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Third quarter housing affordability

by Kathy and Michael Rain - The Rain Team

For release:
November 1, 2018 

Flat home prices, stable interest rates lift California housing affordability, C.A.R. reports

  • Twenty-seven percent of California households could afford to purchase the $588,530 median-priced home in the third quarter of 2018, up from 26 percent in second-quarter 2018 and down from 28 percent a year ago.
  • A minimum annual income of $125,540 was needed to make monthly payments of $3,140, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 4.77 percent interest rate.
  • Thirty-five percent of home buyers were able to purchase the $479,390 median-priced condo or townhome. An annual income of $102,260 was required to make a monthly payment of $2,560.

LOS ANGELES (Nov. 1) – More Californians could afford to purchase a home in the third quarter as flat home prices and stable interest rates combined to improve California housing affordability, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today. 

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in third-quarter 2018 edged up to 27 percent from 26 percent in the second quarter of 2018 and was down from 28 percent in the third quarter a year ago, according to C.A.R.’s Traditional Housing Affordability Index (HAI). The index has been below 30 percent for five of the past eight quarters. California’s housing affordability index hit a peak of 56 percent in the first quarter of 2012. 

C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The index is considered the most fundamental measure of housing well-being for home buyers in the state. 

A minimum annual income of $125,540 was needed to qualify for the purchase of a $588,530 statewide median-priced, existing single-family home in the third quarter of 2018. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $3,140, assuming a 20 percent down payment and an effective composite interest rate of 4.77 percent. The effective composite interest rate in second-quarter 2018 was 4.7 percent and 4.16 percent in the third quarter of 2017.  

Conversely, housing affordability for condominiums and townhomes fell in third-quarter 2018 compared to the previous quarter with 35 percent of California households earning the minimum income to qualify for the purchase of a $479,390 median-priced condominium/townhome, down from 36 percent in the second quarter. An annual income of $102,260 was required to make monthly payments of $2,560.

Compared with California, more than half of the nation’s households (53 percent) could afford to purchase a $266,900 median-priced home, which required a minimum annual income of $56,930 to make monthly payments of $1,420. 

Key points from the third-quarter 2018 Housing Affordability report include:

  • Housing affordability improved from third-quarter 2017 in 10 tracked counties and declined in 33 counties. Affordability in five counties remained flat.
  • In the San Francisco Bay Area, affordability improved from a year ago in San Francisco and Marin counties, primarily due to higher wages. Affordability fell in six counties (Alameda, Contra Costa, Napa, San Mateo, Solano, and Sonoma). Affordability held steady in Santa Clara County.
  • In Southern California, affordability improved only in Ventura, and dropped in four counties (Orange, Riverside, San Bernardino, and San Diego) compared to a year ago. Affordability in Los Angeles County was unchanged.
  • In the Central Valley, Fresno and Madera counties saw an improvement in affordability from third-quarter 2017. Housing affordability decreased from a year ago in eight counties (Kings, Merced, Placer, Sacramento, San Benito, San Joaquin, Stanislaus and Tulare). Affordability held steady only in Kern County.
  • In the Central Coast region, only Santa Barbara experienced a year-to-year improvement in affordability, while three counties (Monterey, San Luis Obispo, and Santa Cruz) posted a decline.
  • During the third quarter of 2018, the most affordable counties in California were Lassen (67 percent), Kern and Kings (51 percent), Tehama (49 percent) and Yuba (48 percent).
  • Mono (11 percent), Santa Cruz (12 percent), San Mateo (14 percent), San Francisco (15 percent), and Santa Clara (17 percent) counties were the least affordable areas in the state.

Housing Affordability slides (click link to open)


Affordability peak versus current 
Annual required income peak vs. current
Monthly PITI peak versus current

Affordability by region peak versus current
Housing affordability by county 

See C.A.R.’s historical housing affordability data.
See second-time buyer housing affordability data
.

 

Photo by Pixabay on Pexels

Six Reasons Why The Holidays Are A Good Time To List Your Home

by Kathy and Michael Rain - The Rain Team

What home buyers need to know when mortgage rates rise- even just a fraction

by Kathy and Michael Rain - The Rain Team

By: Clare Trapasso

By now, we've all grown accustomed to the screaming, panic-inducing headlines: "Mortgage Rates Are on the Rise!" But what does this actually mean to home buyers? With mortgage interest rates notching up just small fractions of a point, is it really as big a deal as experts are making it out to be?

