Tel: 626-354-8000  Email Chris Griffiths
CA DRE Lic. 01118463 |
Let me explain some of the features to you:
Thanks to my friend Fred Arnold of American Family Funding for these timely thoughts: The housing market still faces many challenges. High unemployment, foreclosures and other distress sales are keeping negative pressure on prices. This of course is good news if you are looking to buy as low rates and lower prices have brought affordability to record levels.
Don’t confuse Price with Payments – Gambling on the expectation of a lower price tomorrow at the risk of higher rates can cost much more in the long run than locking in a sure thing today. Ex. $200,000 30 Yr. fixed loan @ 4.625% = $1028/mo. today vs. $180,000 @ 6.5% = $1137 per month later. In other words, paying less can still cost you more. Own, Rent, or Borrow – One way or another, a home is something we all need every day. The numbers here tell the story and it’s no secret that values have fallen, yet over time, that’s not the case. As you can see by the chart, values over the last 10 years in most states show very healthy appreciation. And over the long haul (map), all states have positive appreciation. We don’t get a history lesson in the news because the news is about the moment and the more dramatic the better. That’s what sells advertising and that’s how they get paid. For the rest of us, taking a rational, longer term view of things makes more sense. This is particularly true when it comes to a home, for this is something we are likely to own for many years rather than just moments.
That sentiment is also strong among homeowners who are under water on their mortgages. Nearly two-thirds (65 percent) believe owning a home is worth the risk of the ups and downs of the housing market and 83 percent of say they are happy with their decision to own a home. Four out of five homeowners (80 percent) say they would advise a friend or family member to buy a home while slightly fewer (78 percent) of underwater homeowners would do the same. Only 19 percent of homeowners under water believe homeownership is too risky.
The Center says its last measure of home-cost challenges showed that 9.3 million homeowners paid more than half their income on their mortgage – and that was in 2009. With the state of the labor market only worsening since then, and not only unemployment but underemployment plaguing more and more American families, the figure has undoubtedly risen. While low-income households are most likely to have such severe burdens, the Harvard researchers point out that cost pressures have been moving up the ladder to affect more moderate- and middle-income households. In fact, rates of severe-cost burden among households making between $45,000 and $60,000 per year has nearly doubled since 2001. In addition to longstanding and worsening affordability challenges, the academia report points out that the housing crash and ensuing economic downturn drained household wealth, ruined the credit standing of many borrowers, and devastated communities with widespread foreclosures. According to the Harvard Housing Center’s study, the collapse of house prices has left nearly 15 percent of homeowners with properties worth less than their mortgages and eroded the equity of most others. Overall, the amount of real home equity fell from $14.9 trillion at its peak in the first quarter of 2006 to $6.3 trillion at the end of 2010 – well below the $10.1 trillion in outstanding mortgage debt, according to the report. Meanwhile, the foreclosure crisis continues. The report cites statistics from Lender Processing Services which show that as of the end of March, about 2 million home loans were at least 90 days delinquent and another 2.2 million properties were still in the foreclosure pipeline. The LPS study found that 67 percent of these owners had made no payments in over a year, and 31 percent had gone for two years without a payment. The crisis is especially acute in pockets across the country, according to the Harvard report, which notes that just 5 percent of census tracts have accounted for more than a third of all homes lost to foreclosure since 2008. “It will take years for these neighborhoods – which are disproportionately minority – to recover from this calamity,” the researchers said. “As policymakers tackle the regulation and redesign of the mortgage market, it will be important to keep sight of the needs of these hard-hit communities.” On the foreclosure front, the Harvard report says the good news is that the share of home loans delinquent by at least three months dropped from 5.6 percent in early 2010 to 3.8 percent in March – a sign of light at the end of the tunnel, according to the researchers.
