Homeownership Rate Continues it Fall in 2016

The rate of U.S. homeownership decreased to its lowest level in more than 50 years caused by soaring home prices that keep purchasing unrealistic for numerous renters.

The percentage of Americans who own their homes was 62.9 percent in the second quarter of 2016, the lowest pace dating back to 1965, based on a Census Bureau report released on July 28. Moreover, it was the second straight quarterly decline, falling from 63.5 percent in the prior quarter.

Rising home prices are making homeownership simply out of the question for households that are leasing their residence.

First-time buyers have found it difficult to locate reasonably priced real estate as low interest rates and a strengthening job market promote competition for low inventory. Home prices rose 5.2 percent in May from a year earlier, according to the S&P CoreLogic Case-Shiller index of values in 20 cities released this week.

Many experts claim that the largest obstacles is affordability. Home prices are going up a lot quicker than incomes, so it's tough for prospective buyers to save up for a down payment.

In June 2004, the homeownership rate reached a peak of 69.2 percent.  In June 2016, the homeownership rate for Americans between the ages 18-34 dropped to 34.1 percent in the second quarter in contrast to 34.8 percent the prior year, according to the Census Bureau.

The bottom five states in terms of homeownership percentage are Hawaii, Nevada, California, New York and Washington D.C.   The average rate of homeownership in California is 54.3% compared to its peak of 60.7%.

 Back in 2006. This percentage is due both to prices in California exceeding average incomes and to the anticipated rise in mortgage rates, likely to begin in the second half of 2016.

California's lower rate of homeownership should not be that alarming since it is typically lower by ten percentage points from the national average due to the higher cost.

The National Association of Real Estate Brokers (NAREB) reports the homeownership rate for blacks is 41.7 percent, which is less than the national homeownership level during the Great Depression. The rate is the lowest of out of all races in the USA. While, the home ownership rate for whites is 71.5 percent,  asians at 59 percent, and hispanics at 59 percent.  In California, the homeownership rate is 62.9% for whites, 56.7% for asians,  41.9% hispanics, and 34.5% for blacks.

The housing industry and consumer advocates state that homeownership can put families on a path to financial stability by compelling them save, provide a place to retire and enable their hard asset to appreciate into the future. It additionally makes people more involved in the neighborhood, effecting higher property values, and lower crime.

OC Home Values 30 Years Ago

Trulia recently analyzed median home values from the period 1986 to 2016 of the 100 largest metro areas.

What was learned is that real estate in the Western U.S. (metropolitan areas in California, Oregon, Washington, and Hawaii) generated the highest return of investment, fetching nine spots in the top ten. Trulia determined that people's rising income in the region along with new housing developments were largely responsible for adding to the region's housing price appreciation.

In Orange County, CA  the historical statistics are
1986 median home value: $143,210
2016 median home value: $643,483
Gain: 349.3%

For new homes in the period ended Aug. 8, 2016, Orange County’s median selling price was $742,000, a decline of 7.2 percent from the prior year.

Reports from analysts at PropertyRadar and the California Association of Realtors showed.
1. Sales Decline: Californians purchased 37,823 single-family homes and condominiums in July, which is a decrease of 12.8 percent from July 2015. Year to date, home buyers have purchased 2 percent less from 2015.

The median price of a home in California was $438,000, an increase of 5 percent from 2015. The median-priced for a condo was $417,000, which is a rise of 4.3 percent from $400,000 in July 2015.

Less all-cash buyers in 2016: Does it mean there's less cash-rich buyers or just more people applying for and getting financing?  Not really, as there were 13 percent less buyers not obtaining mortgages in July compared to July 2015.  All-Cash purchases accounted for 18.1 percent of total purchases compared to 19.9 percent from July 2015, and 40 percent of all purchase transactions in August 2011.

The Decision on Down Payments and Mortgage Insurance

An enormous hurdle to purchasing a home for many home buyers is having an adequate down payment of 20% or more. To offset that, lenders allow borrowers to to buy mortgage insurance which lets them come in with less than the standard 20% down payment.

What is private mortgage insurance? (PMI)
PMI is insurance is to aid the mortgage lender's when a mortgage loan transaction is over 80% of it's appraised value. The lender is taking on more risk of the borrower defaulting on the loan with a low down payment, so they require the borrower to purchase private mortgage insurance.

If the borrower stops making payments on their , private mortgage insurance is triggered to pay the lender's portion of the principal balance due.

For example, if you brings in just a down 10% payment to buy a home, private mortgage insurance may insure the outstanding 15%.

The fee for private mortgage insurance is dependent on the type of mortgage loan, the loan size, your down payment and credit score. Typically, the normal price can range from 0.5% to more than 1.0% of the loan amount,  divided by 12 and included in your monthly mortgage payment.

Is there a point when I can cancel private mortgage insurance?
As soon as the balance of your mortgage is below 80% of the current market value of your home you are able to usually request the cancellation of private mortgage insurance. Most of the time there are other stipulations, such as making payments on time and not having a junior lien.

By and large, mortgage lenders should cancel PMI the moment your mortgage debt falls to less than 78% of it's market value. They won't know that unless an appraisal has been reviewed or some will accept the tax assessor's value.