Well, yes. And they're about to go up again.

As it turns out, those teeny, tiny increases can cost home buyers hundreds of dollars a year, and thousands of dollars over the life of their loans. And they're likely to keep rising as the Federal Reserve continues increasing its key interest rate. (Mortgage rates are different, but often follow the same trajectory as the federal ones.) The latest Fed hike is expected this month, with more on the horizon.

"When you're talking about a 30-year mortgage, a small increase in mortgage rates adds up to a lot of money," says Senior Economist Joseph Kirchner of realtor.com®. "If you've got a house in mind and you're ready to pull the trigger, don't dillydally. Interest rates will definitely go up ... so you're going to be paying more money for the same house."

And they're not just a buyer's dilemma. Rising mortgage rates limit just how much buyers spend on homes—and therefore serve as a bit of a check on just how high sellers can price their abodes. It can prevent some folks from becoming buyers, meaning there are less offers to go around.

How much can higher rates add to a mortgage bill?

So what does this all mean? Well, current mortgage rates are 4.65% on 30-year, fixed-rate loans. If they increase by just one full percentage point, it costs typical home buyers an additional $147 a month—or almost $53,000—over a 30-year period. (This assumes that a home is about $300,000 with a 20% down payment.)

Even much smaller increases really add up. If mortgage rates tick up by just 0.05%, it can cost typical buyers $2,600 or more over the life of their 30-year loans.

Rates are expected to rise to between 5.5% and 6% over the next two years if the economy keeps humming along, according to Len Kiefer, deputy chief economist at Freddie Mac.

Those escalations can make it harder for buyers to qualify for loans on the abodes of their dreams, forcing some to purchase smaller residences, fixer-uppers, or properties in less desirable or farther-out neighborhoods as a result. Some may even be priced out of the market altogether.

But don't panic just yet.

It's important to realize that rates are still low. Yes, they're more than 0.8% higher than they were a year ago, according to Freddie Mac data. But they're nowhere near the peak of 18.63%, in October 1981. So, you know, breathe.

"We've experienced low rates for a very long time," says Kiefer. He pointed out the last time that rates rose above 5% was way back in 2011. "[So] the increases that we've seen are likely to stick."

Mortgage broker Chris Brown has seen fewer buyers seeking loans over the past few months as a result of the increases.

"Buyers are starting to come to the realization that real estate prices have moved up significantly over the last six or seven years and, combined with higher rates, the homes they were once targeting are no longer in their price range," says Brown of CB Investments in Huntington Beach, CA. "It has forced them to either settle for a lesser home than they expected or temporarily put off the home search. [And] a lot more buyers are opting for the latter."

What should buyers do to get the lowest-cost mortgages?

Hope is not lost for those striving to protect their pocketbooks from rising rates. Consumers should start by looking for the cheapest loans with the lowest mortgage rates.

"Shopping for a mortgage is like shopping for anything else," says Eric Tyson, co-author of “Mortgages for Dummies.” Some lenders offer specials to lure in customers while others have consistently lower prices. "You can certainly check with the bigger banks and credit unions in your area, or online."

They may also want to consider getting a rate lock with their mortgage providers. This means that they're guaranteed a certain rate once they turn in their offer. So if rates go up, buyers don't have to worry about it. The downside, however, is that not all rate locks are free. And if rates fall, buyers can't take advantage of them.

Should buyers consider adjustable-rate mortgages?

Another option is an adjustable-rate mortgage, known as an ARM. This loan typically starts with a lower interest rate that then goes up after a set period of time. The proliferation of ARMs was partly responsible for the housing crash about a decade ago as rates—and therefore monthly payments—suddenly ballooned and homeowners couldn't afford the new, higher bills.

But newer regulations have since been put in place to make them safer for consumers. In addition, most of these loans come with a cap that limits just how high interest rates can go.

Miami-based mortgage loan originator Sylvia M. Gutiérrez has been advising her clients to consider ARMs, which typically fix interest rates for three-, five-, seven-, or 10-year periods.

