I tell those who ask about buying in San Jose that now is not the time to buy; but, get ready. It seems like this economic misery has been with us forever but it has only been a short while and ‘this too shall pass’. Nothing in this physical world lasts forever.
Gas Prices up. Food Prices up. Mortgage Prices up and real estate prices according to Schiller are probably finally headed down. Buyers need to be prepared to buy because when the real estate market changes it always seems to change fast.
When Mortgage Magic opened in San Jose in 1990 the 30 year rate was 10.13 and the median home price was $194,300. Ten years later in 2000 the rate was 8.05 and the home prices were $ 211,500 – still reasonable; San Jose had not yet become ‘Silicon Valley’. Today the 30 year mortgage rate is 7.25 and a typical 3 BR 2 BA home in San Jose costs just under $2,000,000.
The fate of mortgage rates and home pricing is in many ways in the hands of the Federal Reserve Board and Government Policy. If the Government insists on continuous unrestricted spending then the Fed will feel pressure to raise interest rates because Inflation will be unabated. Eventually there will become a time when public pressure will demand a change in policy or leadership or both and then the rates and home prices can both decline.
When will that be ? I do not know but I do know the old Boy Scout Motto is always valid, “Be Prepared”. A potential buyer should get the paperwork in place and keep it up dated. Put these things in a computer file and be ready to go (1). Always have the most recent 2 pay stubs from all jobs (2) current 2 bank statements and proof of the down payment (3) copies of valid ID (4) Last two years w-2’s (5) Up to date list of bills and copy of a credit report. *Note- if self employed there is additional income documentation.
The credit report will be gotten by the lender and is needed to price the loan (scores affect price) and to determine the debt ratio. It is more than a good idea to be talking to a lender who has this in place for you. I have had customers send me documentation for 2 years prior to buying.
In recap. Start thinking about and planning to buy. Be ready when the market turns. In this interim you have the time and opportunity to educate yourself about the mortgage and home buying process.
