When to use an Adjustable Rate Mortgage

An Adjustable Rate Mortgage (ARM) can be risky because – as the name implies – the rate is adjustable based on a financial index. Thus, the rate can go up, down or remain the same. However, there are situations where an ARM makes sense.

  • Buying for the short term – Buyers planning to live in the home for 3-7 years.
  • Strong future prospects – Buyers who know their financial future is about to improve.
  • High net worth individuals – Buyers who know they can earn more interest with their than what they are paying in interest on a mortgage.

Experts warn that the worst scenario is for a buyer who can’t qualify for a 30-year fixed to use an ARM to qualify with a lower rate.

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Checking out the neighborhood

The location of a home determines its value and desirability; it also determines your overall satisfaction. A few things to keep in mind:

  • Don’t just visit the prospective home on the weekends. What’s the traffic and the noise like on a Monday morning. Will you be on a school route? If possible, stay overnight nearby so you’ll have an idea of how things are on a workday 8am.
  • Check the sidewalks. Sidewalks are a safety measure and should be in good repair. The lack of sidewalks may mean that taking a stroll around the neighborhood could be a risky proposition,
  • Local foreclosures. Foreclosure trends can be a good indicator of the local job market as well as the state of the neighborhood long-term.
  • Local amenities. Do your homework on schools, crime rate, parks as well as nearby shopping.
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Baby Boomers finding it difficult to downsize

Fifteen years ago or so the trend in warm climates such as Texas, Arizone, North Carolina, Florida etc. was for new retirees (mostly Baby Boomers) to advertise their success in life by building huge 5 or 6-bedroom homes. This, of course, was a time of easy credit and real estate was booming.

These days, of course, everything is different. Keeping up with maintenance is very costly and the owners are that much older. Even more challenging is the fact that these large homes are proving to be very difficult to sell. Younger buyers aren’t interested in these mansions, opting instead for more modest homes. A recent survey revealed that more than half of would-be buyers are looking for homes priced $200,000 or less.

In Scottsdale, Arizona there are currently 349 homes valued at more than $3 million on the market with many being listed at discounts of up to 50 percent.

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Easing the mortgage application process for the self-employed

Fannie Mae and Freddie Mac are instituting an automated system that will simplify the mortgage application of self-employed and freelance workers. This automated income verification system will put an end to the manual combing through tax documents that often delays the process.

The new system should allow loan applications to take only three to five days to process and reduce the costs of the applications.

According to the Bureau of Labor Statistics the number of self-employed works in the United States is over 15 million.

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Co-Living: A new era of affordability and connectedness?

In an age of high home prices, low inventory and an ever-increasing sense of human disconnectedness, is co-living an answer in the coming decades?

With rentals at the highest point since the mid 1960’s, more and more millennials – and those coming after, about to enter the workforce – are looking for housing that is affordable and brings a sense of community.

A growing list of startups are helping to facilitate co-living in urban areas from finding matching roommates to classes on collective living.

While home ownership remains the “American Dream” for many, others are seeking different alternatives for the future.

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Home equity continues to increase

Given the continued appreciation of home prices, it’s no surprise that CoreLogic’s Home Equity Report states that U.S. homeowners with a mortgage saw an increase in equity of 8.1 percent year over year. The average homeowner saw home equity gains of approximately $9,000 between the fourth quarter of 2017 and the fourth quarter of 2018.

The number of homes with negative equity, where the loan balance is higher than the home’s current worth sits at 2.2 million or 4.2 percent of all mortgaged properties.

Given that home prices are predicted to rise 4.5 percent over the next year, this number should be reduced by 350,000.

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More Americans keeping up with mortgage payments

According to the Mortgage Bankers Association the number of Americans who are able to keep up with their mortgage payments has recently hit a twenty-year high. Analysts attribute this to the strong economy and the more rigid underwriting rules enacted in 2010 that make it more difficult for financially strapped individuals to attain a mortgage.

However, skeptics point to the fact that many lenders are easing up on their standards as the average credit ratings of borrowers is already declining according to a new study by FICO.

In addition, Fannie Mae has eased it’s requirements on debt-to-income and the FHA is now approving debt-to-income rations above 50 percent.

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January home sales drop in Bay Area

The California Association of Realtors reported that home sales in the San Francisco Bay Area decreased in January by 5.8 percent from a year ago. Home sales in the six of the nine Bay Area counties decreased with Napa, Solano and Contra Costa counties declining by more than 10 percent.

Home prices continued to increase in the Bay Area but at a much more modest pace. On a year-over-year basis the median home price in the Bay Area increased by 4.5 percent over January 2018.

Most analysts saw these changes as a “rebalancing of the market” as part of the cyclical nature of real estate.

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Spring 2019 Real Estate Trends

Super high prices and bidding wars are over. Here’s what to look for in the coming months:

  • It’s no longer strictly a sellers market. Many buyers have been in the market for a long time and have continued to save. They are ready to buy but won’t get cut up in a purchasing frenzy.
  • Many looking to other neighborhoods. Reality has set in, particularly among millennials, and many will be willing to move farther out from city centers. Also, many will be willing to buy more basic homes to break into the market.
  • Affordability continues to be an issue for many. Some things haven’t changed and while prices aren’t increasing at the rate of years past, rising interest rates are now playing a more significant role.
  • 2019 will be better than 2020. Many experts say that spring 2019 will be a good time to buy if possible.
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What it means to live in “the Bay Area”

The trend isn’t new, it’s been going on for a decade at least, probably much longer but with the housing prices and rents in San Francisco, and now Oakland and San Jose, continuing to more and more families are moving east in search of affordable housing. San Ramon, Dublin, Pleasanton, and Livermore have all become large-scale suburbs, of course, and the same now can be said of Tracy, Lathrop and other communities even farther away.

According to the Bay Area Council, more than 86,445 workers traveled a minimum of 60 miles – often 120 miles or more, from the northern end of the Central Valley (including San Joaquin, Merced and Stanislaus counties), to jobs in the Bay Area in 2017 — a 43 percent increase since 2010.

The good news is that cities such as Tracy and Stockton are being revitalized as more businesses move their operations there and local shops and restaurants are starting to thrive.

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