"The lower initial rate allows you to qualify with a lower mortgage payment," says Gutiérrez, also the author of "Mortgage Matters: Demystifying the Loan Approval Maze." "[And] today's ARMs are much stabler than pre-recession ARMs."

But folks need to pay close attention to when those rates are likely to adjust and just how high they could possibly go before signing on the dotted line. And they shouldn't bank on being able to refinance at a lower interest rate down the line, because rates are just going to keep going up, says realtor.com's Kirchner.By: Clare Trapasso

By now, we've all grown accustomed to the screaming, panic-inducing headlines: "Mortgage Rates Are on the Rise!" But what does this actually mean to home buyers? With mortgage interest rates notching up just small fractions of a point, is it really as big a deal as experts are making it out to be?

Well, yes. And they're about to go up again.

As it turns out, those teeny, tiny increases can cost home buyers hundreds of dollars a year, and thousands of dollars over the life of their loans. And they're likely to keep rising as the Federal Reserve continues increasing its key interest rate. (Mortgage rates are different, but often follow the same trajectory as the federal ones.) The latest Fed hike is expected this month, with more on the horizon.

"When you're talking about a 30-year mortgage, a small increase in mortgage rates adds up to a lot of money," says Senior Economist Joseph Kirchner of realtor.com®. "If you've got a house in mind and you're ready to pull the trigger, don't dillydally. Interest rates will definitely go up ... so you're going to be paying more money for the same house."

And they're not just a buyer's dilemma. Rising mortgage rates limit just how much buyers spend on homes—and therefore serve as a bit of a check on just how high sellers can price their abodes. It can prevent some folks from becoming buyers, meaning there are less offers to go around.

How much can higher rates add to a mortgage bill?

So what does this all mean? Well, current mortgage rates are 4.65% on 30-year, fixed-rate loans. If they increase by just one full percentage point, it costs typical home buyers an additional $147 a month—or almost $53,000—over a 30-year period. (This assumes that a home is about $300,000 with a 20% down payment.)

Even much smaller increases really add up. If mortgage rates tick up by just 0.05%, it can cost typical buyers $2,600 or more over the life of their 30-year loans.

Rates are expected to rise to between 5.5% and 6% over the next two years if the economy keeps humming along, according to Len Kiefer, deputy chief economist at Freddie Mac.

Those escalations can make it harder for buyers to qualify for loans on the abodes of their dreams, forcing some to purchase smaller residences, fixer-uppers, or properties in less desirable or farther-out neighborhoods as a result. Some may even be priced out of the market altogether.

But don't panic just yet.

It's important to realize that rates are still low. Yes, they're more than 0.8% higher than they were a year ago, according to Freddie Mac data. But they're nowhere near the peak of 18.63%, in October 1981. So, you know, breathe.

"We've experienced low rates for a very long time," says Kiefer. He pointed out the last time that rates rose above 5% was way back in 2011. "[So] the increases that we've seen are likely to stick."

Mortgage broker Chris Brown has seen fewer buyers seeking loans over the past few months as a result of the increases.

"Buyers are starting to come to the realization that real estate prices have moved up significantly over the last six or seven years and, combined with higher rates, the homes they were once targeting are no longer in their price range," says Brown of CB Investments in Huntington Beach, CA. "It has forced them to either settle for a lesser home than they expected or temporarily put off the home search. [And] a lot more buyers are opting for the latter."

What should buyers do to get the lowest-cost mortgages?

Hope is not lost for those striving to protect their pocketbooks from rising rates. Consumers should start by looking for the cheapest loans with the lowest mortgage rates.

"Shopping for a mortgage is like shopping for anything else," says Eric Tyson, co-author of “Mortgages for Dummies.” Some lenders offer specials to lure in customers while others have consistently lower prices. "You can certainly check with the bigger banks and credit unions in your area, or online."

They may also want to consider getting a rate lock with their mortgage providers. This means that they're guaranteed a certain rate once they turn in their offer. So if rates go up, buyers don't have to worry about it. The downside, however, is that not all rate locks are free. And if rates fall, buyers can't take advantage of them.

Should buyers consider adjustable-rate mortgages?

