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Is There a Bubble Coming in the Housing Market?

Is the current market heading toward another housing bubble? Today we will talk about the housing trends we’re seeing in Southern California.

Given current interest rates, pricing, and inventory, is a bubble on its way?

Before answering this, let’s define the term “bubble.” A housing bubble refers to a period of rapid, unsustainable growth in the market. What happens after this growth is an equally rapid decline, very much like a bursting bubble. When you feel a bubble burst, fragments go everywhere.

Certain housing corrections and cycles are normal, but bubbles are not. So it’s important to know the difference between them. Based on this, we aren’t likely seeing a bubble on the horizon.

Interest rates are going up, but does that mean that home prices are going to go down? Actually, there is no relation between interest rates and house prices. There have been four times in history when interest rates have gone up over a half percent. And each of these times, prices continued to rise. This is likely because when interest rates go up, there are usually higher wages and higher employment, meaning people are able to afford increased expenses.

With a mortgage, there are tax write-off benefits and equity being built up with each payment you make.

In Southern California, we have just about 1.5 months of inventory. So if you’re a buyer and you come across the right home, you need to make your move. You are either going to pay a landlord's mortgage, or you're going to pay your own. If you find the right house at the right cost, don't worry about timing out the market.

To demonstrate the benefits of homeownership, something our team likes to do is provide people with a rent-to-own analysis. We look at how they much pay for rent compared to what they could get for a monthly mortgage payment of around that same amount.

With a mortgage, there are tax write-off benefits and equity being built up with each payment you make. Sometimes, numbers talk.

If you have any additional questions regarding the current market, please contact us. We would be happy to assist in any way.

Are These Home Buying Myths Preventing You From Making a Move?

Today, I’d like to address two common misconceptions people tend to have about purchasing a home in our market.

Today I’m joined once again by Frank Blakely of Bay Equity Home Loans to talk about a question that arose while talking to some of my clients: “How am I going to get into the Southern California market?”

According to Frank, this concern actually arises as a result of two common misconceptions people have regarding the home purchase process.

The first misconception is that you need to put 20% down to secure a home. The truth is that you can put down as little as 3% to qualify for a conventional loan under $450,300. In high-cost areas of California, Fannie Mae and Freddie Mac allow people to secure conventional loans up to $679,650 for just 5% down. For that same price range, people in these same areas can obtain an FHA loan with as little as 3.5% down.

While it’s preferable to have a higher credit score when purchasing a home, it’s certainly possible to qualify with a lower one

People often think it’s better to wait and save up money, but by the time they have a higher down payment saved, home prices may have also risen.

The second misconception people often have is that you must have a perfect credit score to purchase a home. It’s true that a higher credit score will earn you a better rate, but there are absolutely options for people with lower scores. For example, you can still qualify for an FHA loan with a credit score as low as 580. For a conventional loan, your score can be as low as 620. So, while it’s preferable to have a higher score, it’s certainly possible to qualify with a lower one.

If you have any other lending questions for Frank, feel free to give him a call at (949) 433-0539. And, as always, if you have any other questions or would like more information about real estate, feel free to give me a call or send me an email. I look forward to hearing from you soon.

Keep an Eye on These New California Laws

There have been a number of legal changes in California that will impact real estate. Here are a few of the major ones to note.

Today, I wanted to update you on certain laws that have been changed in California which will impact real estate.

First, new disclosure requirements have been added. One of those is the bedbug disclosure; it is now a requirement to disclose whether or not there have been bedbug infestations in the past. Additionally, you must now disclose to new tenants if a property is located within a flood zone. You’re not required to disclose this to older tenants.

Another legal impact to consider in real estate is California’s laws about marijuana. If one is over the age of 21, they are legally allowed to use marijuana, and legally, you’re only allowed to own six plants per one adult person. You are, however, allowed to place restrictions on smoking and drug use within your property.

As a landlord, you are allowed to place restrictions on pets, however, with regards to comfort or therapy pets, the restriction must be reasonable. For example, even though one might have a pit bull as a comfort pet, if the city ordinance bans such dogs, you needn’t make an exception for them. Similarly, therapy animals like peacocks and other, exotic animals would be considered unreasonable.

It is now a requirement to disclose whether or not there have been bedbug infestations in the past

When it comes to swimming pools, if the pool was built before 1996, you were required to have one kind of alarm or gate with a spring lock on it to prevent children from falling in. Now, if the pool is being renovated or was built after 1996, you are required to have two of about six different security systems. You need to have some combination of a fence, a cover, a latch, and/or and alarm. Inspectors in California are now required to inspect all pools, where it was once an optional feature that would constitute an extra charge.

Finally, another interesting change is that you are now no longer able to ask a prospective or current employee’s wage history, where once you were able. You also are required to clearly inform an employee about what they will be making at your workplace. Further still, any background checks you do must take place after you’ve extended a job offer.

There have been a lot of changes, so be sure to stay updated on those to avoid any trouble in the future.

If you have any questions about any of these changes, feel free to reach out to me. I'd be happy to help.