Are Assumable Loans About to Become Desirable?

Giving some thought to the financing of real estate, I wondered whether most loans issued over the past few years are assumable. Why would anyone care? Money, of course.

While interest rates have been low, low, low for a long time, they’re rising again now. New loans taken out today are virtually guaranteed to have higher interest rates. If a buyer can assume the sellers’ loan at an advantageous interest rate, that fact alone would be worth thousands of dollars.

Similarly, county & city transfer fees are based on the amount of money used in transferring the property, exclusive of any loans assumed in the process. While probably not thousands of dollars, there could certainly be a substantial savings.

So, if you’re thinking about selling your home, it might be worthwhile to haul out that old loan contract and determine if the loan is assumable. Some buyers may be very much attracted by the opportunity to save. Possibly enough to offer even more for your home + loan, than for another sellers’ home without an assumable loan.

We’re curious. Is your loan assumable? Do you know someone who has assumed a loan recently? Let us know. Write, call, post, or otherwise contact us. We’ll let you know what we discover in a future post.

June 2017 Update on SoCal Beach Real Estate

Looking for the elusive “top dollar” in real estate can be trying. The market news this month talks to some of the timing surrounding the various factors impacting sales in 2017. I thought our readers might like to see this report from first tuesday (link below), one of the earliest reports to arrive. (It’s not uncommon to receive market analyses two-three months after the data is available.)

This is strictly a major metropolitan, California report, so we’re able to avoid the distraction provided by up and down markets in rural areas and in other states. Note that most beach cities property is in the “high tier” as the likely sale price is over $811K.

The first important data is the 5% increase in high tier prices over 2016. This data point gives a secondary method of estimating current value, and is especially important when the market has low inventory and the associated paucity of legitimate comparables.

The second important piece of information is the slowing rate of that price appreciation. As we can see in the Tiered Property Price Index chart, high tier prices which were out pacing the two lower tiers until 2014, have gradually dropped behind. Compare the current performance to the market performance in 2004, as high tier prices dropped off before the market collapse. In the words of the report author, “By 2018, home prices will likely reverse direction due to a slowing sales volume.”

The Homes Sales Volume vs Pricing chart graphically reflects that sales slowdown. In that chart, it’s easy to see the 2014 slowdown, followed by a relatively flat line after that. Note the report forecast, “… the price increase is expected to fall off by the end of 2017.”

The final chart on Annual Residential Construction in California, speaks to the market for new construction directly, and can be viewed as analogous to the remodeler’s market. This is a measure of the construction industry reaction to the real estate market. Developers and builders are typically among the first to shy away from investment in a slowing market because of the long term required to design, permit and build before being able to market.

Knowing when the market is at the absolute peak is very challenging. Needless to say, if we wait past that point, it’ll be years before getting back to it again.

California’s housing market at the halfway point of 2017; Monthly Statistical Update (June 2017)

Open House Tips for Buyers

Are you looking for a home? Here’s how to get the most out of your weekend open house tours before you make an offer.

  1. First, talk to at least one loan broker, or a couple direct lenders (like the bank you regularly deal with), or to your credit union. Ask each to tell you how much you can afford to pay for a new home and how much you’ll need for a down payment. There are two reasons for doing this.  One is you’ll be able to limit your viewings to homes in your price range which avoids disappointment and wasted time. Another is with a pre-approved mortgage lined up, your offer will carry more weight when presented to the seller.  In a strong sellers’ market, you’ll need all the advantage you can get.
  2. Be prepared when you head out for viewings. Have questions ready to ask the listing agent, and be sure to bring a notepad, measuring tape and camera. Measure closets and other spaces to see how much room they have for your belongings. Especially consider your larger furniture pieces, like an over-size bed or sofa. Take photos of key elements to remind you later of the positives and negatives in each home.
  3. Don’t rely only on your eyes. Stay awhile and listen for traffic sounds or noisy neighbors. Note any strange or musty smells – they may indicate underlying problems. Ask about “neighborhood nuisances” of any kind.
  4. Go outside. The outer condition of your home is as important as the inside. Talk a walk around the home to check for evidence of deferred maintenance. Look at the home from the street.  Is it a place you would be proud to call “home?”
  5. Travel light. Leave your children with relatives. Plan to show your top choices to family members after you have narrowed the selection. Family can provide valuable input, and can be a major distraction when you’re trying to gather as much information as possible.

Use your open house visits to determine if a house is suitable to be your home. Don’t worry about looking for physical problems. You’ll want to have an professional inspection anyway, to spot major issues. Use this time to decide whether the property overall will work for you and your family. If it will, then ask your agent for help in pulling the details together.

With over 25 years of experience, we can help you find your perfect home. Call us today.