Another option is an adjustable-rate mortgage, known as an ARM. This loan typically starts with a lower interest rate that then goes up after a set period of time. The proliferation of ARMs was partly responsible for the housing crash about a decade ago as rates—and therefore monthly payments—suddenly ballooned and homeowners couldn't afford the new, higher bills.

But newer regulations have since been put in place to make them safer for consumers. In addition, most of these loans come with a cap that limits just how high interest rates can go.

Miami-based mortgage loan originator Sylvia M. Gutiérrez has been advising her clients to consider ARMs, which typically fix interest rates for three-, five-, seven-, or 10-year periods.

"The lower initial rate allows you to qualify with a lower mortgage payment," says Gutiérrez, also the author of "Mortgage Matters: Demystifying the Loan Approval Maze." "[And] today's ARMs are much stabler than pre-recession ARMs."

But folks need to pay close attention to when those rates are likely to adjust and just how high they could possibly go before signing on the dotted line. And they shouldn't bank on being able to refinance at a lower interest rate down the line, because rates are just going to keep going up, says realtor.com's Kirchner.

Photo by rawpixel on Pexels.com

Market Snapshot: San Mateo County Real Estate Report

by Kathy and Michael Rain - The Rain Team

Here is an updated Market Report summarizing recent real estate activity along the coastside. Please keep in mind that the values represented are based on current, detailed information from the Regional Multiple Listing Service. If you need clarification on any of the figures or if you wish to take additional steps toward property ownership, please let us know. We are happy to help you. See the full report.



2019 California Association Of Realtors Economic & Market Forecast

by Kathy and Michael Rain - The Rain Team

The Bigger Picture

by Kathy and Michael Rain - The Rain Team

It Pays To Be A Homeowner: Home Equity Shot Up In Just One Year

by Kathy and Michael Rain - The Rain Team
By: Clare Trapasso

It pays to be a homeowner—quite a bit, actually. In certain parts of the country, it's even wildly profitable. Cha-ching!

Nationally, the average homeowner with a mortgage saw their equity shoot up by nearly $16,200 in the past year alone, according to a recent report by CoreLogic. (The real estate data firm compared the second quarter of this year to the second quarter of the previous year.) That's a 12.3% annual increase, thanks to fast-rising home prices across the country.

"It's good news if you're an existing homeowner. ... You can certainly use that additional wealth as collateral you could borrow against if you're looking to make some home improvements," says CoreLogic's chief economist, Frank Nothaft. "But it's probably not good news if you're in the market looking to buy."

Homeowners on the West Coast accrued even more equity. In just one year, those who own homes in California gained an average $48,800 in home equity. That was the most in the country—and more than many folks earn in a year.

"The first half of 2018 was probably the most ferocious market since the year 2000 in terms of buyer demand, competition between buyers, and overbidding," says Patrick Carlisle, chief market analyst of the Bay Area for the real estate firm Compass. "In the [San Francisco] Bay Area, we saw some huge jumps in median sale prices. It’s crazy.”

But the huge equity gains could slow down at least a little in California. More homes are expected to go on the market there this fall, and that could check prices somewhat. If buyers have more to choose from, prices are less likely to be driven up by bidding wars.

"There does come a limit on what people can afford to pay for a home," Carlisle says.

The Golden State was followed by Washington, where average home equity was up $41,100; Nevada, at $32,193; Hawaii, at $29,565; and Massachusetts, at $23,527.

But in three states, equity actually fell—by $1,078 in Louisiana, $910 in Connecticut, and $773 in North Dakota. The other bottom states were Oklahoma, where equity rose an average of just $2,226, and Iowa, at $4,386.

Nationally, 4.3% of homes, or about 2.2 million properties, were underwater in the second quarter of this year. That percentage is down 20.1% year over year.

Photo by PhotoMixLTD on Pexels.

Make Your Home A Model

by Kathy and Michael Rain - The Rain Team

Creating Curb Appeal

by Kathy and Michael Rain - The Rain Team

6 Costs Homeowners Overlook And How To Pay For Them

by Kathy and Michael Rain - The Rain Team

For many people, a house is the biggest investment they'll ever make. And whether you're a first-time homeowner or you're buying your third property, you're bound to end up covering some unexpected expenses. Here are six costs homeowners tend to overlook and how to pay for them:

 

1. Property taxes

Be prepared to pay property taxes and keep in mind that they rarely decrease. Homeowners often pay them every month along with their mortgage payments. If your loan is backed by the Federal Housing Administration, you're required to have an escrow or impound account.

