If you are renting and can afford to buy, but have decided to put off buying a home due to all of the chatter about a housing bubble... you may be sorry. Is there a 'real estate bubble'? The simple answer is 'No'. Even if interest rates due move up a little bit higher, it won't be enough to cause a slide in Real Estate prices here in Mission Viejo. The key to a healthy real estate market is the jobs market... and in south Orange County, has some of the lowest un-employment in the Nation, with a good forecast for job growth for years to come.
Even though the payment on a home may be slightly higher due to increased interest rates, it generally won't stop someone from buying the home of their dreams... but if they feel their job is in jeopardy, it usually will stop most people in their tracks from purchasing a home.
A major mortgage industry group recently release its three year economic forecast, projecting robust economic growth for the Nation and projecting a small rise in long term home mortgage rates to about 6.5% by the year 2007. Again, making the likelihood of a real estate bubble bursting unlikely in Orange County.
Price declines are unlikely, but we do expect a slowing in real estate appreciation in the years to come to a level of 3% to 6% per year, which is still good. Unfortunately, the talk of a real estate bubble, has been going on for some years and has victimized many renters who could afford to buy. Is it too late? No it's not, but here is an example of what can happen if one continues to procrastinate on buying a home.
For example, if one is paying rent in Mission Viejo of $2,000 per month, and the landlord increases the rent by 5% each year, one would wind up paying over $130,000 over five years with nothing to show for it! Also, if one does any type of maintenance to the home (paint, leaky faucet), and then moves out, those improvements belong to the landlord.
With the extensive variety of loan programs to help buyers purchase with No or very low down payment, the very same money could have been used towards home ownership. Using an adjustable rate loan, a mortgage of $375,000 could be obtained with a total monthly mortgage payment - including property taxes and insurance - of around $2,400 per month. Assuming a 25% tax bracket, one would save about $300 to $400 per month, so the effective net payment would be close to the above rent payment example. After 5 years one would also have paid down some of the principal by about $12,000 which is now added to ones net worth.
Home appreciation can add even a bigger chunk of equity. If the Mission Viejo home appreciates by a modest 5% per year for the next 5 years, the $375,000 Condo would be worth $455,000 in the year 2010. Now ones net worth could be a whopping $95,000 which by the way, is tax free.
Don't be victimized by the real estate bubble hype. Buying a home in Mission Viejo or elsewhere in south Orange County is a big step for most people, and a step in the right direction. |