You're in Charge of the Down Payment
A lot of people can become homeowners who otherwise might not be able to without the help of mortgage insurance. However, consider the real costs of putting down as little as possible. 

Most industry experts and homeowners can agree that the larger the down payment, the better your financing deal will be. You'll obtain a lower mortgage interest rate under 80% loan-to-value than you would at 90%. Sometimes it's as much as 2.5% lower when it's a jumbo loan. 4.00% vs. 6.50% is a huge difference for a home in Orange County and especially California. Additionally, you will pay much less in fees.

In the end, it's a question of balancing your finances with the house, your future savings and earnings potential to figure out the best long-term strategy for you.

The Best Ways to Reduce the Risk of Fire in your Home

Once you finally move into your new home from being a renter for a while, there's plenty to consider.  If you had renter's insurance in your rental, you most likely transferred your policy to your new home. Now that you're in your new digs, you probably bought some new furniture for the rooms along with decorative items.  Naturally, your homeowner's insurance will increase with more space and more valuables.  Additionally, you should become familiar with the potential risks of fire and learning how to protect yourself, your family and your property.

Nationally each year, residential fires result in an average of $7 billion in property damage based on reports by the American Red Cross. In California, wildfires are the norm in the summer and dry months.  In September of 2015, more than 1,000 homes burned from two large wildfires in Northern California.  Wildfire or not, the following are a few safety measures to lessen the risk of fire in your home.

A vital part of reducing the risk of fire is prevention. Have fire extinguishers and smoke detectors all through your residence, especially in the kitchen. If you have a two or three-story home, have a fire extinguisher on all floors. Each of these items only need standard servicing in order to work right. For smoke detectors, just replace the batteries two times each year, and monitor the date of expiration on your extinguishers so they can be swapped out too.

With many historical homes built in the early to mid-1900s, it's crucial for homeowners to make sure the existing electrical wiring is safe, because poor wiring is among the top causes of home fires. Some of the indicators of defective circuits are walls that are hot if you touch them or breakers that regularly go off. Look out for flickering lights or sparking, electrical outlets that are charred. During escrow on the home you bought, hopefully, you did a home inspection and the wiring is not an issue per the report.  You don't want to move into a home that has prominent signs of malfunctioning or old wiring.

Q & A Regarding Simultaneous Home Purchase & Sale

Q - When selling a home "as is", is a Transfer Disclosure Statement still mandatory in California?

A - In a Standard sale, the seller is required to provide the buyer with a detailed Transfer Disclosure Statement even when the sale has an "as is" clause. If the seller fails to disclose any material fact affecting the value of the house or desirability of the property which are known to him or her, as well as knowing of any previous lawsuits against the property, the buyer has a legal remedy.

Q -  I'm selling my house and at the same time , I'm buying a new one. I already received an offer for my house and I accepted it and I got my asking price and the buyer gave me a pre-approval letter. What's Next?

 A - Ask the escrow company to schedule a concurrent closing, taking the money for the sale of your home and paying your down payment on the new property.

Another tip is to get all the information about the buyer, ask your agent to ask the buyers agent to allow authorization to speak with their lender. By doing so, the lender can talk to you and give you some assurance that the buyers are strong.

If you are able to request using the same Title and Escrow company, especially the same Escrow officer, it will make the transaction so much easier.

Another tip is to make sure you receive a signed release of all contingencies from your buyers and from the Sellers approving any inspections and repair costs in your purchase BEFORE you pay for an appraisal; that way you won't pay out any appraisal fees if anything goes "south" in the transaction. Find your next property at HomeFinderOC.com

Recommendation for Home Buyers in Orange County

If you are a tired of renting for the last few years and want to own your home instead? The following are some great tips to prepare for the home buying process.

1. Get familiar with the prices of homes in the neighborhood you want to live in. Get in touch with a local realtor and get listing alerts and recent sales data. All they need is your email and you can view it at your leisure.

View of Mission Viejo

2. Make use of online mortgage calculators to know how much your approximate mortgage payment will be every month should you buy a home in the next 30-60 days. The calculated figure will show you the total housing payment, which includes principal, interest, property taxes and homeowners insurance. In certain locations, you'll have to pay an HOA fee and/or Mello Roos taxes which can increase your monthly payment substantially.  There are many single family homes, townhomes, and condos in Aliso Viejo, Mission Viejo, Lake Forest, Laguna Hills and nearby areas that require an HOA fee.

3. Determine the amount you'll pay for closing costs. This is not an area to forget about as closing costs can change a lot of home appliance or upgrades you were going to do upon move-in. Closing cost fees are typically lender's origination, title insurance and settlement/escrow, and monthly recurring expenses such as property taxes, homeowners insurance, and HOA.

4. Is your monthly income adequate to cope with owning a home. Lenders recommend that buyers pay out a maximum of 28% of their monthly income on housing expenses and 43% for all combined monthly expenses.

5. If you're not truly approved by a lender? Find a local OC lender and get pre-approved. The realtor you talk to should have a good referral to get it done. Once you're pre-approved for a mortgage, it'll help you negotiate from a position of strength when you are searching for a home to buy.