April 25, 2023

Mortgage Qualification Tips: How To Qualify For A Mortgage

Qualifying For A Mortgage: The Basics

Let's begin by looking at the major factors lenders first consider when they decide whether you qualify for a mortgage or not. Your income, debt, credit score, assets and property type all play major roles in getting approved for a mortgage.




One of the first things that lenders look at when they consider your loan application is your household income. There is no minimum dollar amount that you need to earn to buy a home. However, your lender does need to know that you have enough money coming in to cover your mortgage payment, as well as your other bills.

It's also important to remember that lenders won’t only consider your salary when they calculate your total income. Lenders also consider other reliable and regular income, including:

  • Military benefits and allowances
  • Any extra income from a side hustle
  • Alimony or child support payments
  • Commissions
  • Overtime
  • Income from investment accounts
  • Social Security payments

Lenders need to know that your income is consistent. They usually won't consider a stream of income unless it's set to continue for at least 2 more years. For example, if your incoming child support payments are set to run out in 6 months, your lender probably won't consider this as income.


Property Type


The type of property you want to buy will also affect your ability to get a loan. The easiest type of property to buy is a primary residence. When you buy a primary residence, you buy a home that you personally plan to live in for most of the year.


Primary residences are less risky for lenders and allow them to extend loans to more people. For example, what happens if you lose a stream of income or have an unexpected bill? You're more likely to prioritize payments on your home. Certain types of government-backed loans are valid only for primary residence purchases.


Let's say you want to buy a secondary property instead. You'll need to meet higher credit, down payment and debt standards, since these property types are riskier for lender financing. This is true for buying investment properties as well.




Your lender needs to know that if you run into a financial emergency, you can keep paying your premiums. That's where assets come in. Assets are things that you own that have value. Some types of assets include:

  • Checking and savings accounts
  • Certificates of deposit (CDs)
  • Stocks, bonds and mutual funds
  • IRAs, 401(k)s or any other retirement account you have

Your lender may ask for documentation verifying these types of assets, such as bank statements.


Credit Score


Your credit score is a three-digit numerical rating of how reliable you are as a borrower. A high credit score usually means that you pay your bills on time, don't take on too much debt and watch your spending. A low credit score might mean that you frequently fall behind on payments or you have a habit of taking on more debt than you can afford. Home buyers who have high credit scores get access to the largest selection of loan types and the lowest interest rates.


You'll need to have a qualifying FICO® Score of at least 620 points to qualify for most types of loans. You should consider an FHA or VA loan if your score is lower than 620. An FHA loan is a government-backed loan with lower debt, income and credit standards. You only need to have a credit score of 580 in order to qualify for an FHA loan with Rocket Mortgage®. You may be able to get an FHA loan with a score as low as 500 points if you can bring a down payment of at least 10% to your closing meeting. We don't offer FHA loans with a median credit score below 580 at this time.


Qualified active-duty service members, members of the National Guard, reservists and veterans may qualify for a VA Loan. These government-backed loans require a median FICO® Score of 580 or more.


Debt-To-Income Ratio


Mortgage lenders need to know that you have enough money coming in to cover all of your bills. This can be difficult to figure out by looking at only your income, so most lenders place increased importance on your debt-to-income ratio (DTI). Your DTI ratio is a percentage that tells lenders how much of your gross monthly income goes to required bills every month.


It's easy to calculate your DTI ratio. Begin by adding up all of your fixed payments you make each month. Only include expenses that don't vary. Debt that’s considered when applying for a mortgage can include rent, credit card minimums and student loan payments.


Do you have recurring debt you make payments toward each month? Only include the minimum you must pay in each installment. For example, if you have $15,000 worth of student loans but you only need to pay $150 a month, only include $150 in your calculation. Don't include things like utilities, entertainment expenses and health insurance premiums.


Then, divide your total monthly expenses by your total pre-tax household income. Include all regular and reliable income in your calculation from all sources. Multiply the number you get by 100 to get your DTI ratio.


The lower your DTI ratio, the more attractive you are as a borrower. As a general rule, you'll need a DTI ratio of 50% or less to qualify for most loans.


Lenders will often use your DTI ratio in conjunction with your housing expense ratio to further determine your mortgage qualification


Other Mortgage Qualification Factors

The factors lenders look at during the mortgage loan process aren't the only things you need to consider before you submit an application. Make sure you consider PITI, private mortgage insurance and closing costs when you calculate how much buying a home will cost you.




PITI stands for principal, interest, taxes and insurance, and acts as a rough estimate of how much you can afford to purchase a home. Many lenders will use your PITI estimate to determine if you qualify for a mortgage, as it provides an idea of whether you can afford to pay back the loan. You can calculate your PITI yourself if you have an idea of what you’ll owe in each category. That way you’ll know how much house you can afford before you fall in love with one you can’t.


