For years, loose lending practices dominated the mortgage industry. Banks made it easy to borrow money for a home purchase.
All you needed was an average FICO (cedit) score and a signed document that said you have sufficient income to make the payments, and the money was yours. But as those homeowners stopped making their monthly loan payments and forced banks to take back the property, the nation was introduced to the recent, well-publicized subprime mortgage blow-up. The most recent and important news for Carlsbad homeowners is the bank's reaction to the subprime issues in the form of stricter lending standards. Buyers looking to purchase a home with a home loan will need stronger credit scores, larger down-payment and have to contend with stricter rules on income verification. In the short term, tougher lending standards will reduce the number of qualified buyers that will that will be able to purchase real estate in North County. These changes come at an inconvenient time in the Carlsbad market, as the fall and winter real estate markets are notably slower than the rest of the year. As local schools welcome their students back, families settle into their current homes, too busy with sports, school and holiday parties to think about the stressful moving process.
Rate changes that affect Carlsbad
With the average single family home in Carlsbad nearly $850,000, the most common loan for a Carlsbad home purchase is a “jumbo-loan.” This is a home loan for $417,000 or more. The upset caused by subprime lending market has caused investors to turn away from the jumbo-loan backed investments. In response, the average jumbo 30-year fixed loan rate is now between 7.5 to 8 percent, up from 6.5 percent recently. To articulate how this affects the market: A buyer that can afford a $600,000 mortgage at 6.5 percent will find that with the 1 percent increase will limit them to a home worth $520,000. Seasonal slowing combined with stricter lending documentation requirements and now higher mortgage rates will make it much more difficult to sell a property. Sellers should consider these market forces when decided how to price and market their property.
Selling a home in the current market
Homeowners can expect to be on the market for at least 90 days with an additional 45 days for escrow. Sellers should prepare themselves for the brutality of the current buyers. The buyers are making simultaneous offers on multiple properties, all of which are 15 to 20 percent below the asking price. And even after getting a below market price, the buyers want additional incentives like closing costs, repair work or even new flooring paid for by the seller. In the current market, it is ill-advised to purchase a new home first before selling your existing home. Your home's estimated, online or appraised value property will be different than the current market will offer for your property. Buyers want a discount and it is not uncommon to see homes selling below their asking price. Sellers are advised to plan accordingly.
Buying a home in the current market
Buyers should consider this an excellent opportunity to secure a below-market price for a home. The ongoing turmoil in the credit market is causing mortgage rates to rise; affecting a buyer's ability to afford the current home prices. Less buyers means less competition in the market, so many homes have reduced prices and increased incentives to purchase now rather than later. Investment buyers should know that most banks are now requiring at least 20 percent down on a secondary home purchase. Also, primary-homebuyers (those purchasing a home to live in) have become more particular with the condition of the property before purchasing; shying away from any property that needs the slightest cosmetic change, for example, new flooring, landscaping, new paint. Many “fixer-uppers” are currently priced extremely well and stand at a great value for the new owner with the ability to see the property's potential.
All you needed was an average FICO (cedit) score and a signed document that said you have sufficient income to make the payments, and the money was yours. But as those homeowners stopped making their monthly loan payments and forced banks to take back the property, the nation was introduced to the recent, well-publicized subprime mortgage blow-up. The most recent and important news for Carlsbad homeowners is the bank's reaction to the subprime issues in the form of stricter lending standards. Buyers looking to purchase a home with a home loan will need stronger credit scores, larger down-payment and have to contend with stricter rules on income verification. In the short term, tougher lending standards will reduce the number of qualified buyers that will that will be able to purchase real estate in North County. These changes come at an inconvenient time in the Carlsbad market, as the fall and winter real estate markets are notably slower than the rest of the year. As local schools welcome their students back, families settle into their current homes, too busy with sports, school and holiday parties to think about the stressful moving process.
Rate changes that affect Carlsbad
With the average single family home in Carlsbad nearly $850,000, the most common loan for a Carlsbad home purchase is a “jumbo-loan.” This is a home loan for $417,000 or more. The upset caused by subprime lending market has caused investors to turn away from the jumbo-loan backed investments. In response, the average jumbo 30-year fixed loan rate is now between 7.5 to 8 percent, up from 6.5 percent recently. To articulate how this affects the market: A buyer that can afford a $600,000 mortgage at 6.5 percent will find that with the 1 percent increase will limit them to a home worth $520,000. Seasonal slowing combined with stricter lending documentation requirements and now higher mortgage rates will make it much more difficult to sell a property. Sellers should consider these market forces when decided how to price and market their property.
Selling a home in the current market
Homeowners can expect to be on the market for at least 90 days with an additional 45 days for escrow. Sellers should prepare themselves for the brutality of the current buyers. The buyers are making simultaneous offers on multiple properties, all of which are 15 to 20 percent below the asking price. And even after getting a below market price, the buyers want additional incentives like closing costs, repair work or even new flooring paid for by the seller. In the current market, it is ill-advised to purchase a new home first before selling your existing home. Your home's estimated, online or appraised value property will be different than the current market will offer for your property. Buyers want a discount and it is not uncommon to see homes selling below their asking price. Sellers are advised to plan accordingly.
Buying a home in the current market
Buyers should consider this an excellent opportunity to secure a below-market price for a home. The ongoing turmoil in the credit market is causing mortgage rates to rise; affecting a buyer's ability to afford the current home prices. Less buyers means less competition in the market, so many homes have reduced prices and increased incentives to purchase now rather than later. Investment buyers should know that most banks are now requiring at least 20 percent down on a secondary home purchase. Also, primary-homebuyers (those purchasing a home to live in) have become more particular with the condition of the property before purchasing; shying away from any property that needs the slightest cosmetic change, for example, new flooring, landscaping, new paint. Many “fixer-uppers” are currently priced extremely well and stand at a great value for the new owner with the ability to see the property's potential.