Orange County Real Estate Blog

Posts Tagged ‘mortgage calculator’

Is it a good time to buy in Southern California?

September 23rd, 2015 by Joe Van Fossen

“Is it a good time to buy?” is one of the most often asked questions we get as a real estate professionals.  Many cynics would assume the answer is always “yes” where real estate agents are concerned. However, I see this as a more personal question than a general one.

If your goal is to time the market, good luck with that. There are plenty of people who have predicted upturns and downswings, but the reality is nobody can honestly or accurately predict where we are at in any given real estate cycle. What we can do, as professionals in the field, is provide our clients with accurate housing market data and discuss current trends.

Now getting back to the “personal” part of that question. What I mean by that is, whether or not it’s a good time to buy is largely up to the individual(s) asking. The best way for me to answer this question is to pose the following questions to the inquirer:

  1. Can you comfortably afford to buy?
  2. Do you have money saved for a down payment and closing costs?
  3. Do you plan on living in the home for many years (7-10+)?
  4. Does the idea of owning rather than renting appeal to you?
  5. Are you comfortable taking on the responsibilities of being a homeowner? (taxes, maintenance, etc)

Those are among the most important questions, but there are plenty of other considerations too, including creditworthiness. A great way to figure out how much you can afford is to get in touch with a lender. If you’re not ready for that kind of commitment there are plenty of great online resources like my affordability calculator.

If your answers to all of the previous questions were “yes”, then I would say it’s probably a great time to buy in Southern California.

The real reason you’re probably reading this article in the first place, though, is for the general answer. Not wanting to disappoint the cynics, I have to say the answer is probably yes again. Let me back this up with some data:

  1. As of this writing, 30-year fixed rate mortgages are back below 4%
  2. The local rental market is ridiculously competitive and rates are rising

Now for the negatives:

  1. Home prices are up and affordability is down across much of Southern California
  2. Inventory is tight

Back in 2012 our local real estate market hit rock bottom. Then later that year, the low prices coupled with record low interest rates helped usher in a new real estate boom. The competition was rough and buyers were having to write up several offers before they could even secure a property. Prices went up so fast that we’ve had armchair economists shouting “bubble!” since 2013. While the momentum has waned, prices continue to rise across the Southland.

A common refrain is “prices have risen well above 2006 levels”, referencing the previous housing market peak. While that is true in many areas of So Cal, one should keep in mind that $500,000 in 2006 is $591,062 in 2015 when adjusted for inflation. While the recent uptrend in home prices seemed much faster than we are accustomed to, the reality is that it’s not unusual for home prices to rise significantly over time.

To make a long story short (TLNR), yes I believe it is a good time to buy real estate in Southern California.