We know what the acronym A.S.S.U.M.E. really means, right? Here is a good example: “Renting is cheaper than buying“. Simply assuming that paying rent costs less than making a house payment is ignoring many factors: the interest portion of the principle & interest and, the property tax portion of a house payment are tax deductible. Appreciation also needs to be placed in the equation: rent payments will go up; home values (typically) go up while the house payment remains unchanged.
Would you believe this holds true even in San Francisco, Oakland and San Jose, CA? As the attached article demonstrates, these and other cities have home purchase costs lower than paying rent. In San Jose, CA for example, the difference is 9%.
If the rent vs. house payment debate wins in these large, metropolitan cities, we can assume (oops, here we go again) that the more affordable cities like Morgan Hill, Gilroy and Hollister, CA will have an even bigger difference favoring the purchase of a home vs. renting someone else’s.
Why not take a challenge? Text or email me your city and the amount of rent you pay. I will give your own comparison.
REDUCE YOUR HOUSE PAYMENT BY $220/mth*
Since home values have risen over the last 18 months we are often asked: “How do I drop that Private Mortgage Insurance (PMI) from our house payment?”
So here is the Good News and the Bad News:
Good: ”The Homeowner’s Protection Act of 1998“: home lenders MUST drop the PMI when the loan balance reaches 78% of the original value.
Bad: “78% of ORIGINAL VALUE” means the price you paid for the home, NOT today’s appreciated value. Additionally, most lenders require that you have a 2-5 year payment history with them before they will consider your request.
Additional ‘Bad’: Even if you have paid extra toward your loan balance the lenders look to the original amortization schedule to determine when you reach 78% in order to drop the PMI. That typically takes 9 – 10 years.
Once you have 80% equity you can ask the lender to cancel your PMI however, there is no guaranty they will.
While the Federal Housing Administration (FHA) is not governed by the same law they do have a similar ’78%’ rule with the added proviso that the payment needs to have been made for at least 5 years or your balance is 78% of the original value – whichever comes later. FHA’s insurance for loans originated after 7/1/2013 however, is permanent.
Good: You don’t have to wait for the magical date on your amortization table…you can refinance your current loan. In the South County (Morgan Hill, Gilroy, Hollister, San Juan Bautista) home values rose over 36% in 2013 from 2012. With at least 20% (new equity) your new loan will not need PMI. On a $300,000 purchase where you put originally put 5% down to a $285,000 loan, the PMI would cost roughly $220 every month*. Even if you include the closing costs in your refinance loan you will still have a lower payment due to no PMI; probably a savings of $150 or more per month.
In a 5 minute visit I can tell you what YOUR particular numbers will look like. Text, email or call me. Let’s get rid of that PMI before another month rolls by.
The average home value in Hollister, CA rose 36% over the last 6 months as compared to the same period last year (June to the end of Nov.) Homes sold for an average of $421,798 this year vs. $316,894 for the same time last year in Hollister.
There are 3 indicators which provide some measurable reasons for this significant increase:
- The number of home for sale dropped from 323 in ’12 to 283 during the same 6 months this year.
- The average number of days on the market dropped from 54 last year to 44 days this year. That 19% decrease suggests a robust demand.
- Finally, the actual sale price was 102% of the asking price in the last 6 month where last year’s relationship of “asking and actual” was 99%.
Gilroy, CA has experienced similar appreciation. The South County (Morgan Hill, Gilroy, Hollister and San Juan Bautista, CA) is a favorite ‘bedroom’ community for Bay Area employees. Gilroy & Morgan Hill home values were just as impressive.
What does this mean for home values in 2014? Probably more of the same. Do you think we’ll see the same pace? Are we headed for another bubble? Watch the home loan interest rates. Their direction will have an inverse affect on the rate of appreciation: if they go up significantly or, quickly, all 3 factors above should head in their opposite direction. The rate of appreciation will slow or stop – depending on the severity of the rate changes. Stay tuned. It’s going to be exciting!
(data from MLSListings)
The average home value in Gilroy, CA rose 32% over the last 6 months as compared to the same period last year (June to the end of Nov.). Homes sold for an average of $611,850 this year vs. $462,083 for the same time last year in Gilroy.
There are 3 indicators which provide some measurable reasons for this significant increase: The number of home for sale dropped from 298 in ’12 to 267 during the same 6 months this year. Classic “Supply & Demand, 101″ is in play here. The average number of days on the market dropped from 50 last year to 40 days this year. That 10% decrease suggests a robust demand. Finally, we saw asking prices and actual sale prices were virtually the same this year as well as last year; Two years now of firm sales prices.
Morgan Hill, CA has experienced similar appreciation. The South County (Morgan Hill, Gilroy, Hollister and San Juan Bautista, CA) is a favorite ‘bedroom’ community for Bay Area employees. Hollister and San Juan Bautista home values were even more stunning. I will post their reports soon.
