Choosing the right mortgage

When you purchase a home, chances are you won’t be able to buy it outright: you’ll need to borrow money and this loan is called a mortgage. Depending on your financial situation and your long-term plans, there are several options for choosing which type of mortgage is right for you.

  • Fixed rate mortgage: For those who want predictability – your interest rate will stay the same for the life of the loan (typically either 15 or 30 years). A good choice if you plan on living in the home for 7 years or longer
  • Adjustable rate mortgage (ARM): ARMs have a fixed rate for short period (usually 3 or 5 years) often at lower rate, then can change according to the interest rate index changes. Good to get started or if you don’t mind the unpredictability. Also good if you only plan to be in the home for less than 5 years
  • Conforming or jumbo loans: Conforms to the guidelines of Freddie Mac and Fannie Mae, loan limits depend on location and number of units. Jumbo loans exceed those guidelines and have stricter qualifying standards
  • Government backed loans: FHA loans, backed by the federal Housing Administration often have lower down payments, interest rates and more flexible qualifying requirements. VA loans are for veterans or the members of the military offering favorable terms

The end of the Open House?

According to the National Association of Realtors only 3% of potential home buyers visited an open house in 2018. This is down from 68% twenty years ago!

Moreover, many realtors are advising their clients not to feature an open house saying it is “out of date” or “utterly worthless.”

The rise of the Internet has changed home buying, of course, and 92% of potential home buyers view properties first online. Email alerts allow buyers to see changes in price etc. instantly.


Sales are down, prospects are good

In a bit of good news / bad news, pending home sales (contract signings) decreased by 2.2 percent in December but the Federal Reserve’s announcement that they don’t foresee any increases in the interest rate for the future has already sent mortgage rates tumbling.

Moreover, the government shutdown did not have any significant impact on home sales although analysts warned that a second shutdown could have more severe consequences.

Overall, the National Association for Realtors expressed confidence that 2019 would be strong year for home sales.


Natural disasters caused $11 billion real estate damage in 2018

According to CoreLogic’s Natural Hazard Report there were 11 major natural disasters – floods, hurricanes, and wildfires in the United States in 2018 causing more than $11 billion in commercial and residential real estate losses.

Hurricane Florence caused widespread flood damage in North Carolina, South Carolina, and Virginia with 85 percent of the losses not covered by insurance policies.

Wildfires burned the eighth highest number of acres in U.S. history. Eleven states (all in the West) had a least one wildfire that burned more than 50,000 acres with California and Oregon suffering the most.


The hottest housing market in 2019? Think San Jose

According to a report by Zillow, San Jose with its low unemployment rate and double digit home value growth, projects to be the hottest housing market in the United States in 2019. Just as it was in 2018, as a matter of fact.

Income growth remains strong in San Jose with the average household income rising by 6.8 percent in 2018. The good news for potential home buyers is that inventory of available homes in San Jose has nearly doubled in recent months.

However, change could be coming in the real estate market as analysts see a move towards the South where homes in Jacksonville and Orlando, for example are selling for six times cheaper than San Jose and rents are three times cheaper on average.


NAR Real Estate Forecast

It’s that time of year again and the National Association of Realtors is weighing in on their forecast for the real estate market in the coming months.

Although the Pending Home Sales Index fell by 0.7 percent in November 2018 and contract signings were down 7.7 percent compared to 2017, analysts see this as a short=term pullback as mortgage rates fell to 4.55 percent.

More inventory should be coming to the market soon and the overall strength of the economy should provide long-term growth potential in real estate.


2019 Real Estate Trends

The San Francisco Business Times has posted their 2019 residential real estate preview with the following highlights:

  • Yes, the San Francisco market remains very hot but the days of multiple bids and overbidding seem to be over, unless the property is an absolute stunner
  • Home price appreciation continues to slow – 3 percent in November over November 2017 – and analysts expect more of this in the immediate future
  • 8,000 new homes are scheduled to be built in Oakland in the next few years but experts wonder if it is simply too little, too late as rentals have increased by nearly 70 percent in the last five years and the city’s population has increased by 7 percent since 2010

A decelerating market?

According to the most recent report from CoreLogic, Bay Area home prices rose at their slowest year-over-year pace in almost two years last month. The median price paid for a home in the nine counties of the Bay Area was $815,000 in November, which is down 3.8 percent from October and up 3.8 percent from November 2017. This median price represents a 6.9 percent decrease ($875,000) set in June of 2018.

Sales were down 14 percent from October and 15.2 percent from November, 2017.

Many analysts predcited a fairly slow market until spring.


Lack of affordable rental housing contributing to homelessness

Despite low unemployment and rising incomes, homelessness continues to increase – up 0.3 percent for the second straight year – and most analysts cite the lack of affordable rental properties as the prime reason.

Not surprisingly, the most expensive metro areas are seeing the greatest jumps in homelessness. Currently, nearly one quarter of the country’s homeless populations lives in either New York or Los Angeles where rents have risen 20 percent and 35 precent, respectively since 2012. In Seattle homelessness has increased by 4 percent in 2018 while rents have risen 64 percent since 2012.


Housing inventory continues to grow

According to the November Zillow Real Estate Market Report the number of homes for sale has increased year-over-year for three straight months after four years of annual declines.

Many of the most significant increases are in some of the country’s hottest markets (think San Jose and San Francisco) but these are also areas with the most potential buyers so competition remains fierce.

Nationwide, the median home value is $222,800 up 7.7 percent year-over-year.