October 2021
What Americans will sacrifice to buy a home
Most Americans want to own a home at some point in their life and they say they’re willing to make sacrifices to achieve it. For some, that meant forgoing vacations or alcohol for a year to save. But others say they are willing to give up having kids in order to have their dream home.
About 60% of recent survey respondents from a survey on clinch Home Services, say they would prefer their dream home over 40% who said they would prefer kids first. The youngest adults in the housing market (GenZ) feel the strongest about one day becoming a homeowner. Nearly 84% recently surveyed say that owning a home is a major component of achieving the American dream. Read the entire article here
Natural disaster threats are now front and center for homebuyers
About three in four recent home buyers say they factored in natural disasters when choosing a location for their new home, according to a new survey of about 3,000 consumers conducted by Realtor.com
75% of recent home buyers say they are concerned about: tornadoes 39%; severe cold or winter storms 38%; floods 35%; hurricanes 29%; earthquakes 21%; wildfires 17%; and droughts 11%. While being prepared can't prevent a disaster it can help homeowners recover faster; when asked how prepared they were for a natural disaster specific to their area, two thirds (68%) of surveyed consumers said they were very or somewhat prepared and less than one third (32%) said they were only somewhat or very unprepared.
Natural disasters can have enormous impacts on communities and homeowners, and with increased frequency and intensity of weather-related events, National Preparedness Month is a good reminder of how important it is to be prepared.
Reasons why waiting a year to buy could cost you
If you’re a homeowner who’s decided your current house no longer fits your needs or a renter with a desire to become a homeowner, you may be hoping that waiting a year might mean better market conditions to purchase a home. To determine if you should buy now or wait, you need to ask yourself two simple questions:
1. What will home prices be like in 2022?
Three major housing industry entities project continued home price appreciation for 2022. Freddie Mac: 5.3%, Fannie Mae: 5.1%, Mortgage Bankers Association: 8.4%
Using the average of the three projections (6.27%), a home that sells for $350,000 today would be valued at $371,945 by the end of next year. That means, if you delay, it could cost you more. As a prospective buyer, you could pay an additional $21,945 if you wait. Consider that the median price for a home in California is over $750,000. You do the math.
2. Where will mortgage rates be by the end of 2022?
Today, the 30-year fixed mortgage rate is hovering near historic lows. However, most experts believe rates will rise as the economy continues to recover. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above: Freddie Mac: 3.8%, Fannie Mae: 3.2%, Mortgage Bankers Association: 4.2%
That averages out to 3.7% if you include all three forecasts, and it’s nearly a full percentage point higher than today’s rates. Any increase in mortgage rates will increase your cost.
3. What does it mean for you if both home values and mortgage rates rise?
You will pay more in mortgage payments each month if both variables increase. Let’s assume you purchase a $350,000 home this year with a 30-year fixed-rate loan at 2.86% after making a 10% down payment. According to the mortgage calculator from Smart Asset, your monthly mortgage payment (including principal and interest payments, and estimated home insurance, taxes in your area, and other fees) would be approximately $1,899.
That same home could cost $371,945 by the end of 2022, and the mortgage rate could be 3.7% (based on the industry forecasts mentioned above). Your monthly mortgage payment, after putting down 10%, would increase to $2,166. That is $3,204 more per year and $96,120 over the life of the loan.
If you consider that purchasing now will also let you take advantage of the equity you’ll build up over the next calendar year, which is approximately $22,000 for a house with a similar value, then the total net worth increase you could gain from buying this year is over $118,000.
4. The Bottom Line
When asking if you should buy a home, you probably think of the non-financial benefits of owning a home as a driving motivator. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.
California’s Market Update according to C.A.R.
The housing market continues to adjust as we move into the off season. Home prices are cooling off and we will unlikely see another record statewide median price before 2022. While fewer listings are expected to come onto the market in the fall than in the spring homebuying season, sales actually remain solid depending on the area despite some pullback in demand due to recent rate hikes.
With the economic recovery remaining on course but progressing at a slower pace than anticipated, inflationary pressure will hopefully ease in coming months. Rates are expected to rise modestly but will remain low, and the housing market should remain stable throughout the rest of the year.
Third Quarter statistics for Santa Cruz, Monterey & the Bay Area
Comments: All 3 counties showed a steady decline in new listings month over month. Santa Cruz and Monterey counties showed stability in sales while Santa Clara continued to decline. Median prices slightly declined in Santa Cruz and Monterey while increasing month to month in Santa Clara. The days on the market ticked up a bit and list to sale price ratio ticked down. Display of MLS data is deemed reliable but is not guaranteed accurate by the MLS.
