What If I Wait Until Next Year to Buy?

First-time homebuyers are flocking to the housing market in greater numbers than any time in the last few years. Renters who are ready and willing to buy are now realizing that they are also able to as well. Many first-time buyers are Millennials (born between 1981 – 1997).

If you are one of the many in this generation who sees your friends and family diving head first into the real estate market, and wonder if now is the time for you to do the same, keep reading!

The Cost of Waiting to Buy is defined as the additional funds it would take to buy a home if prices and interest rates were to increase over a period of time.

Let’s look at an example of what the experts are predicting for the upcoming year, and what that really would mean for you. Let’s say you’re 30 and your dream house costs $250,000 today. Right now mortgage interest rates are at or about 4%.

Your monthly mortgage payment (principal & interest only) would be $1,193.54.

But you’re busy, you like your apartment, and moving is such a hassle. You decide to wait until next year to buy. CoreLogic predicts that home prices will appreciate by 5.1% in the next 12 months; this means that same house you loved now costs, $262,750.

Freddie Mac predicts that over this same period of time, interest rates will be a full point higher at 5.0%. Your new payment per month is now $1,410.50.

The difference in payment is $216.96 PER MONTH!

That’s basically like taking $8 and tossing it out the window EVERY DAY!

Or you could look at it this way:

• That’s your morning coffee everyday on the way to work (average $2) with $10 left for lunch!
• There goes Friday Sushi Night! ($50 x 4)
• Stressed Out? How about a few deep tissue massages with tip!
• Need a new car? You could get a brand new car for $217 a month.

Let’s look at that number annually! Over the course of your new mortgage at 5.0%, your annual additional cost would be $2,603.52!

Had your eye on a vacation in the Caribbean? How about a 2-week trip through Europe? Or maybe your new house could really use a deck for entertaining. We could come up with 100’s of ways to spend $2,603, and we’re sure you could too!

Over the course of your 30 year loan, now at age 61, hopefully you are ready to retire soon, you would have spent an additional $78,105.60, all because when you were 30 you thought moving in 2015 was such a hassle or loved your apartment too much to leave yet.

Or maybe there wasn’t an agent out there who educated you on the true cost of waiting a year. Maybe they thought you wouldn’t be ready. But if they showed you that you could save $78,000 you’d at least listen to what they had to say.

They say hindsight is 20/20, we’d like to think that 30 years from now when you are 60, looking back, you would say to buy now…

Just Sold! 2869 Ben Lomond Drive, Santa Barbara, CA 93105

 

We are incredibly happy to have negotiated a great price for our Buyer on this very special view property in Mission Canyon! This 2BD/1BA single story home is ideally situated to capture dazzling panoramic views of the ocean, islands, and the city from nearly every room!

Sold for $959,624

New Listing! 4311 Carpinteria Avenue, Carpinteria CA

4311 Carpinteria Avenue, Carpinteria CA 93013

Just listed! Lowest priced SFR on the market! Flexible mixed use CPDR zoned single family home w/detached 2-car garage only a short distance to bustling business district, beaches and estuary. Sold “As-Is”.

Offered at $499,000

MLS #15-2368

JEFF BRIDGES' MONTECITO ESTATE DAZZLES AT $30 MILLION

After 20 years, actor Jeff Bridges is selling his Montecito ranch for a whopping price of $29.5 million! The 19.5 acres of land include a 9,500 square foot main house, a separate theatre/recording studio, two private guest houses, a pool with its own pool house, a vineyard and a greenhouse, as well as a collection of aloe trees tended by Bridges. Fans of Bridges' role as "The Dude" in cult classic The Big Lewobski will be excited to learn that the property also comes with a body cast from the movie itself.

Featuring breathtaking views, high ceilings, ornate tiling and masterful woodwork, Bridges' and his wife, Susan, are exchanging the five-bedroom family estate they've owned since 1994 for a smaller Montecito home now that their three daughters are grown. Check out the photos below for a peek into Bridges' stunning former residence!

