Loan limits, investors may impact your decision
By Dian Hymer
The decision of whether to buy or sell a home is perplexing. A lot of buyers and sellers are still wondering if now is the right time to be in the market.
Ideally, buyers would like to know that the market has hit bottom and that the value of what they buy won’t decline. Sellers who will sell at a loss today wonder if they should get out now or wait for a better market to sell.
When will that better market appear? It’s impossible to time the market. We’ll know that we hit bottom after the market turns around — not before. Some economists think this will take another two years; others expect a turnaround in five to six years.
Many economists think we’re at or close to bottom. However, it’s expected that the market will be rocky for some time. The market will change seasonally. For example, it’s typical for home sales to decline during the winter months.
HOUSE HUNTING TIP: Good and bad news can affect whether buyers feel optimistic about homebuying. The fact that the conforming jumbo loan limit is likely to drop to $625,000 from $729,750 could spur home sales in higher-priced markets between now and September, when the higher loan limit expires.
Interest rates have been fluctuating but remain below 5 percent for conforming, fixed-rate mortgages. Interest rates and affordability in general have a great impact on the strength of the housing market.
The news about the real estate market was discouraging at the beginning of the year, as hopes of a solid recovery were dashed by declining home-sale volume and prices. Some economists even predicted that the housing market was headed for a double-dip recession, but this doesn’t look likely at this point.
March brought good news as home-sale volume nationally picked up 3.7 percent from February, according to the National Association of REALTORS®. However, the sales were primarily driven by investors buying cheap foreclosures.
Although investor purchases were up, the percentage of first-time-buyer purchases was down, possibly due to tough mortgage qualifying criteria, which are expected to become even more difficult going forward.
Leslie Appleton-Young, chief economist for the California Association of REALTORS® (CAR), points out that it’s difficult for buyers to trade up or down if they don’t have equity in their homes. According to CAR, approximately 25 percent of homeowners in the U.S. owe more than their home is worth. Appleton-Young believes the figure is closer to 31 percent in California.
As grim as the picture looks, it’s not the same everywhere. Residential real estate is a localized phenomenon. The San Francisco Bay Area is a good example. Although median prices are still lower than they were a year ago, the number of homes sold in the Bay Area in March was the best showing in four years. Sales volume was up 41.3 percent from February and up 0.2 percent from a year ago, according to MDA DataQuick.
However, within the Bay Area there was considerable diversity. Several higher-priced counties, which haven’t seen much activity until recently, saw gains. These included San Mateo County, where sales were up 8.6 percent, and Santa Clara County, up 3.9 percent. Both counties benefit from the Silicon Valley rebound. Jobs are necessary for a healthy housing market.
In Alameda County, home sales declined 7 percent in March. Even so, there are hot spots within the county. Select neighborhoods close to shops, transportation and good schools defied statistics with high buyer demand and over-asking-price sales.
THE CLOSING: Keep an eye on trends, but focus on your local neighborhood when making decisions about buying and selling.
Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”