Rent Disenchantment

Is it time to start thinking about owning a home?  Shelter-seekers in Northern California often choose to rent, but there is some debate about whether or not renting is actually the best financial option. Spoiler Alert:  Real estate professionals tend to think buying is the answer.  Here are a few places where you can follow the discussion, look at the numbers, and decide for yourself if renting or buying is the right choice for you.

• According to “You’re Making Your Landlord Rich” by David Cross, California renters tend to spend more each month than homeowners. To bring it even closer to home, he reports that “Alameda County renters pay an additional $332/month.”     

•  “I left my heart in San Francisco…As I Move to the East Bay”-- Trulia makes the case that buying in the East Bay will get you the best deal if you are switching from renting to buying in the Bay Area.

•   Try the New York Times buy or rent calculator to help you crunch the numbers.

If you do decide it is time to own your own home, give us a call at Berkeley Hills Realty.  We’ll help you find a home that fits your budget and your lifestyle.

Fourth quarter housing affordability

C.A.R. reports entry-level housing affordability remained at 64 percent in the fourth quarter of 2009

Quick Facts:
. C.A.R. First-time Buyer Housing Affordability Index stood at 64 percent in the fourth quarter of 2009
compared with 61 percent (revised) in the fourth quarter of 2008
. The median price of an entry-level home in California was $257,940 in the fourth quarter of 2009
. The estimated monthly payment including taxes and insurance was $1,470 in the fourth quarter of
2009
. The minimum household income needed to purchase an entry-level home in California in the fourth
quarter of 2009 was $44,100.

LOS ANGELES (Feb. 12) The percentage of households that could afford to buy an entry-level home in California remained at 64 percent in the fourth quarter of 2009, compared with 61 percent (revised) for the same period a year ago, according to a report released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. C.A.R. also reports first-time buyer indexes for regions and select counties within the state. The Index is the most fundamental measure of housing well-being for first-time buyers in the state.

The minimum household income needed to purchase an entry-level home at $257,940 in California in the fourth quarter of 2009 was $44,100, based on an adjustable interest rate of 4.5 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $1,470 for the fourth quarter of 2009.

At $44,100, the minimum qualifying income was 4 percent lower than a year earlier when households needed $45,900 to qualify for a loan on an entry-level home. Home prices remained below peak levels, resulting in an improvement in housing affordability compared with the previous year.

At 84 percent, the High Desert region was the most affordable area in the state. The San Luis Obispo County region was the least affordable in the state at 48 percent, followed by the San Francisco Bay region and Santa Barbara area both at 50 percent.

Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than 167,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Source: CALIFORNIA ASSOCIATION OF REALTORS^®

^{Berkeley Hills Realty notes: Our market is highly localized. For East Bay specific data, contact your Berkeley Hills Realty agent.}

^{Click here to access housing affordability tables.}

Buy a House, but Don't Pay the Mortgage!

A new reverse mortgage option, HECM (Home Equity Conversion Mortgage, the FHA term for a reverse mortgage), has been unveiled that may help senior citizens age 62 or older buy a house or downsize from a current home in the Bay Area. Reverse mortgages have been around for quite some time. However, the concept of their use to purchase a home is new.

In the past a reverse mortgage was a way for seniors to access the equity they had built up in their primary residence. The concept is simple; a homeowner receives a check (in lump sum or multiple payments) from the bank against the existing equity in his/her home and the homeowner's obligation to repay the loan is deferred until the owner dies or the home is sold.

The new version of the HECM program allows buyers to use a reverse mortgage as a plan to permanently finance the qualified buyers new home. Through the program, the qualified homeowner may live "mortgage free" and only be responsible for property taxes, insurance and maintenance costs for as long as they live in the home. Beyond living mortgage free, additional financial benefits may be found by freeing a retired homeowner's equity:

The purchase program, in effect, doubles the purchasing power of eligible buyers, several brokers said. Under the program, a couple with a $1,800 monthly payment on a home in which they have $250,000 in equity could sell the house, use $150,000 of their equity to buy a $300,000 condo and never make another mortgage payment.

They would then have $100,000 in cash that could be used for any purpose, such as supplementing their retirement savings or pension income.

Here are few of the fine points:

• Buyers need to be at least 62 years old. The older the borrower, the greater the amount of the home price that can be financed.
• The property being purchased must be a principal residence and owner-occupied.
• Homes can appraise at up to $625,500.
• Buyers need to put up a substantial down payment (often 40% or more) to create the instant "equity". The size of the down payment varies depending on the age of the buyer and the interest rate of the loan.
• Reverse mortgage costs and fees can be substantially higher than for conventional loans.
• Buyers must pay 2 percent of the property's appraised value - up to the maximum value of $625,500 - as a premium for federal mortgage insurance.

Resource: New reverse mortgage opens options for seniors, by Robert Hollis, Special to the Chronicle.

First-time Buyers Benefit by Employing a California REALTOR®

From C.A.R: C.A.R. launches mortgage protection plan for first-time home buyers

The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) launched the C.A.R. Housing Affordability Fund Mortgage Protection Program (C.A.R.H.A.F. MPP), for first-time home buyers.

Through the Housing Affordability Fund Mortgage Protection Program, first-time home buyers who lose their jobs due to layoffs may be eligible to receive $1,500 per month, for six months, to help make their mortgage payments. A qualified co-buyer also can participate in the program, and receive a monthly benefit of $750 per month for up to six months. Program benefits also include coverage for accidental disability and a $10,000 death benefit.

C.A.R.’s Housing Affordability Fund is dedicating $1 million toward its Mortgage Protection Program, and estimates that as many as 3,000 families will benefit from the program this year.

To qualify for the Mortgage Protection Program, applicants must:

• Be a first-time home buyer – someone who has not owned a home in three or more years

• Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009

• Use a California REALTOR® in the transaction

• Purchase the property in California

• Be a W-2 employee (cannot be self-employed)

To apply for the program, home buyers must request an application for the H.A.F. Mortgage Protection Program from their REALTOR®.

Note to first-time home buyers: All Berkeley Hills agents are REALTORS®, and can help with the paperwork. We can also help provide details of other programs such as the $8,000 tax credit for first-time home buyers. Call 1 800 Hi Berkeley to start the process.