Now is NOT a good time to purchase a home in Oakland. In general, if you can get approved and have money to put down on a home or have cash and find a home that you want to live then that is a good time to buy.
There is NEVER a one size fit all time to buy. When someone ask if it is a good time to buy I normally say NO. Most ask why? I say because if you have to ask someone if it is a right time for you then you might not be ready.
Purchasing a home is personal and depending on what you are looking for dicates rather it is a good time to buy.
In this current climate people that are attempting to flee higher rental prices, investors and those looking to move to more affordable states or purchase larger properties in California, these situations appear to be most common in my experience.
I still haven't gotten an answer to my question about interest rates. What's wrong with the following analysis:
1. Real estate prices are largely based on affordability on a monthly basis.
2. People can afford to spend more on a monthly basis when interest rates are low.
3. Therefore, low interest rates correlate with higher house prices (all other things being equal).
On this last point, I didn't make it up. Here's an article from Business Week supporting this rather obvious point: http://www.businessweek.com/lifestyle/content/dec2009/bw2009
Ok, so that means buying when interest rates are low means you're paying more. Now, I'm sure you agree that interest rates tend to fluctuate and that they are currently at historical lows (artificially supported by government policy)? That means they will go back to normal at some time in the future. What will that do to housing prices? Well, they will go down.
4. The value of your home you buy now will go down if interest rates go up.
5. You will be underwater, or at least have lost some equity.
Now, contrast this with buying when interest rates are higher.
1. High interest rates means lower home prices, so, on an affordability basis, its a wash (roughly speaking, your monthly payments are the same for the same house).
2. Since interest rates fluctuate, at some point, they go back down.
3. Then you refinance, and your interest rates are lower.
4. You end up with lower payments than in the scenario where you bought a higher priced house at a low interest.
So John, you're a thinking person. Tell me why this shouldn't be a factor in peoples decision making process? Agreed that if you can't rent the place you want to live, that's a factor. Agreed that there may be other reason's you'd rather own than rent. All these are factors in favor of buying. I acknowledge that. Will you acknowledge the flip side?
The truth is that it's a way better time to buy now than, for example, in 2007, but don't think that makes it the right time. It's far cheaper to rent now, even considering the amazing interest rates and mortgage interest deductions. Also, here are a few facts to keep in mind concerning the market:
1. Even nationally, prices have not yet returned to the historical trend line. (I.e. have not recovered from the absurd run-up that started in 2000). (http://www.ritholtz.com/blog/2011/03/comparing-housing-price ). As you may know, historically, in a post bubble crash, prices tend to overshoot on the low side. High end houses have even further to fall, as there is a great latency in the price response to changing market conditions.
2. Interest rates are artificially low. Housing prices are typically based on affordability, so this means that prices are far higher than they will be when interest rates get back to normal. If you buy now, when interest rates are low, when they return to normal, house prices will go down (all other things being equal :)) and you're under water with your mortgage. On the other hand, if you buy when interest rates are higher, you get the house for less, and if interest rates go down, you can refinance at the lower rate and you end up with a win/win.
3. Baby boomers are retiring. 50% of baby boomers have 0 savings for retirement, and many of the rest haven't saved enough to continue with their current lifestyle. Add to this that their kids have left home (well, some of them ;)) and they typically have more house than they need. For many of these folks, their only savings is the equity in their homes and their survival strategy will be to sell their houses in expensive areas like the Oakland hills and move somewhere cheaper to live.
4. The shadow inventory is huge. I don't know what the current stats are, but last I looked, for every house on the market there were two others that were either: Bank owned, but the bank is keeping it off the market or the owners have stopped paying on the mortgage and foreclosure hasn't happened yet (I think the stats I saw talked about homes where the owners were 90 days or more behind on their mortgage.) As you drive down the street and see "for sale" signs, just imagine that between every two you see, there are two other homes that are part of the shadow inventory. This source (http://originationpro.wordpress.com/2012/02/22/just-how-larg ) says estimates range from 1.6 million homes to over 10 million homes. I tried to get a number for what the current number of Single Family Home listings is for the USA, but couldn't find it.
Basically, I would look for sources of information from sources other than real estate agents and loan brokers. Even if they have managed to convince themselves that they are right about this, the underlying fact is that they have a significant (I'd even say existential) incentive to believe that now is the right time to buy. They could be right, (because no-one has a crystal ball), but since the NAR (National Association or Realtors) and their brethren have been saying that since they came into existence, it probably shouldn't be taken as authority.
Anyway, good luck on this. My opinion, if you're on the fence, sit it out even if we're close to a bottom. I've heard (even from some agents) that when we do hit a bottom, it's likely to stay there for a while. Be patient, and I think you'll be rewarded.
