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Rising Home Prices Pressure Whittier Home Buyers

by The Domis Team

Whittier home buyers face tough decisions these days: buy a home now, before home prices rise higher and mortgage rates increase? Or, wait for better home inventory and risk paying a bit more?

According to industry analysts, the rise in home prices, especially in California, will not slow down anytime soon. The New York Times reports that sunbelt states are seeing double-digit increases in price rates from a year ago, with hot markets like San Francisco and Phoenix setting examples.

What keeps California home prices on the rise? In addition to our improving economy and employment outlook, homes in California are a popular choice for retirees, vacation home buyers, and international buyers and investors. We are also seeing an uptick in corporate relocations.

In other words...if you don't buy a Whittier home that's on the market today, someone else will! We should see some improvement in home inventory in the upcoming months, but we are unlikely to see a glut of homes on the market. As long as home demand remains strong, prices will push higher.

Meanwhile, mortgage interest rates are expected to gradually climb higher, from the 3.50% we are seeing today for 30-year fixed rate mortgages, to 3.75% or 4.00% in the next 12 months. Slow growth in the economy will keep mortgage rates behaving, but unexpected market shifts and global events can influence rate hikes.

The biggest challenge for first-time California home buyers who face escalating prices, involves staying qualified for a mortgage as rising rates and home prices affect debt-to-income ratios. Home buyers who are in the entry-level price ranges, who qualify for a mortgage today, are the least equipped to gamble with what the market could bring tomorrow!

Need help with your home buying questions? Turn to the Domis Team for expert, professional assistance for Los Angeles and Orange County real estate! Let us be your guide to the newest home listings and the latest market activity. Contact us today - we will be glad to help you!

The Domis Team
Prudential California Realty
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Are First-Time California Home Buyers Pushed Out of the Market?

by The Domis Team

A new article in the Los Angeles Times evidences an unfortunate trend in the housing market: fewer first-time home buyers. The combination of tough mortgage underwriting standards and competition from cash buyers seems to be putting the squeeze on first-time home buyers in California and around the country.

Here are some highlights from the article, along with our own thoughts on the matter!

According to data from the National Association of Realtors, first-time home buyers typically represent about 40% of home sales. But between 2008 and 2012, they’ve accounted for fewer transactions, representing about 30% to 35% of the market. The result? 2.2. million fewer home buyers over a four-year period.

In the past 3 months, first-time home buyers have accounted for only 30% of the market, even while mortgage interest rates have remained at historic lows. This would suggest that reduced home inventories are also taking away home ownership opportunities from first-time buyers, who are often competing with cash buyers who are buying homes for investment purposes.

One challenge for first-time home buyers is qualifying for a mortgage while their debt-to-income ratios exceed 43%. The common culprit is student loan debt, which has become a growing burden on would-be home buyers. A Pew Research study shows an average student debt balance of $26,682. More than 1 in 10 graduates have nearly $62,000 in student loan debt. These figures have increased sharply in recent years.

FHA mortgages remain the best, and perhaps only option for first-time home buyers, but increased mortgage premiums have made them more expensive than in prior years. This also affects the debt-to-income ratio as mortgage insurance premiums are considered in the picture.

What can first-time home buyers do? Here are some suggestions:

  1. If you have more than one student loan, consolidate them. This can help lower your overall interest expense and improve your cash flow.
  2. It will take years to pay off your student loans, so keep your other debts at an absolute minimum. Car payments, cell phone contracts, and credit cards payments can easily add up to far more than your student loan payment. Control what you can!
  3. If you need time to catch up on other expenses, ask for a forbearance on your student loan. This means you can stop making payments, with permission, for a specified period of time without penalty.

Buying a home may be a bit tougher for first-time home buyers, but it is not impossible! When you need home buying help, let the Domis Team be your guide to Whittier real estate! We will be happy to refer you to a reputable mortgage lender and give you the inside scoop on the local market!

Contact us for friendly, professional service!

The Domis Team
Prudential California Realty
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Are First-Time Home Buyers Too Hesitant in Whittier?

by The Domis Team

A recent article by Bloomberg claims that adults 20 to 34 years old are reluctant to buy a home, due to the lingering effects of the Great Recession. Stagnant wages, high student loan debt, and slow economic recovery daunt the financial mettle of "Generation Y."  Per Bloomberg, this generation is reluctant to commit to home ownership, due to the previous decline in home values and shaken confidence in their own earning power.

At the same time, an article by USA Today points out once again that home ownership is the better long-term solution to rising housing costs. Here are some reasons to buy a home now:

1. Homes are very affordable. The national median home prices today are near 2003 levels. Note, prices have risen about 8% as a national average, from June 2011 to June 2012. Those waiting for prices to fall further may find themselves disappointed!

2. Diminishing home inventory. Yes, we will continue to see foreclosures on the market, but it is predicted that surplus inventory will be cleared by the end of 2013 - which in turn will cause increases in home prices. Here in Whittier, we have seen the effects of reduced inventory in our market, and home prices have firmed up.

3. Low mortgage interest rates. With 30-year mortgage rates running just under 4%, a fixed-rate mortgage protects you from inflation much better than a landlord will! Our prior blog illustrated the compounding effect of annual rent increases, and how home ownership allows you to get ahead after just a few years.

This doesn't mean you should throw all caution to the wind and buy whatever you can get. Instead, plan your home purchase based on long-term needs, using practical budgeting and a sensible mortgage as your guide.

That said, you shouldn't let media-driven fears prevent you from home ownership. First-time homebuyers in Whittier who are prepared for a mortgage can do very well in today's market! And if you're not quite ready to buy a home yet, that's ok! You can still gather information about the Whittier real estate market and learn about the home buying process.

For full-service home buying help, turn to the Domis Team, your Whittier real estate professionals! Whether you're just starting to look, or you're ready to buy, we can help you! Take advantage of our free, automated alerts and enjoy the benefits of our local expertise! For friendly, professional assistance, contact us today!

The Domis Team
Prudential California Realty
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Linda & Ryan Domis - The Domis Team
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Whittier CA 90603
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