Owners have the largest mortgages in history!

It’s no secret that the housing market has been unbalanced over the past few years. Prices have been rising, and with them, so have average home loans.

mw-average mortgage size

According to The Mortgage Bankers Association (MBA), the average home loan size is the largest its been in the history of its survey, which began in 1990.

Additionally, the median mortgage size was only about 3.3 times the median annual income in 1990 – now, it’s more than 5 times as big. This is likely due to the increase in housing prices, buyers getting bigger homes and lower interest rates over the years.

Here’s a look at some housing market characteristics for select years.

Housing market data points
Courtesy Realtor.com (link in text above)

According to Mike Ervin of Supreme Lending, people are just waiting and waiting for mortgage rates to go down. People who are using securitizers like Fannie Mae and Freddie Mac have to wait until the Fed buys up more mortgage bonds so that rates will go down. It is unknown if that will happen, but rates have dropped in 2017.

Multiple factors can affect the bond and mortgage markets. The most recent major event was the Trump election and presidency, which saw a large immediate increase in mortgage rates, which have since rebounded, even with the Fed raising rates.

In California, we are in the wealth-building business and real estate in the Bay Area is going to be a good investment for years to come. I am here to advise, provide insight and help you build wealth through real estate.

Pending home sales are down in CA – what does it mean?

According to the California Association of Realtors, pending home sales have dialed back and marked the weakest February in three years.

Courtesy mcar.com.

Low housing inventory, eroding affordability and rising interest rates made pending sales on a year-over-year basis for the month of February suffer after a good start to the year in closed escrow sales. Also, sellers simply aren’t selling.

They did see elevated market activity, but the Bay Area pending sales specifically were down year-to-year for the fifth straight month. According to the release, the Bay Area has been plagued by a shortage of homes on the market and poor affordability.

We have seen an increase in listings starting in April, but with pent-up demand, buyers are getting frustrated losing out in multiple-offer scenarios and with ever-increasing prices.

If you want to know more about the market, give me a call!

More change coming to downtown WC

The ever-evolving landscape of downtown Walnut Creek is about to change again. Soon enough, there will be another new restaurant and Amazon’s new brick-and-mortar location.

Citra Grill, which has held a corner location by the movie theater for a few years now, is already out. In its place goes KoJa, which is a food truck-turned-restaurant that serves up a Korean-Japanese sandwich fusion with crispy garlic rice buns instead of bread.

Additionally, there is a physical Amazon location coming to Walnut Creek. The new bookstore, which will go in Broadway Plaza, will infuse a little literature into a town that lacks it. I find it ironic that Amazon’s business model literally (pun intended) closed most of the brick and mortar stores because it was much cheaper to order books via Prime. How I have missed browsing a book store before a movie, but isn’t that the problem? We as consumers browsed and then bought online and now with Audibles, I just download a book. I am curious to see how and why this fits their warehouse-style business model that ships to your door.

The last update is one recommended to me by a team member. Apparently, there’s a new sushi joint next to Crepes Ooh La La called Kurumi Sushi that gives gigantic portions for fair prices and which he says is above average in taste! I personally don’t think you can have both (great food and large portions), especially with Walnut Creek real estate rents, so you decide and let us know.

How rate increases affect your payments

We’ve seen rates increase since Donald Trump won the election. Now, the Fed is saying they’ll do three rate hikes instead of the expected two in 2017. This caused rates to bump up about half a percent. What do interest rate increases mean in regards to a buyer’s payment and the overall market?

interest-rate-hike

According to The Wall Street Journal, if we adjust for inflation since 2006, housing prices are actually 16 percent below their 2006 peaks in most areas.  Many economists are saying the demand for housing remains as strong as ever and that recent rate increases will have a minimal effect.

However, people usually make home purchases based on payment. So as interest rates increase, somebody thinking of purchasing should know a 1/2 percent increase in rates for a $500,000 loan, increases the payment about $140-$150 (and even less after “tax benefits”).

bear-and-bull-market

Should buyers and borrowers wait to see if rates fall before moving forward with transactions? Jay Voorhees of JVM Lending says absolutely not. Borrowers can easily take advantage of no-cost refi’s if rates fall.

And, as Gary Shilling wrote in a Forbes column on Dec. 6, he thinks the markets massively overreacted to Trump’s election. He points out that the root causes of weak economic growth (that have kept rates low) will remain. He also says that Trump’s proposed tax cuts and stimulus programs will be watered down by Congress; the expectations of an economic boom are overblown.

What do you believe? Are you bullish or bearish? This election reinforced the notion that nobody has a crystal ball and sitting on the fence waiting for one outcome or another may be the worst thing you can do.

Living Near Trader Joe’s and Whole Foods Improves Your Home Value

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Really? According to the Huffington Post, homes located within a mile of Trader Joe’s stores are seeing a significant increase in value, compared to homes that are not within that range. Same thing goes for Whole Foods!

Luckily for us living in the immediate East Bay, where healthy eating and living is quite common, there are at least 12 Trader Joe’s and no less than six Whole Foods (including one each in Walnut Creek!). Chances are, as HuffPo says, if you’re close enough to one of these stores, your home value will see an uptick. I am not so sure this shows the entire picture; maybe Trader Joe’s and Whole Foods just tend to pick more affluent neighborhoods. I have never heard a buyer say they would like to be in close proximity to either of those stores when thinking about purchasing a home.  On the other hand, I personally live within walking distance to both stores in Walnut Creek.  Do I like it, absolutely!  I just finished eating a salad from Whole Foods and often stop off at TJ’s on my way home.

On the other hand, I personally live within walking distance to both stores in Walnut Creek. Do I like it? Absolutely!  I just finished eating a salad from Whole Foods and often stop off at TJ’s on my way home.

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For me, the real estate market is never boring and always provides interesting insights – location and surrounding amenities play such a huge role in pricing. Walnut Creek and the Bay Area overall are much different than the rest of the country: great for those who already own, but not so much for those trying to find a home or move in from another state. I feel very blessed to own my own and live in such a beautiful place, whether I am located within a mile of Trader Joe’ or not.