The Cost of Waiting

How Long Will the Housing Stall Continue?

For the third month in a row, the median home price across Southern California has stayed flat at $382,000. There are multiple factors that are resulting in the current stall: higher mortgage rates, skyrocketing prices, an expanding supply of homes and investors pulling back after swarming the market. This cooling has suppressed the fear of another housing bubble and could signal a return to normality.

The California Association of Realtors predicts that year-over-year price increases will return to 6% next year which is more in line with historic norms. The run-up in prices peaked in June with an outstanding 28% year-over- year increase in the median price. This increase was a result of sellers getting multiple bids over asking price among a heavy demand and scarce supply.

Part of the slowdown is seasonal and another part is attributed to a more empowered class of buyers who won’t buy if they feel the house is not perfect. Buyers are also demanding more repairs from sellers, and getting them.

The housing recovery started in 2012 and shifted into overdrive this year as traditional buyers and investors rushed into the market trying to take advantage of rock-bottom interest rates and below average home prices. Buyers were convinced that the housing crash had finally bottomed out and began placing bids without even touring the homes. Families were forced to do battle with all-cash investors amid a historic shortage of homes.

Now prices and mortgage rates have risen to the point where many buyers have decided to check out. The current waning demand has caused some sellers to reduce their asking prices. As the number of September listings rose in Southern California, a total of 19,112 houses and condos were sold resulting in a 17.1% drop from August.

The slowing is not just a local but a national trend: 20 of the largest metro markets have seen a decline in home sales. Even homes in good locations with the right price are sitting on the market for longer than anticipated. Despite the slow months inventory remains tight and experts say the housing recovery continues to move forward, adding that home prices will rise slowly over the next year.

One of the first stages during the hunt for a new home is crunching the numbers to figure out your budget. And no matter how high or low that budget may be, prospective homebuyers should take into consideration the cost of insuring the home.

It's easy to overlook insurance, especially since you may be more worried about the number of bedrooms, the school district, or the size of the backyard. But before you can close on the purchase, your lender will require you to line up homeowners insurance. You may be hit with some sticker shock if the home you are about to buy ends up being a high risk- and therefore high cost- home to insure.

Once you’ve got a few homes in your sight, you should get some preliminary home insurance quotes on each property. Just as you will compare asking price and property taxes- figure your insurance costs into the equation as well. Even homes of similar size and style can vary greatly in terms of cost to insure.

Here are a few lesser known home features that affect insurance costs:

Location- The location of a home will have a huge impact on the insurance premiums due to the proximity to a fire station, the fire station ratings and the flood zone it’s located in.

• When you shop for homeowners insurance you will be asked how close the home is to a fire hydrant and to a fire station. In the event of a fire, the quicker the fire department can respond to the home, the less damage will be incurred. The average claim for a residential fire exceeds $33,000, according to the Insurance Information Institute (III). Therefore insurers typically charge lower premiums for homes within a close proximity of each.
• Fire stations in each community each have a specific fire protection class rating which also affects the home insurance premiums on a home.
• Last but certainly not least, the specific type of flood plain that a home is located in may require you to carry a separate flood insurance policy in order to obtain a mortgage. Flood insurance is recommended for all properties, however, in certain high-risk flood plains a flood insurance policy is not only required- but the coverage could double your annual insurance spend.

Roofing- Ask your realtor about the home's roof. You'll want to know how old it is and the material it's made of. Roofs that are 20 or more years old can be considered high risk and may be expensive to insure. Replacing a roof also can be costly so you'll want to weigh the pros and cons. Newer roofs, built with impact-resistant material, are ideal. These roofs are made to withstand nature's harshest elements, and they can also qualify homeowners for more preferred home insurance policies.

Swimming Pool- You might be looking specifically for a house with a pool but you should know swimming pools can drive up your insurance premiums. Accidents frequently happen in and around pools so insurance companies see them as a high-risk home feature. Remember, you can be held liable even if a trespasser has an accident at your pool. For this reason, homes with swimming pools located on the property should meet all local safety codes and carry high limits of liability coverage.

Age- The age of the home can also affect your premium. Typically older homes have outdated electrical wiring and plumbing systems, which can lead to fires or water damage. If you are considering an older home, ask your realtor the age of the plumbing, HVAC and electrical systems. If they have been updated in recent years, this is important to note with your insurance agent. If not, make sure you know what this may cost you in additional premiums and to upgrade in the future.

Security equipment- Security equipment is a plus for obvious reasons- items such as burglar alarms, deadbolt locks, and smoke alarms can make your home a safer environment. In addition, insurance providers offer discounts for homes featuring these items. In fact, you could save 10% or more on your premium. Take note of the types of safety devices in the homes you are comparing so you can get accurate discounts figured into your insurance rates.

You likely won't make a decision on a house because of insurance factors alone. But it's best to have an idea of where you stand as you consider your options. Start by checking out average home insurance rates in your state. Then work with an agent you can trust to compare quotes on various properties. An educated search can help you find the home of your dreams and home insurance premiums that won't break the bank.

Happy Veteran's Day!!

Asking Prices Slowing Down

Asking Prices Slowing Down, But Rise Year Over Year
In October, asking prices for homes listed for sale increased 0.6 percent month-over-month, the second-slowest monthly gain in seven months, according to Trulia’s latest Price Monitor report. This continued slowdown in asking prices is largely due to expanding inventory, rising mortgage rates, and declining investor activity. Asking prices could potentially slow further if consumer confidence suffers from the ongoing budget uncertainty and future shutdown and debt-default worries. Nevertheless, the monthly, quarterly, and yearly gains are all still high compared with historical norms. In fact, asking prices rose 11.7 percent year-over-year – the highest increase since the housing bubble burst.

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