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The Aramco Group specializes in providing an array of mortgage products and options for home buyers and those seeking to refinance their homes. It also hosts free semi-regular seminars to educate potential clients and financial planners about reverse mortgage products. For more information visit  www.TheAramcoGroup.com or call (877) 700-0972. Aramco Mortgage is a member of the Better Business Bureau and is licensed under California DRE #01853626 and NMLS #277316

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Is Now The Best Time to Buy a Home? – Home Loan Rates

 

Being so deeply entrenched in California real estate finance, I am asked daily if now is a good time to buy a home or investment property. And whether this question arises on a TV or radio interview or a one-on-one meeting with a client in the office, I have the same response for everyone, “I’ve never in all my life seen a better time to buy as much real estate as possible.” With a combination of low sales prices (down 42% since their peak in 2006), high inventory, record-low home loan rates, and a strong rental market, it is a fabulous time to grow your real estate portfolio or buy your first home.

After numerous reports from multiple sources including a recent California Association of Realtors report which showed a 6% increase in single family home sales since June 2011, it’s safe to say the housing market has begun a rebound, however sluggish it may be. Will home prices return to the levels seen in 2006 and 2007? Yes, but probably not as quickly as we would all like. One major factor which will be driving up home prices though is future inventory. While today’s high inventory due to unemployment, underemployment, uncertainty and the shock of the Great Recession is lending to low home prices, I believe we will see a major shift in inventory within a few years.

Home Supply Aramco Mortgage

Since 2008, housing permits for both single and multi-family homes have been nearly stagnant as one might expect, due to the economic downturn we've experienced over the last few years. But while the economy has slowed down,the number of college studnets graduating and getting jobs, families moving to California and first-time home buyers continue to rise at extremely high levels. Thus, the simple economic laws of supply and demand should take over, in which construction will be a couple years behind the demand for homes and a fairly serious shortage of homes will occur due to low supply. This lack of supply should boost home prices, and incentivize home builders to increase home devoloping, until the demand and supply are once again balanced.

But even if you wanted to take an ultra-conservative prospective on the housing market and assume 0% appreciation over the next few years, now is still one of the best times in our nation’s history to purchase real estate. The Housing Affordability Index which measures the affordability of home ownership based on median home prices, median income, and average mortgage interest rates, is currently at its highest level since record keeping began in 1970. Record-low long term interest rates are one of the catalysts driving this rebound, making homeownership extremely affordable.  But in addition to rock bottom rates and low prices, the current rental market should attract many more investors into real estate.  Due to uncertainty and a depressed level of income, many families have elected to rent instead of buy. Apartment vacancies are falling monthly, while effective rent has been rising in most parts of the state for 10 consecutive quarters. This combination of low interest rates and high rents are allowing many investors to make a monthly profit even if their properties show zero appreciation.

As you can see, barring any major double-dip recession, or shock to the economy, it seems as though the California housing market is poised for a slow but much anticipated recovery. The perfect combination of low interest rates, deflated prices, and high rents lends to an extremely favorable home buying environment. My final word of advice is to avoid waiting for home prices or interest rates to creep down even lower, as it is much more likely that both rates and prices spike rather than go down any further. 

Mehran Aram

President/CEO The Aramco Group


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