What does this mean for home values in 2014? Probably more of the same. Do you think we’ll see the same pace? Are we headed for another bubble?
This study shows San Jose, CA as the 4th of 10 top real estate areas in the US where home values continue to increase.
Likewise, the South County communities, who supply much of the employment for the San Jose area, have been experiencing the same appreciation. Morgan Hill, Gilroy and Hollister’s home values have all risen proportionate to that of #4 in the nation, San Jose.
So, is this another inflating bubble? Will we see another bubble burst? What if the interest rates keep going up will that slow down the appreciation? What if the bank’s bulging inventory of foreclosed homes came onto the market at a faster pace than the trickle of token homes we have seen over the last 14 months?
What do you think?
Remember when we were on a road trip with the kids in the car? What was the question they always got around to? “Are we there yet?”
Nearly every day people ask me the same question relative to home values: “Are housing values at the bottom yet?” The answer varies depending the area you are asking about.
In this article Forbes provides mixed answers: homeowners in the San Francisco Bay Area may “be there”. Other places in CA and around the country, however, may have a ways to go yet before their house-value-slide ends.
San Jose was specifically listed as one of the few metro area where values seem to have leveled. This continues to be good news for Morgan Hill, Gilroy and Hollister home values. With the majority of South County residents commuting up into the Bay Area, home values in these three cities will continue to follow San Jose’s lead.
So, Johnny, we’re there – but we won’t be returning to increased values for some time to come.
Here is yet another article which demonstrates that Bay Area home values have bottomed out and have continued a steady climb from there.
With little land left few homes are being built. Therefore, the varied employment opportunities which provide a fairly consistent demand for housing, are tipping the supply/demand scale in favor of firm-to-increasing values.
Natural migration for affordable housing therefore, continues to be South of the Bay Area, namely: Morgan Hill, Gilroy and Hollister. Many families are investing a slightly longer commute in order to have a desirable place for their family to enjoy.
Here is a good indicator of value: “Price per square foot“. When you look at a home’s cost/sq. ft. it quickly becomes clear - your housing dollar goes much further in our “South County” areas:
A 3 bedroom, 2 bath, 1,700 sq. ft., on a 7,000 sq. ft. lot costs:
- San Jose $303.87/sq. ft.
- Morgan Hill $247.10/sq. ft.
- Gilory $206.48/sq. ft.
- Hollister $146.71/sq. ft.
If you have been waiting to make your next housing move, I wouldn’t wait any longer. Home prices, in our area, are rising. The home loan rates are still extradordinarily low – FOR THE MOMENT. You will be disappointed if you stay with an abritary “wait for 6 months to a year” idea.
BTW: The “City Tours” tab above will provide you with video tours of each of our communities. Enjoy.
If you have wanted to refinance, you should send me an e-mail with your address. I will be happy to provide you an updated market value. Your home’s value may be high enough now to take advantage of these low rates.
(data source: MLS Listings)
Not only is San Jose, CA the highest home-value-appreciation area in the US (see 2/10/11 post below), it is also the city with the happiest employees in the country. This Forbes article puts San Jose on top and San Francisco right behind it.
And, since the majority of those who live in Hollister, Gilroy, and Morgan Hill drive to the San Jose area for work we can safely assume that we are also the happiest employees in the US. Right?
After all, we have 2 of our own In-N-Out restaurants, the Gilroy Premium Outlets and 3 lakes.
Now if we could just get Hwy. 101 widened from Hwy. 152 in Gilroy to Hwy. 85 in San Jose we would all be a lot happier.
And the winner of the highest appreciation of home values in the United States is: San Jose, CA!
Of course, Morgan Hill, Gilroy and Hollister home values followed in the same direction, as they always do.
The GOOD NEWS in this article is believable when you see the actual single family home value appreciation from 2009 to 2010:
San Jose’s average single family home value ROSE 11.5%.
Morgan Hill’s average value INCREASED 4.5%.
Gilroy homes saw the values RISE 6.8%.
Homes in Hollister enjoyed a healthy JUMP of 11.3% in values!
So, those of you who have been waiting to buy a home may want to take advantage of the incrediblely low interest rates and go buy a home. Their values have come off the bottom of value slide and are beginning to increase.
You homeowners who have been waiting for values to come back so you can refinance should e-mail or call me. I will research your home’s current value for you.
2011 is going to be an exciting year – IN OUR AWESOME AREA! What do you think?
(data source: MLSListings)
If you have been waiting to buy a home, NOW is the time.
If you have been waiting to refinance your current home today is the day.
Neither these rates nor the sale prices will remain down here much longer. Some day soon the bills for “CHANGE” will come due and we’ll see the rates begin to rise.
Look at this AP article for more details.
Gilroy home values have already bounced off the bottom. Likewise, Morgan Hill and Hollister homes have seen a balance in demand and supply.
Time for your co-workers, friends and family to make their move.
What do you think?