Are you thinking of buying a house in California in 2017? Do you have questions about the latest real estate and mortgage trends? You’re in the right place! Here are five things every home buyer should know about buying a house in California, as we approach the summer of 2017.
Buying a House in California in 2017
Home prices are still rising in most parts of the state, but at a slower pace than the last couple of years. Competition among home buyers remains high, largely due to inventory shortages. Here are five more things you should know about buying a house in California in 2017:
1. Home prices are starting to slow down.
According to the real estate data company Zillow, the median home value in California rose by around 7% over the last 12 months (April 2016 – April 2017). That’s well above the historical average for annual home-price appreciation, which is closer to 3%.
But we probably shouldn’t expect that kind of appreciation going forward. In May 2017, the company’s economists and analysts predicted that California home prices would rise by just 1.7% over the next 12 months.
2. Housing affordability has become a concern.
Can you afford to buy a house in California in 2017? And if so, how much of a home can you afford? These are two important questions for those planning on buying a home this year, especially since we’re coming off three years of above-average price growth.
Housing affordability has become an item of concern among industry professionals, economists, and policymakers alike. Sung Won Sohn, a professor of economics at California State University, recently told The Sacramento Bee:
“…the average person, especially in the Bay Area and Southern California, is essentially priced out of the market. The only way they can buy a home is with a high-paying job or their parents helping them out.”
And speaking of parents helping out, that brings us to another important point…
3. There are ways to lower the down payment “hurdle.”
Some home buyers think that buying a house in California in 2017 is beyond their financial reach, specifically because of the down payment. They could afford the monthly payments associated with a mortgage loan (which might actually be close to what they’re paying in rent). But it’s the down payment that intimidates them.
There are many myths and misconceptions relating to down payments, so let’s clear the air:
- You don’t have to put 20% down. There are several ways to buy a home in California with less money invested up front, as little as 3% in some cases.
- Depending on the type of mortgage you use, the down payment funds could be provided by a third party such as a family member, a close friend, an employer, etc.
- Military members and veterans can often qualify for 100% financing (with nothing down) through the VA home loan program.
Learn more about low down payments when buying a house in California.
4. Competition remains high in many cities, due to limited inventory.
Even though home prices appear to be rising more slowly across the state, the level of competition among buyers remains high. This is especially true in the major cities and metro areas, where demand for housing is generally higher.
Anyone planning on buying a home in California in 2017 should be prepared for stiff competition — especially if you’re in a market with depleted housing inventory.
So what does it mean to be “prepared”? For one thing, it means you should have your financing lined up before entering the market. If you’re going to need a mortgage loan to help finance your purchase, you should get pre-approved for a loan prior to house hunting. Sellers will expect you to have a pre-approval letter when you make an offer.
Researching your local real estate market is another must-do item for your checklist. Home buying success begins with research and planning. Start by looking at recent home sales in the area where you want to buy. How much have properties been selling for? How quickly are they selling? Answering these questions will give you a more realistic sense of what you can afford to buy, and how much to offer when the right house comes along.
5. Mortgage rates are expected to inch upward during 2017.
Mortgage rates change constantly and are notoriously difficult to predict. But there are some general trends to be aware of, when buying a house in California in 2017. Here’s an updated look at mortgage rates.
Mortgage rates have been a little more volatile in 2017, compared to 2016. You can see this in the chart below. Rates shot up at the end of 2016, following a long period of relative stability. But they’ve leveled off a bit since then (as of spring 2017).
When this article was published, in early May 2017, the average rate for a 30-year fixed mortgage was 4.02%. That’s based on the weekly survey conducted by Freddie Mac. A year earlier, 30-year home loans had an average rate of 3.61%. So they rose by 41 basis points (0.41%) during that 12-month period.
The Mortgage Bankers Association expects rates to continue rising, albeit gradually, between now and the end of this year. They recently predicted that 30-year fixed mortgages would have an average rate of 4.6% by the fourth quarter of 2017.
These are some of things home buyers should know, when buying a house in California in 2017.