Now for a mea culpa. I've always believed there was a tight correlation between interest rates and house prices. After some research, it turns out the truth is murkier. When interest rates go up, apparently this tends to happen in times of economic growth and inflation, both of which tend to increase housing prices. This to some degree counterbalances the "affordability" argument that I made. I also for some reason couldn't follow the link I posted. Here's another one that has a more balanced discussion: http://www.theatlantic.com/business/archive/2011/07/how-risi
I would have to disagree with John J, who claims "Current interest rates have nothing to do with home affordability". That, I'm afraid, is patently false. Take for example, a $500,000 30 year loan at 6%. Monthly payments for that would be $2998/mo. Lower the interest rate to 4%, and the payment is than $2387/mo. That's a $611 a month difference. I suppose if you're really rich (or really poor :)), that doesn't change affordability, but for most of us it sure would.
Current interest rates have nothing to do with home affordability and everything to do with the Fed’s attempt to stimulate the economy and housing by keeping interest rates artificially low. Interest rates are not based on affordability but on the demand for money and the return on investment of money. Also, remember that there are many other borrowers in addition to home buyers who are affected by the level of interest rates. Your formula indicates that interest rates should fall if prices rise. We know that is not true. If prices rise, demand may fall but that will not drive down interest rates. When home prices were screaming up because of hyper demand a few years ago lenders made plenty of money available to lend because they were making huge profits. If it was true that simply lowering interest rates yielded lots of home sales due to increased affordability we would see a vibrant real estate sale environment with today’s record low rates. That is not what is happening. Demand/Supply is what drives interest rates. The Fed is trying to stimulate demand.
For those who say wait because prices are going down, I say you are guessing and you are trying to time the market. Timing the market is not a good approach to investing or to home buying.
My knee jerk and uneducatied reaction is that unless there's some radical fluctuation in interest rates there shouldn't be a radical fluctuation on RE values as they relate to interest rate fluctions but that's what I want to verify. Thanks for your intelligent participation and observations.
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I am an agent in CT - so I know nothing about the market in Oakland right now...
But I am always curious about this question when asked by a potential buyer.
What are your feelings about the market out there, based on your own research, and how long
have you been considering purchasing a home?
The truth is that there is never one right answer to this question... so much has to do
with your personal situation and what you want to do, or are in the position of doing.
I think that the last Real Estate boom made people look at their homes differently....
They saw their homes as piggy-banks that they could withdraw from, and "home" became
"commodity"... not a home anymore, in the traditional sense of a place that you lay down your roots and become a part of the community. Just the question itself, "is now a good time to buy?" sounds like the kind of question someone would ask when they want to buy a stock...
Of course when you ask a bunch of Real Estate agents if it's a good time to buy, they are going to show you the upside of buying... that is their job, that is the profession, and we do see the overall upside... It's not to sell you a cheap bill of goods, but to show you the upside. You are the one that will decide if it's the right time - for you...
No one knows what the future holds - people end up selling for all kinds of reasons... they want to move for a new job, they loose a job, they get a divorce, or they just want to be in some other part of the world... If you don't sell in a down market - you don't loose money. The market goes up and the market goes down... that is what the market does.
How long do you want to be in the same place? Is it a year, two years... ten? Maybe you are moving somewhere new and you want to rent a bit before you jump into owning?
Whatever the case, you will buy when you are ready... when it's your time.
All the best of luck to you,
None of this should affect your decision to buy or sell a house now. I provided a reference to the various estimates of the "Shadow Inventory" provided by the Wall Street Journal. To many serious people, they are a trustworthy reference. Antoine's suggestion that "it does not exist in reality" pits his credibility as an interested party against the WSJ. I'll let you be the judge of who to trust when you're making one of the most important financial decisions in your life. I also don't say that you shouldn't buy now, just that you should make your decision in light of the factors I raised. I also said, and believe, that now is a much better time to buy than 5 years ago.
That said, I'd like to hear a reasoned and calm response to the point about low interest rates being (ironically) a reason not to buy now, since prices are based on affordability, and low interest rates make prices higher than they would be with normal interest rates. When interest rates return to normal levels, affordability goes down at any price point and house prices will adjust downward (all other things being equal). If you buy when interest rates are high, prices are adjusted lower, and when interest rates fluctuate downward again you can refinance and have a big win. Anyway, as before, I do wish you the best of luck in your decision, whatever it is.
Interests are the lowest they've been since the early 1970's - 40 yrs ago! "Is now a good time to buy" can be answered by asking yourself "Am I ready to buy and build for my future, and am I motivated and have set aside the time and planning for moving into my new home.??? If the answer to those questions are "Yes", then forge ahead with confidence. And call me when you're ready go move into the driver's seat!
So, yes - it's an excellent time to buy.
If you're financing your new home and you have been paying income taxes, having a mortgage is still one of the best deductions there is.
All good reasons - saving money. Personally, having your own home means you can really make the place your own, adding sustainable features or just decorating and changing it to fit your taste.
However, if you're intention is to buy a home and sell it within a couple of years to move out of the area, you may not realize any profit in such a short time, unless you are buying a distressed property that you will fix up.
Just FYI - I am offering a totally FREE class for women in how to manage a home renovation. It's next Monday evening, 5:30 - 7 pm in Oakland, refreshments served.
Good luck to you!
Current interest rates have nothing to do with home affordability. By that I mean that rates are not a product of home affordability but are an attempt to make homes affordable. The Fed is attempting to keep rates at a very low level to stimulate borrower demand, not only for home loans but for all loans. Increased borrowing by consumers and businesses results in spending that expands the economy.
