The real price of buying..

The real price of buying is the cost of buying.
Will prices continue to fall? Should I buy now?

While price is always one of the major concerns when buying a property, cost and affordability should be at the forefront of your considerations as a buyer.

That means you have to take into account what your monthly payment will be, considering not only the price of the home but also the interest rate of your mortgage. Waiting for prices to bottom out while rates are increasing can wind up costing a lot more.

So the price of the property is, in a way, not the thing to focus on: if interest rates are low enough, the home that will make you happy could be a lot lower in price than you'd think. - I know, I know, no one wants to over pay for a property; but this is an other matter - and so "relative".

We cannot control what the market will be doing, but we can control how we address our housing expenses. 

So I say, look at what is comfortable to own, without breaking the bank, and see if something fits the bill.

On the subject of interest rates:  all lending and financing institutions, like Fannie Mae (FNMA – the Federal National Mortgage Association), Freddie Mac (Federal Home Loan Mortgage Corporation), the National Assocation of Realtors, PMI (Private Mortgage Insurance) and the Mortgage Bankers Association are all projecting rising interest rates over the next several quarters.

Although I have to say, personally, that I did not expect rates to stay so low so long.  So who knows.  If you have an opinion, chime in!

Francis

Silicon Valley real estate
Silicon Valley Smart graphs

Market trend in Mountain View - price/sq.ft

Market trends -  Mountain View:
Following some of my last blogs on average prices in Mountain View and Los Altos, someone asked me to show the evolution of $ price per square foot.



 

So, how is “Google’s” City doing in that respect? 

  As always with figures and statistics one has to take the information with a grain of salt, or a good dose of caution. The figures can be deceiving.
The price per square foot is a good measure of the activity, as part of a combination of measures. It is shown below for the market of condominiums and townhouses, for the past 3 years; it is showing a lower value as we go into 2011:

…and for the house market, it shows a very healthy trend:

But this is one element of a big picture. In this case it is good to remember that as a property is larger, the price per square foot is lower. So the figures may also partly reflect a difference in average size of the properties sold.

Curious about another City? Do let me know at francis@frolland.com

Silicon Valley real estate
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A link of interest: recycling event in Los Altos next week.

Los Altos prices: condos vs houses.

In the category: condominiums vs houses, I was curious to see how Los Altos fared, in plain simple terms.


Does it vary a lot from one City to another?  Not much: it turns out that it is fairly similar between Los Altos and Mountain View.
The following graph shows how condominiums and houses evolved in the past 5 years:

In Los Altos the condominium market started to be soft earlier than houses, and is a little slower to recover; - but overall is doing very well.




Los Altos townhall

  From the average price in 2006 to the average price in 2010, condominiums lost 4.3% in value, while houses lost 5.3% .  This is about the same as what the market did in Mountain View.

I think what is important to note is the general direction these figures point to, and the general idea that the peak was in 2007 - 2008, and the low 2009.

Again, it mirrors fairly closely what the County of Santa Clara experienced.      --Are you curious about your area? Let me know I am curious too.  I'll run the figures for you.
Francis
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Silicon Valley real estate

Silicon Valley and FHA loans..

Home prices are pretty high in the Silicon Valley.  Here, where sometimes wages are comfortable and disposable income or savings pretty low, it is good to remember that it is still possible to purchase a home with as little as 3.5% downpayment. 

How is it possible? with an FHA loan, which is an (almost) normal loan, guaranteed by the Federal Housing Administration.

How does it work? Well it is fairly easy in fact - there are few limitations: the buyer does not have to be a first-time home buyer, there is no limitation of income for the buyer, and the property purchased can be pretty much any price.  The loan amount is limited to about $730,000.

So I like to remind my clients of this option if they have little savings or family help for the downpayment, or if their salary is modest: they can still think in terms of homeownership while prices and interest rates are low.  It is quite a good loan, with an attractive interest rate (at or slightly lower rate than a normal conventional loan).  It is a little more expensive to get: there is a 1% upfront fee for the mortgage insurance and a fee of about 1% every year on the amount of the loan.  Note: If it is used to purchase a condominium, the complex has to be FHA approved.

If you know someone who wants to take advantage of such a loan program let me know: I will share names of lenders who know FHA loans well.  Time is also important: the loan limit will go down on October 1st to $625,500. 

Thanks for reading, and sharing!
Francis Rolland
- Since 1985

Silicon Valley real estate
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A link of interest:  American Legion Santa Clara Post 419