidding wars still occur, particularly if the property is reasonably priced to begin with.

Home buyers being patient

As the median price nationwide for a single-family house increased 4.3 percent to $279,600 in the second quarter, according to the National Association of Realtors, prices in many of the country’s most expensive markets – including San Jose and San Francisco actually declined.

Analysts report that buyers are more cautious and not rushing to buy as in years past, perhaps hoping for further declines. Lower-end properties remained out of reach of most first-time buyers.

Bay Area housing in perspective

According to a new study by Clever Real Estate, home prices have increased four times as fast as incomes since 1960. This ever-widening gap between housing costs and wage growth means the typical family in San Jose and San Francisco spends at least nine times their annual household income to buy a home. This is the highest ratio in the country.

While housing prices have leveled off this year after hitting a peak of $928,000 in May 2018 – according to real estate data firm CoreLogic – home sales have also declined even though more units have come on the market.

An often unseen consequence of the high real estate prices is that many service providers – restaurants, barbers, dry cleaners, and others – have to raise their prices as rents go up.

Finding the best home loan

When it comes time to look into mortgages it pays to search as many avenues as possible.

  • Gather information: All loans require basic information so it makes sense to gather the documents etc. for the preapproval process. This includes banking, checking, savings, investment information; debt obligations – credit cards, car loans, student loans child support, etc.; two years of tax returns – W-2s, 1099s, etc,; employer and salary and employer information; down payment information.
  • What kind of loan: Fixed rate, adjustable-rate loan (ARM), Federal Housing Administration (FHA), VA loan, Other (USDA Rural Development loan. Bridge loan, etc.
  • Investigate lenders: Big banks, neighborhood banks, credit unions, savings and loans, online mortgage lenders, provate lenders

Millennials finances improving

A new survey of 1,000 adults born between 1981 and 1996 shows that they are earning more and are confident that they will be able to purchase a home in the near future.

Much of the improvement in earning power comes from women who are making more money than women of older generations. Today’s millennial women are focusing more on careers at a younger age while postponing marriage and having children.

Only 10 percent of those surveyed said they would have to have help from their parents to get a mortgage down from 17 percent a year ago.

Singe-family home construction increases

In a bit of good news for the real estate industry – and those looking to purchase a home – single-family home construction increased in June, although not nearly enough to meet buyer demand. According to the U.S. Commerce Department, a drop in multi-family startups meant that total housing starts in June were 0.9% lower than a year ago.

Single-family construction increased by 3.5% in June to 847,000 units while multi-family startups dropped by 9.2% to 406,000 units.

Builders again cited labor and lot shortages as well as rising costs of building materials for the general shortfall.

Foreign real estate investing continues to decline

Since 2017 residential home purchases by people outside of the United States has essentially been cut in half, dropping from $153 billion to $78 billion in 2019.
Analysts cite two main reasons for the steep decline:

  1. The slowdown in the global economy – particularly China, which is the number one investor in U.S. real estate but has declined by over 56 percent in the last two years. The other top countries include Canada, India, the U.K. and Mexico.
  2. The U.S. dollar remains strong, making it more expensive for foreigners buying in other currencies.

Cutting FHA insurance premiums for first-time buyers?

The US House of Representatives has approved a bill that cut the cost of upfront mortgage insurance fees on FHA (Federal Housing Administration) loans for first-time home buyers. The bill still has to pass the Senate.

The bill states that first-time buyers who attend a housing counseling program can qualify for a 25 basis point discount on FHA mortgage insurance loans.

The idea is to improve the financial literacy of first-time buyers and has the support of the Department of Housing and Urban Development.

Rent or buy?

These days both are expensive propositions, especially in the Bay Area. According to a recent report by CNBC News, it is currently cheaper to rent a home than to buy a new one. Which is right for you?

  • Affordability: A good rule of thumb is to plan on spending 30% of your monthly income on the total housing cost.
  • Long-term: Where do you plan to be in five years, career-wise? Buying a home is a huge investment; will you be able to afford it in five years?
  • Maintenance: Upkeep of a house is not cheap and must be factored in to monthly expenses.
  • Emotions: Just because everyone in your circle seems to be buying a home doesn’t mean it’s the best decision for you at this time.