If borrowing goes up (the demand for money) rates will also go up.
(1) Low Prices
(2) more houses available than buyers
(3) Low long-term interest rates
(4) Low down-payment
You can strike a deal, if you are working with a good buyer's agent! In terms of the local market... as in the Oakland part of your question... if you like Oakland then you like it... no need to ask anyone else :)
Is a vibrant place, I was there last weekend and was impressed by the amount of activity!
“If I had a way of buying a couple hundred thousand single-family homes I would load up on them.”
If one of the wealthiest men in the world says it’s time to buy a home i think it’s time to buy!!!!
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For an investor this is the best market to purchase in. The pricess have been steady for the past 6 months. The interest rate has remained the same for the past year which gives buyers the confidence to purchase. This consumer confidence has build a rally in Real Estate single property purchases to be upgraded and put back on the market for sale.
When you asked is this a good time to buy? What are you asking about single property purchase, multi unit purchase, appartment building purchase, commercial purchase, property flipping purchase and dvelopment purchase. Please elaborate more.
Our local economy has continued to demonstrate signs of a recovering real estate market. Of course like every area of the country we are experiencing a high volume of short sales and foreclosures which is affecting the absorption ratios as well as extending days on market.
Now is the time to buy in North Alabama with interest rates at an all time low. Not to mention Fannie Mae and Freddie Mac guidelines are increasing the upfront PMI and re-finance fees again. Home buyers can build a wide variety of new full brick homes with all the amenities you could dream up for around $100 or less $ per Sq. Ft.
If you currently don't own a home then purchasing a home now for no other reason but to have a tax deduction of home ownership is worth the process.
For more info or questions feel free to contact me any time.
If you look back at several threads I have commented on you would have observed that I've been very conservative and redicent when advising folks to get off the fence. In fact I've suggested on several occassions that if you're an inexperienced RE investor or a first time buyer that perhaps it would be in your best interest to stay sitting on that fence for awhilel But that was last year and the years before.
Now, as others including the one and only WB, have intimated that this is indeed the right time to get off the fence if you're a serious buyer/investor. Sure there can continue to be a certain downward trend in some areas but the bottom line is the bottom line. Just how much would you really be leaving on the table by acting now?
Main thing? Get a competant and experienced RE professional to work with you and get busy at least doing some bottom fishing so you can begin testing the waters a tad. Just sitting on the fence will not get you in the pearly brine enough to get your heart beating or your adrenalin flowing. You can't swim until you get in the water.
I'm not in your market area and really wouldn't be able to represent you but if you want some sound and unbiased advice please feel free to contact me anytime. I would be happy to answer any questions or concerns you may have at no charge. firstname.lastname@example.org 760 815-6977. Good luck.
Find a reputable local agent who's been around awhile and just talk to them about what's happening in the market. There's really no way to time the market. Do you believe in 5-10 years that home prices will be higher or lower? Do you want to live in Oakland for the next 5 or 10 years? Interest rates are historically low making the cost of borrowing money about as low as it can get.
Best of luck...
Here is why most people make mistakes in real estate and specifically people who are NOT in real estate. They try to find the bottom or the top in the market. They make probably the same mistake in the stock market. If the numbers make sense, then act. Of course, you have to know how to do the numbers in the first place.
Property values in most areas finally seem to be bottoming out. Interest rates are at there all time low and there's still lot's of very good deals to be had. Unless you're unemployed, don't have an adequate downpayment, have very poor credit or you're just a plain doomsdayer you should really think about pulling the trigger.
Once interest rates start ticking up and in spite of what Bernake said about holding the interest rates down until 2014 truth be know they're beginning to tick up a tad. So I say if you're in San Diego....................JUST DO IT!!
If you buy and hold a good property now, you will look back in ten years and say, “That was the best decision that I ever made!”
Plus you can purchase a house for 3.5% down using FHA financing. Where can you get that kind of leverage on any other investment? Plus contact me if you want to discuss Rent vs Own. Most likely you can own more cheaply than you can rent.
Plus owning your own home is part of the American dream. Grab it while it is most affordable.
Carol Sottile Carol@CarolSottile.com
If you havent been pre-qualified, I would love to help! A fully approved commitment can make a difference when presenting an offer!
Home Mortgage Consultant
Land Home Financial
(415) 271-7740 cell/direct
I would love the opportunity to speak with you in person to find out exactly what you would like to achieve with homeownership. It is absolutely a great time to purchase! Interest rates have been steady at all time lows and the inventory of the homes in market are being priced with great equity potential.
I would love to help you establish a high regard for ownership, if you would like to chat about some specific criteria, please do not hesitate to call....
Real Estate...."It's a Piece a Cake"
Renee Elizabeth Hines(CakeLady)
Real Estate Agent DRE#01171827
Better Homes and Gardens
REAL ESTATE Mason McDuffie
3320 Grand Avenue
Oakland, Ca 94610
Angela Mitchell, Realty World-Chabot Highlands