Tuesday, May 31, 2016

HOUSING PRICES NEAR ALL TIME HIGH-- OC CITIES AMONG FASTEST GROWING IN THE STATE--THERE IS NO BUBBLE

When many people see the way prices have climbed the past 3 years, it's easy for the untrained analyst to think there is a bubble.  But the truth is there is not a bubble.  Prices have not been propped up by straw buyers, stated income loans, or under qualified borrowers.  Today's borrowers have been vetted and re-vetted to ensure that they qualify for their loan.  These underwriters of loans are checking employment, source of funds, how seasoned the funds are and confirming that the income the borrower is showing on everything from paystubs to W2's,  is real income  and that that income is going to continue past the year of the application.  And today's buyers  have a down payment.  Yes there is some 3% and 5% down products out there, but by and large we are looking at 10%, 20% or more as a down payment.  Prices have climbed because of the cheap money, something this column has mentioned on several occasions.  In fact, the opposite of a bubble should occur on this economic watch as people's loans are frozen at three and a half percent interest rates, guaranteeing them low housing costs for as long as they reside in that property.  Orange County continues its strong growth, with Lake Forest and Irvine coming in as 2 of the top 10 fastest growing cities.  If you have noticed the development in Brea and new businesses in Fullerton, north Orange County is also anchored in solid growth.  Just in the last 30 days has inventory started to climb a little bit, giving buyers more choices.  More sellers have joined the spring marketing season, creating competition and perhaps giving buyers a respite from upwardly spiraling prices.  It would still be wise to contemplate buying a property now, as interest rates can't stay this low forever.  The Fed has tried on several occasions to raise short term rates, and has been forced back after a week or two.  This has made the cry to buy a home while rates are low, sound a little like the boy who called wolf, but rates will go up.  An election is looming, so who knows?  If you can, you should.  

1 comment:

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