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 paying a hefty price. 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 San Clemente. The key to a healthy real estate market is the jobs market... and here is south Orange County, we have some of the lowest un-employment in the Nation, with a good forecast for job growth for years to come.
If 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 a buyer in their tracks from purchasing a home.
A major mortgage industry group recently release it’s three year economic forecast, projecting robust economic growth for the Nation and projecting a small rise in long term home mortgage rates to about 6.25% by the year 2007. Again, supporting the point that we are not in a real estate bubble here in Orange County.
Price declines are unlikely, but due expect a slowing in real estate appreciation in the years to come to a level of 5% to 7% 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 you keep procrastinating on buying a home.
Let's look at an example in San Clemente. If you are paying rent of $2,000 per month, and your landlord increases your rent by 5% each year, you would wind up paying over $130,000 and you still have nothing to show for it! Also, if you due any type of maintenance to the home at all (paint, leaky faucet), when you move out those improvements belong to the landlord... not you.
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, this would save you about $300 to $400 per month, so your effective net payment would be close to your rent payment. After 5 years you would also have paid down some of your principal by about $15,000 which is now added to your net worth.
Home appreciation can add even a bigger chunk of equity. If your San Clemente home appreciates by a modest 5% per year for the next 5 years, your $375,000 Condo would be worth $455,000 in the year 2010. Now your net worth could be a whopping $95,000 which you won't owe any income taxes on.
Don't be victimized by the real estate bubble hype. Buying a home in San Clemente or elsewhere in south Orange County is a big step, but is almost always one in the right direction. If you would like to view all real estate for sale in San Clemente, please visit our website: San Clemente MLS Search
