BORROWER EDUCATION 101

It has been remarked that one of the most frightening sentences in the English language is, "Hi, I am from the government and I'm here to help."  Of course, that is not always the case.  Take for example the Federal Reserve Board.  It was created by Congress nearly 95 years ago to provide our nation with a safer, more flexible and more stable monetary system. 

Because of Federal Reserve's role as the central bank for the United States the Fed has some incredible information resources for homebuyers or people looking to refinance a home.  And, with the internet the information is available 24/7.  The Fed can provide you a wealth of information about loan types and it even has an easy to use calculator that allows you to compare loan types before you commit to one with your bank or mortgage lender. 

Whether you are contemplating the latest exotic loan de jour or a more basic 30 year fixed rate you can go to the Federal Reserve's Mortgage Comparison Calculator and see which would be best for your needs. 

Well, it is a good news/bad news situation for home buyers and sellers in our local housing market.  The good news is Sacramento County is one of the most affordable areas of the 58 counties in the state for first-time homebuyers.  The California Association of Realtors reported yesterday that 38% of potential home buyers locally can afford to buy a home.

Sacramento County's 38% compares very favorably to just 24% statewide, 25% in the SF Bay Area, and just 14% in Santa Barbara County.  The same survey said that 35% of first-time buyers in the state were able to afford condos.

CAR's "affordability index" assumes a 10% down payment with adjustable rate financing at 6.58%.  Using that formula in Sacramento  County means that it takes a household income of $65,910 and monthly payments of $2,200 (including taxes and insurance) to buy the median-priced home of $319,060.

Even better for buyers is the amount of inventory currently on the market.  With the flood of homes out there homes are staying on the market three to four times longer than just nine months to a year ago causing sellers to become more realistic in order to sell their homes. 

So, where's the bad news?  The bad news is for the sellers who are still holding onto to expectations based on the hot go-go market of the past few years.  That just is not happening.  The key for sellers to price their home to sell today - not trying to get what they might have gotten had they tried to sell a year or more ago. 

Again, this does provide some upside for sellers assuming they are going to purchase another home.  Why?  Well, because the home they are buying will likely be priced lower as well.  In fact, it is conceivable that someone selling today can get more home for less money than they could have a year ago. 

My take on this is the market is transitioning back to equilbrium and will ultimately benefit both buyers and sellers.  Though for the time being it appears that buyers are in the driver's seat.

CA HOUSING PRICES STILL GOING UP

But Increases Are Not At the Heated Pace Seen In Recent Years

View of California's most expense real estate - the Santa Barbara Pier and Coastline

Affordability continues to present a challenge for buyers (and REALTORS®) in California.  Recent statistics provided by the California Association of REALTORS® bear this out.  In spite of the increasing in prices paid for homes sellers (and REALTORS®) are feeling a slowdown in sales due to the more than doubling of homes on the market year over year in most areas of the state. 

While this should bode well for buyers they appear to be holding back despite the fact interest rates are extremely favorable the choice of homes is so much greater.  Makes me think that too much choice may simply make it too difficult for some buyers to decide to act.  When the supply was limited buyers were gobbling up homes like relatives fighting for the last piece of pie at Thanksgiving dinner.  But that is not the case today.

The CAR survey  determined the median home price in California during September 2006 rose to $553,050.  The median is the point at which half of the homes sold for more than a specific amount and the remaining half sold for less than the amount.

The highest median home price during the same period was found in Santa Barbara County's South Coast where the median home was selling for $1,025,000.  The High Desert region was once again the lowest median home price in the statewide survey.  In that area the median price increased to $329,040 from $321,500 in January 2006.