If you don't have to make property tax payments through an escrow account, they may be due at the end of the year. In some counties, you might pay them in installments.

2. Homeowners association fees

Whenever you move into a new home or condominium, you become part of a community. In many cases, there are fees associated with the maintenance and general upkeep of shared common areas. The money collected might cover snow removal, landscaping or repairs to a meeting room.

Monthly homeowners association (HOA) fees for standard single-family homes tend to cost between $200-$300, but rates can vary depending on several factors, including how recently a housing community was built and the kinds of amenities that are available. That's why it's best to know how much fees cost upfront. In West Hollywood, Calif., for example, residents in Sierra Towers condos get access to a 24-hour concierge service and valet parking, but spend around $4,000 per month on HOA fees.

3. Insurance premiums

If you own a home, another cost you should include in your budget is insurance. The average annual homeowners insurance premium costs $1,120, according to recent data provided by the National Association of Insurance Commissioners, but the amount you pay may be higher or lower based on where you live and the kind of policy you choose.

Homeowners insurance typically covers personal possessions, liability for injuries that take place on your property, the structure of your house and additional costs associated with living elsewhere if your home is severely damaged. If you live in an area prone to natural disasters, you might need a supplemental policy like flood insurance.

4. Repair and maintenance costs

Repairing or replacing a roof, furnace or air conditioner can be expensive, and at some point, you might have to address plumbing issues or trade in some old appliances.

The cost of home maintenance is another thing you'll have to factor into the cost of homeownership. You'll need money to keep your yard, gutters, carpet and everything in between in tip-top shape.

Financial experts generally recommend setting aside 1 percent of your home's value to cover the cost of unexpected repairs and maintenance. If you're trying to save money, you're better off doing some of the work yourself. Just make sure you have enough funds for the materials you need to get the job done.

5. Costs associated with selling a home

Having a home that's well-maintained not only lets you enjoy your house while you're living there, but also prevents you from being saddled with additional costs when you're ready to sell it.

Replacing your roof or furnace might be something you want to put off, but failing to make necessary repairs or meet demands made by potential homebuyers could hurt your market value or cost you a sale.

6. Pest control costs

Pests are a real concern for many homeowners. Over time, all sorts of critters—like termites, ants, spiders and rodents—might invade your home. Depending on how serious the problem is, you might need to fumigate your house.

If you're interested in buying a home, make sure you hire an inspector to check for bugs and termites that could cause structural damage. While lenders don't always require homebuyers to pay for pest inspections, it's important to have one done. You don't want to close on a house only to find out later that there's an issue. Termite inspections generally cost between $75-$150, according to Angie's List.

Build a rainy day fund!

It's always better to be prepared for a storm than to be caught in a downpour without an umbrella. Despite the high costs, owning your own home can be a rewarding experience.

Hope for the best and prepare for the worst by keeping enough money in your savings account to cover unforeseen costs. Make sure you account for all of the hidden expenses and fees associated with buying a home and budget accordingly.

Photo by suntorn somtong on Pexels

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The Rain Team
CA# 01169588 | CA# 01125976 | CA# 01908304
248 Main Street, Suite 200
Half Moon Bay CA 94019
Michael: 650-888-6361
Kathy: 650-888-6903
Fax: 866-396-0207

Kathy and Michael Rain of Coldwell Banker provides real estate services in the San Mateo County, California area including the surrounding communities: El Granda, Half Moon Bay, Montara, Moss Beach, Pacifica and San Mateo. Search for homes in San Mateo County. We list and sell residential real estate, investment properties, vacant land, lots for sale in the San Mateo County, California area.

Licensed in the State of California

Kathy Rain - CA BRE# 01169588 | Michael Rain - CA BRE# 01125976 | Coldwell Banker - CA BRE# 01908304
Cell Phone: (650) 888-6903 * Direct Phone: (650) 712-0411
San Mateo County Real Estate and Homes for Sale

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