  

560 CONCHA LOMA, CARPINTERIA - JUST SOLD!

We are excited to announce the sale of this gorgeous ocean-view Spanish hacienda only 2 blocks from “The World’s Safest Beach!” Boasting a cozy interior featuring wood beam ceilings, white washed walls, and a large fireplace, this lovely home creates the ultimate indoor/outdoor living space with seemingly endless walls of sliding glass doors. Outdoor features include an ocean-view deck great for entertaining, a spa with waterfall feature, a built-in BBQ and a trellised patio for dining al-fresco. This .41 acre lot also features 2 separate garages for up to 5 cars, and is only 3 miles to famous Rincon Surfing and a stone’s throw to shopping and restaurants!

Sold for $1,675,000

Homeownership Still The #AmericanDream

Some Highlights:

• Existing Home Sales are 9.2% higher than just one year ago.
• Home Prices are 7.9% higher than last year this time.
• The $250-500K price range leads the way with the largest improvement from last year at 17.4%.

Buy vs Rent #CreateFamilyWealth

 

There has been recent press regarding whether or not it makes better financial sense to rent rather than buy in today’s housing market. As an example, the recently released June Summary of the BH&J Buy vs. Rent Index reported:

“…as of the end of the first quarter of 2015, the housing market in the U.S. and all cities in the index are trending either closer to renting being the superior option or strictly favoring renting over purchasing a home.”

The summary goes on to explain that:

“The index conducts a “horse race” comparison between an individual that is buying a home and an individual that rents a similar quality home and reinvests all monies otherwise invested in homeownership.” (emphasis added)

Though the math may be correct, we are not as sure of the conclusion. Even if you check the methodology offered by the BH&J report itself, you will find that they realize:

“…any extra savings from renting might be spent on non-wealth enhancing goods resulting in any benefits from renting versus owning disappearing in a cloud of consumption spending rather than savings.”

The Concept of ‘Forced Savings’ and Wealth Accumulation

Many believe the wealth accumulation of homeowners is tied into the concept of “forced savings”. The New York Times late last year published an editorial entitled, “Homeownership and Wealth Creation, which discussed this concept. The article explained:

“Homeownership requires potential buyers to save for a down payment, and forces them to continue to save by paying down a portion of the mortgage principal each month.”

“Even in instances where renters have excess cash, saving a substantial amount is difficult without a near-term goal, like a down payment. It is also difficult to systematically invest each month in stocks, bonds or other assets without being compelled to do so.”

Many of the points that were made in the article are on track with the research done by the Joint Center for Housing Studies at Harvard University which agrees that “forced savings” is a major advantage of homeownership. In a paper, The Dream Lives On: the Future of Homeownership in America, they concluded:

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

The Truth is in the Historical Data

Edwards Deming once said: “Without data, you’re just another person with an opinion.”

Let’s look at the data on this subject. The Federal Reserve has conducted a study titled: Survey of Consumer Finances. The study found that the average net worth of a homeowner ($194,500) is 36 times greater than that of a renter ($5,400).

Bottom Line

The New York Times editorial articulated it best:

“Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth…As a means to building wealth, there is no practical substitute for homeownership.”

#FirstTimeHomebuyers Lead The Way

The National Association of Realtors’ (NAR) latest Existing Home Sales Report revealed that first time homebuyers made up 32% of all sales in the month of May; marking the highest share since September 2012 and up from 27% the same time last year.

NAR’s Chief Economist, Lawrence Yun, cited “strong job gains among young adults, less expensive mortgage insurance and lenders offering low down payment programs,” as contributing factors to the increase in first-time buyers.

Existing-home sales rose 5.1% to a seasonally adjusted rate of 5.35 million. Total housing inventory for sale remains under the 6.0 months needed for a historically normal market at a 5.1 month supply.

Homes sold quickly in May, as 45% of homes sold in less than a month. May also marked the 39^th consecutive month of year-over-year price gains as the median existing home price rose 7.9% above May 2014 to $228,700.

Below is a chart showing the breakdown of price increases by region:

Yun went on to say,

"Solid sales gains were seen throughout the country in May as more homeowners listed their home for sale and therefore provided greater choices for buyers."

“However, overall supply still remains tight, homes are selling fast and price growth in many markets continues to teeter at or near double-digit appreciation. Without solid gains in new home construction, prices will likely stay elevated — even with higher mortgage rates above 4 percent."

