What are the factors you will want to consider when you think of buying a home?
The personal reasons will include the comfort level you have in your present situation. Do you need more or possibly less room? Do you want a more up to date home? Would you like to find a better neighborhood or school?
Then there are the budget factors. What can you afford? Should you spend that much on your house?
Fear factors must be faced.
Is the market going to drop so that later on I can buy the same house for less?
Is my job secure or can I expect my income to drop?
Is this where we want to live for the next 3-5 years?
What is the loss if I do not buy now?
Only you can answer those questions. You probably have even more questions of your own.
As a real estate agent I can not answer any of these questions for you. What I can do as an agent is to make some educated guesses. Let's consider price and payment.
1. Price. In the Eastvale community the homes for sale inventory has fallen since the beginning of 2009. The government placed a freeze on foreclosures. January 2009 the inventory of homes for sale was around 500. In September, the inventory was down to about 125 houses. The selling price for homes has increased this year.
Question: Do you expect that the banks will again dump houses on the soft market? Isn't it apparent that the downturn (in prices) was fueled by the banks holding panic sales of homes with bad loans? Can they afford to hold homes that are regaining lost value each month? I certainly think they know it is working.
Are you aware that the government is pressuring banks to modify loans and negotiate short sales? It is also true that there are plans on the horizion that will allow banks to RENT bank owned properties. Does rent not dump sound like an alternative to another round of panic selling?
My conclusion is that all of these measures have stopped the crash. Homes in the Corons, Norco, Riverside and Eastvale communities are realizing higher values than they held one year ago.
2. Payment. A house payment is a mix of loan payment, taxes and insurance.
Insurance. Check with your insurance agent to determine the monthly cost of your home owner's insurance.
Taxes. Property taxes in California are set at the price you pay for the house. Proposition 13 controls how much they can increase each year. You will want to check on the special assessment districts, if any, on each house you consider buying.
Loan payment. The loan payment is usually for 30 years at a fixed interest rate for the length of the loan. (Please avoid variable rates unless you have good financial counsel.) Your payment is heavily impacted by the interest rate you must pay.
Note how as the interest rate changes what you can afford to buy also changes.. For a $300,000 loan 30 years fixed rate the payment is:
5% interest - monthly payment is $1,610.46
6% interest - monthly payment is $1,798.65 or $188.19 more each month
7% interest - monthly payment is $1,995.91 or $385.45 more each month
Turn the payment around. If you can afford $1,995.91 per month today if you can get a 5% loan you can buy a house for about $370,000.
My question is not how stable is the price of the house. My question is how long will the interest stay at these record low prices? Which will squeeze you out of the market faster, rising prices or rising interest?
I can not say that the price of houses will not go lower. But I seriously doubt that the interest rate will go much lower. Most economists think it will begin climbing next year. The result may be that house prices will freeze because with higher interest rates, affordability will decline.
You have much to think about. Oh, there is another problem while you are thinking about buying.
PROBLEM!
Inland Empire real estate in a nut shell. While you are debating whether it is the right time to buy your home at this time, something else is happening. Your problem is that you will be competing with investors who want to buy the same house that you want to buy as your home. While you are nervous to buy it as your home, they are anxious to buy it as an investment.