Only three years ago, it appeared that the future would likely include a healthy entry-level homeownership market. After all, the Millennial generation (also called Gen Y) rivaled the Boomers in numbers, and the youthful immigrant population (both documented and undocumented) continued to increase. Both groups were poised to be enthusiastic first-time homeowners. But a funny thing happened on the way to the future. Is this future actually déjà vu? Strauss and Howe in their influential book titled Generations, made a persuasive case that generational personalities tend to repeat in four-generation cycles. In their book, Millennials Rising, they find this pattern born out in practice by similarities between the Millennial and G.I. Generations (which Tom Brokaw dubbed “The Greatest Generation”). But there is another almost eerie similarity in their experiences so far. Members of the G.I. Generation were born between 1900-1925. They lived through the Roaring ’20’s with great exhuberance, when the future looked rosy. But when the oldest reached 29 the bottom fell out of the American economy. The next decade of the “Great Depression,” saw high unemployment and underemployment, if jobs could be found at all. The blow fell hardest on all who lost their jobs; but, it changed the outlook completely for the generation just entering the job market. Fast forward four generations and we find that Americans are again prospering, their spending patterns even being described as “irrational exhuberance.” The large Boomer population is nearing retirement, and their exodus from the job market will open new opportunities for the emerging Millennial Generation. But then, when the oldest Millennials (those born between 1981 and 2000) reached 26 and most of their peers were still in school, the bottom again fell out of the American economy and we enter the “Great Recession.” The national unemployment rate shot up to over 10 %, Boomers saw the value of their 401K accounts decline and they began making less room for new job entrants as they delayed retirement, a trend that will increase sharply according the Bureau of Labor Statistics. Economic recovery is complicated by a debt crisis in Europe, a disaster in Japan, and unrest in the Middle East which, combined with growing demand from China, is driving up fuel and commodity prices. As a consequence, it is common to hear projections that the return to a healthy jobless rate may take a decade. And the perceived effect of immigrants competing for the low supply of jobs has made Americans less accepting of new immigrants, and especially, of course, of the undocumented. Compounding these problems, the Millennials are strapped with unprecedented levels of education debt. Public support for education has declined and total student loan debt is fast approaching $1 trillion, a drag on future plans for homeownership for many graduates. In addition, some economists indicate that this recession may have a lasting effect on the job mix. Those with relatively low levels of education are likely to see good-paying jobs permanently lost, replaced by an increasing number of lower-paying positions. In this environment, one might at least hope for easier home loan terms. But just the opposite is happening. It has become harder for entry-level buyers to obtain loans as mortgage lenders have tightened up on requirements, demanding larger down payments and full documentation of earning history. As a consequence of these trends, young Millennials are likely to delay homeownership, moving “back home” or becoming renters instead. As to entry-level immigrants, many have lost their homes and some will never return to the homeownership market. The economic recession has hit real estate especially hard. But nowhere are changes in future demand likely to be felt more strongly than in the entry-level homeownership market. So, are there any real estate clients left? Boomers own the most real estate including second homes. While they may have seen their property values decline, this would be good time to buy that single story smaller home or move to an urban easy care luxury condo that fits their new lifestyle. After all, those properties also have soft prices. And the young Millennials may find that those urban condos fit for them, also. Perhaps we need to redefine “entry level”. Perhaps that smaller home or condo is a meeting place for both generations. Rental rates are increasing making mortgage payments attractive. So far mortgage interest rates are lower than they have been in decades and mortgage interest payments are still deductible, FHA still has low down programs and loan limits are attractive. For each of these generations, it is important to understand what drives their real estate decisions. It is also essential to understand how they make decisions, what they expect from an agent, and their very different styles of communicating. Boomers and Millennials need an agent’s expertise to overcome today’s challenges. Become their agent of choice. Carmen and Lloyd Multhauf are the founding developers of the Generational Housing Specialist™Council, a national real estate designation that focuses on the unique impacts made by different generations in establishing housing trends, financial products, negotiating skills and reaching a successful closing. You can read more at www.ghsdesignation.com.
There has been some falloff in the intensity of the public’s faith. Today, 37% “strongly agree” while 44% “somewhat agree” that homeownership is the best investment a person can make. When this same question was asked two decades ago in a CBS News/New York Times survey, 49% “strongly agreed” and 35% “somewhat agreed.” |
|
Copyright © 2012 Real Estate in the Foothills of Southern California - All Rights Reserved |
|
How Affordable? – Since 1963, it has cost an average of approximately 43% of ‘per capita’ or individual income to finance the cost of a median priced home (20% down payment and prevailing 30 year fixed rate mortgage). Right now, it’s only about half of that cost at approximately 22%.
Are you holding off on a purchase for fear that prices might fall further? – Chances are that some sellers might be thinking the same thing. If you’re smart about it, you can use that as an advantage to strike the best possible deal on a home today for once a seller believes that prices have bottomed or are going back up, your advantage will be gone.
The Great Recession has exacerbated the housing affordability challenges that had been building for a half-century, according to researchers at the 
Authored by 
The five-year swoon in home prices has done little to shake the confidence of the American public in the investment value of homeownership. Fully eight-in-ten (81%) adults agree that buying a home is the best long-term investment a person can make, according a nationwide Pew Research Center survey of 2,142 adults conducted from March 15 to March 29, 2011.