This year could potentially be a great time to buy a home. While 2015 saw many bidding wars due to scarcity of inventory which drove prices higher, the expectation for 2016 is for an increase in supply of homes on the market, fewer bidding wars, and moderation of price increases.
The Federal Reserve has already announced its interest rate increase of one percent in increments over the years, so early 2016 will be the best time to lock in lower rates than we will likely see for years to come. There is a good chance we will see further mortgage rate hikes down the road in 2017.
Rent prices are forecasted to spike and with more properties expected to be making their way to the market this year, it is a good time to consider the benefits of purchasing rather than renting.
It is predicted that 1.25 million new households will be created in 2016 because of the improving labor market. Another reason for this spike in new households are the rising rental prices.
Many major cities in the United States are seeing low rental supply which has been causing rental rates to skyrocket. In 2015 almost 90 percent of property managers across the United States raised their rent prices and it does not seem to be getting better for renters any time soon.
Asking rents citywide in L.A. were up almost eight percent for 2015 at an average rent of about $1,875 per month, more than double the rate of inflation. Even those looking to rent more cheaply last year in the San Fernando Valley were out of luck with rentals there not much cheaper than the average.
While rents for one-bedroom apartments in Bel Air, Culver City, and the West Hollywood Hills (including Laurel Canyon area) declined last year, all other areas of L.A. increased. The neighborhoods with the biggest rent increases were Santa Monica (up 17 percent), Downtown L.A. (up almost 16 percent), and Westwood (up 15 percent).
In the Westwood/Beverly Hills/Brentwood area, average rent was about $2,900 per month last year. Average rents in the Santa Monica/Marina Del Rey area climbed to more than $3,000 per month.
With rising rents you could potentially be spending the same amount on a mortgage payment, as you would be on rent. In addition, making payments towards a mortgage allows you to build equity.
Many housing experts expect home prices to rise nationally at a slower pace in the next year, between 2 and 4 percent.
For the greater L.A. area (primarily the Westside, downtown and nearby coastal areas including Malibu), a realtor report on single-family homes showed a price increase of about 8 percent year over year for the third quarter of 2015. Demand is expected to continue strong for luxury Westside properties pressuring prices higher.
As a general rule, markets with fast rising prices tend to create a stronger sense of urgency among buyers.
It is predicted that on a national level more properties will hit the market because of the deceleration of home prices. This will give more homebuyers more selection.
Numbers in new home construction will also grow, as builders place more focus on building starter and middle-range homes.
As more people look to enter homeownership as a way to stop paying high rents, they will look for homes that are more manageable. Many in Los Angeles are looking for homes that are energy efficient and easy to maintain with smaller yards.
Another reason it will be easier to enter into home ownership in 2016 is the change in mortgage regulations that went into effect in the third quarter last year.
The new rule known as the TILA-RESPA Integrated Disclosure rule (or “TRID” rule) gives consumers a better chance to make sound decisions and choices when it comes to their mortgage.
The rule integrates the Truth in Lending Act (TILA) disclosures with the Real Estate Settlement Procedure Act (RESPA).
The final rule integrates the existing disclosures with new rules from the Dodd-Frank Act to improve consumer understanding of the mortgage process, aid in consumer shopping and help prevent surprises at closing.
Now, the lender must provide the Loan Estimate to consumers within three business days after the buyer submits the loan application.
The new rule provides clear details about loan costs and features so that consumers can better understand the costs and terms of the transaction.
The Closing Disclosure must be received by the consumer three business days before consummation of the loan. The rule does not apply to home equity lines of credit.
Forecasts for the New Year point to fantastic possibilities for those who are looking to get into home ownership. The respected UCLA Anderson School of Business says we are halfway through a solid recovery. Experts are generally predicting continued growth for the next few years in the L.A. residential market.
For a free courtesy consultation, or information regarding mortgage brokers, contact Bess Hochman, a top Westside Real Estate Broker for over 20 years. Bess is also distinguished by holding a law degree. This article expresses the opinion of the author. You are advised to consult attorneys & others experts specializing in the issues referenced in this article. Contact Bess at 310.291.4111 or [email protected]
“Bess is a master negotiator!” says Michael Donaldson, attorney and author of “Negotiating For Dummies.”