Lack of affordability in the housing market, as you know, has been an ongoing challenge for home buyers in San Diego for many years. Now that the median home price recently hit 545K in late 2016-just shy of the all-time peak of 576K in July of 2005-the affordability issue is, once again, ‘front and center’. At a price point of $500,000,for example, the typical 20% down payment is $100,000. Not a small feat for most individuals or families-and particularly millennial home Buyers who are dealing with 1.6 Billion in student debt, making it exceedingly more difficult to buy their first home. However, there is some good news. The FHA (Federal Housing Administration) recently increased their loan limits in areas of the US that are experiencing difficulty-based on lack of affordability-including San Diego.
Conforming high balance loans will now be $612,950 – that gets FHA purchases (with 3.5% down) to $635K, which is up about $33K from 2016. It also gets conventional 5% down purchase purchases to $645K, which is up about the same from 2016. There is another excellent loan option that helps home buyers purchase their first home with ‘no money down’. This loan is a special and unique program from CAL-HAFA. The basics are the buyer gets a regular 30-year fixed rate conventional or FHA loan. Then the program (Cal HAFA) gives them a 2nd loan of up to 4% of the new loan amount and a 3rd loan of up to 3.5% of the loan amount. These can be used for down payment and closing costs. Buyer can technically buy with no money out of pocket. They do have to be first time buyers and there are income and loan amount limits for this program. If you would like more information, please contact me-or check out the link below: http://www.calhfa.ca.gov/homebuyer/programs/index.htm
In closing, I will say that many of us have become complacent-because rates have been at historical lows for years now. Many people, especially those under 30, believe that rates are always in the 3.5%-4% range, not realizing that the last time interest rates were this low-was 1959. It is important to maintain a historical perspective when it comes to interest rates. For example, when I first began my career in real estate, in the early 1980’s, rates were in the 16% range!
There is currently serious upward pressure on raising interest rates, once again. If that happens, coupled with current historically high home prices, the dream of home ownership, for many, may be lost forever. If you are thinking of buying a home you may want to act now-before rates go up. Rents have increased by 40% in just the past four years-and there is no end in sight-due to a shortage of rentals. It now actually costs more to rent-than to own-for the first time ever in San Diego.
Please feel free to contact me if I can answer any questions for you-or help you to get qualified for a home loan. The Dream of home ownership may be just a phone call away.