Factors that Encourage a Home Purchase

Jim E. Flynn
"Experience
& Integrity"

Ask The Realtor

As printed in the OC Register / Saddleback Valley News

Written by Jim E. Flynn, Century 21 Beachside Realtors, Lake Mission Viejo

Sept. 3, 2010

Factors That Encourage a Home Purchase

Q. Your last column urged qualified prospective buyers to borrow all they could to purchase the home they need. Our friends and people we talk to say a lot of changes would have to happen before they would be convinced to buy a home in Orange county. How would you answer them?
- Leonard from Laguna Hills.

A. Certainly there are justifiable reasons why some who lease or rent should delay purchasing a home. Economic, medical ,work-related, close proximity of family members are some of the more valid reason. I recently read a portion of a new report by Trulia.com that indicated 27 percent of renters surveyed did not plan to ever purchase a home. Another 68 percent said they were more than two years away from even thinking about jumping into the home owner pool. Of the 68 percent of renters who said they plan to someday purchase a home, nearly 80 percent said there are factors that might encourage them to purchase within the next 12 months. Factors cited included: Able to save enough for a down payment, 47 percent; got a new job, 28 percent; interest rates stay low/get lower, 27 percent; decide it makes more financial sense to buy instead of rent, 24 percent; got a promotion/raise, 23 percent; and local real estate market stabilized, 9 percent.

The encouraging percentage was that according to the study, 72 percent of American adults still believe homeownership is part of their personal American dream. And, another encouraging number was that 23 percent of those surveyed said their attitude toward owning a home has grown more positive over the last six months.

I also, would talk about interest rates in my answer. Mortgage rates, as a result of the market uncertainty are remarkably attractive. Freddie Mac average 30-year rate has falling to about 4.49%, its lowest level ever. A monthly payment for purchasing a home may now be affordable. And, Re-financing for those with current fixed loans in the seven, six and perhaps even the five percentage rates may save two to five hundred dollars or more a month from your current monthly payment. If, your Fico scores are good enough for a RE-Fi that result in a lower house payment then you may be able to channel those extra dollars toward paying off other bills to improve your FICO score. So, again, 28 percent of the respondents in the study cited that if interest rates stay low/get lower they might be encouraged to buy a home. At this writing, the recent projections are for interest rates to stay low and perhaps even go a bit lower.

Lastly, my answer would remind all prospective buyers that the once familiar old saying that a home is worth what a willing buyer will pay a willing seller is not necessarily true in today’s cash market. Why? Because there is still the last appraisal hurdle before getting in the pool. The home must be appraised for the amount needed for the buyer’s loan.

Today’s appraisers tend to be much more conservative. However, today’s Realtors have already provide the best option by using local housing market data and recent sales of comparable homes in the area, to help determine an accurate appraisal price. Jump in the homebuyer’s pool and enjoy the benefits.

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Jim E. Flynn
CalBRE license #: 01215480

Phone: (949) 463-0739