Bottom Line

“More first-time buyers are expected to enter the market in coming months, but the overall share climbing higher will depend on how fast rates and prices rise."

If you are a homeowner considering a move this year, meet with a local real estate agent who can show you the opportunities available right now! Don’t miss out on the influx of new buyers entering the market every day.

4700 Sandyland Rd. Unit 59

We are pleased to announce the sale of this 2BD/1.5BA ocean view beach condo! Turn-key end unit is fully furnished, sleeps 6 & features remodeled kitchen & bathrooms, wood floors and view balcony...all only steps to the sand. Resort-style amenities include 2 pools, hot tub, club house, gated parking & on-site rental-management staff.

Sold for $941,000

2 Out of 3 Renters Want to Own, What’s Stopping Them?

The Federal Reserve Bank of New York recently released the 2015 SCE Housing Survey. The survey revealed that most current renters would prefer owning and that 61.9% of them plan to buy a home within the next five years.

68.3% stated they would prefer owning (with 45.6% saying they ‘strongly’ prefer owning). When asked at what point in the future do they think they will own a primary residence:

• 8.2% said within a year
• 15.3% said in 1 to 2 years
• 38.4% said between 3 to 5 years

What’s Holding Them Back?

Of the 68.3% who would prefer to own, 2 out of 3 cited difficulty in getting a mortgage for the reason they do not own. However, many believe that the reason so many think that it would be difficult to get a mortgage is not fully based on current market realities.

For example, studies have shown that there is confusion over the amount of money needed for a down payment. Research has shown that 40 to 50% of Americans believe that between 15-20% is the minimum required for a down payment. In reality, there are many programs available at 5% and even 3%. There are even some programs that don’t require any down payment (ex. VA loans).

Others fear they need a perfect credit score or believe that the overall mortgaging process has become almost impossible. Actually, the Mortgage Credit Availability Index, a report from the Mortgage Bankers Association, has shown that, over the last seven months, access to mortgages has gotten much more available.

And the NY Fed study suggests that some renters are waiting for interest mortgage rates to fall even further. Fifty percent of the renters surveyed believe mortgage interest rates will fall over the next year and almost 10% believe that they will fall by more than 1%. However, the reality of the situation is that Freddie Mac, the Mortgage Bankers Association and the National Association of Realtors are all projecting that rates will be significantly higher at this time next year. They are all predicting mortgage rates will be almost 1% higher!

Bottom Line

Many renters want to own their own home. Some are not moving forward based on misunderstandings regarding the mortgage process. If you are currently a renter who desires the benefits of homeownership, sit down with a local real estate professional to determine what your options actually are.

#SantaClausLane Project Rising Up

A new housing and business project is appearing on Santa Claus Lane near Carpinteria.  The project is on county land just outside of the city limits.  It has been years in the planning stages.

The finished project will be four commercial and three residential units on a lot between the train tracks and the street.  It's also adjacent to the beach.

The developer Claus Properties,  spent years on the project and efforts to get it off the ground were delayed by the recession .  The project is now back on a new schedule with active work underway.

In the last week a large crane has been on the site which is surrounded by a green fence.

Improvements to the roadside parking are part of the development conditions, in coordination with a county master plan for Santa Claus Lane.

#CarpinteriaCA Broker's Open Today! 10am-1pm

4816 Sawyer Ave Carpinteria, CA | Offered at $655,000

Come join us for the Broker's Open Wednesday (today) from 10am-1pm

Open Houses will be held this weekend, Saturday (06/13/15) from 12-2pm & Sunday (06/14/15) 1-4pm!

View All Images & MLS Info

Excellent quiet location for this spacious 3 bedroom 2 bathroom Barry Berkus designed Town Home. Features soaring ceilings, fireplace, ground floor master bedroom, 2 private patios, attached 2 car garage and community pool.  Located in the heart of downtown near pristine beaches, wildlife estuary, dining and shopping. Only 5 minutes to Rincon surfing, 10 minutes to Santa Barbara, 40 minutes to wine country and 90 minutes to downtown Los Angeles.