Private Mortgage Insurance


Many people believe that it's impossible to buy a home if they don't have at least 20% down. This actually isn't true. You can buy a home with as little as 3% down, depending on your loan type. Some government-backed loans can even allow you to buy a home with $0 down. However, you will need at least a 20% down payment if you want to avoid paying for private mortgage insurance (PMI).

PMI is a special type of insurance that protects your lender in the event that you default on your loan. Despite the fact that PMI affords you no protections as the buyer, most mortgage lenders require that you pay it if you bring less than 20% down at closing. You have the option to cancel your PMI once you reach 20% equity in your home by paying down your principal each month.


Closing Costs


You also need to factor in closing costs when you apply for a mortgage. These are processing fees you pay to your lender in exchange for finalizing your loan. The specific closing costs you'll pay depend on where you live and the type of mortgage you're getting. Some common closing costs include appraisal fees, attorney fees and escrow fees. You can expect your closing costs to equal around 2% – 6% of your total loan value. Make sure that you have enough money to cover these costs before you apply for a loan.




March 24, 2023

The Art of Real Estate Negotiating


Real estate negotiations 

are a part of the business everyone needs to be familiar with. In many markets where supply is limited, how well you negotiate will directly determine how successful your business is. There are certain skills and styles that have become synonymous with the best negotiators.

They know when to be aggressive and how to keep the negotiations moving forward. They also understand that sometimes the best thing you can do is walk away. If you can get just a few more deals a year with your negotiating ability, your business will be transformed. The next time you are in the midst of negotiations, remember these real estate negotiation tips:

1. Know when to walk away: 

Before you get involved in any negotiations, you should have a number in mind for which you want to acquire the property. This should not be based on the asking price or where you think the negotiations will take you. Take the time and come up with your own bottom line number. The hard part is being disciplined enough to know where to draw the line. There are many negotiations that come down to wire, and a few thousand dollars may secure you the property. The problem is that you never know where the bidding will end up. Once you go over your bottom line number, there may be no turning back. Even if you up your price and get the property, you will be putting yourself at a disadvantage. You probably overpaid, and will be forced to cut corners in other areas. Don’t let yourself get involved in these situations.

2. Don’t take it personal: 

When you are negotiating for a piece of real estate, it is important to consider the end-game. You are not looking to get the property just for the sake of winning the negotiation. Winning or losing a bid should never be taken personally. The listing agent may come back three or four times looking for a higher offer. Instead of getting frustrated and turning it into a personal battle, take a step back and think about what you are doing. By the time the dust settles, you may win the property bidding battle but end up losing the war. The same is the case with auction bidding: instead of having the mindset that you aren’t going to let someone outbid you, focus more on the property. There will always be someone in your local area that you end up butting heads with during negotiations. You will not get every property that you have your eyes on. If you are outbid, don’t take it personally. It is just part of the business.

3. Evaluate risk and reward: 

There are times in every negotiation that you need to take a step back and evaluate what you are doing. Time is always of the essence on every deal, so you will need to make your decisions rather quickly. You may have to make your evaluation hastily or while you were distracted with something else. Before you commit to changing your offer or something on the contract, think about the risk and reward that come with the property. There reaches a point in every negotiation that the returns of the property are not worth the risk. Once you go over a magic number, the deal no longer looks as attractive as it once did. Instead of moving forward because you think you are committed, consider the return. If it is not what you expected or desired, there is nothing wrong with walking away. The goal is not just to accumulate properties, it is to buy properties that impact your bottom line.

4. Small concessions: 

Negotiating is not about who wins, it is about the bottom line. Many people need to feel like they are getting the best end of the deal in order to move forward. Whether you are dealing with a lender or a traditional seller, small concessions can help seal the deal. Little things such as small credit or a change in closing date could make all the difference. Try to find the motivation of the other party. Once you know their position, cater your stance on giving them what they want while still making the deal attractive for you. This may cause you to waive concessions or to close in a shorter amount of time than you would like, but it will ultimately be well worth it. Small concessions can have a huge impact.

5. Keep taps on negotiations: 

Odds are you will negotiate with the same party again in the future. Every time you battle for a property, you should make notes on what worked and what didn’t. Some lenders may want to see their contract structured a certain way. Certain bidders at an auction have a style they use when they really want a property. Taking notes will not guarantee the property, but it may just give you an advantage in the future. It is also important to take notes on the deals you don’t get. It is important to find out where the price ended up, and if there was anything that tipped the scales to the other party. Negotiation is often about who is the most prepared and who knows how to structure the deal best. Keeping tabs on past negotiations will only help you.

There are many little things you can do during negotiations that will help you secure your next deal. The more negotiations you are involved in, the more comfortable you will be.


Dec. 27, 2022

Leaders of Industry Forecast Real Estate for 2023

2023 Real Estate Forecast: Market to Regain Normalcy

But even though mortgage rates and home prices are expected to moderate, home sales may still sag under persistent inventory shortages, housing economists predict.


While 2022 may be remembered as a year of housing volatility, 2023 likely will become a year of long-lost normalcy returning to the market, economists predicted Tuesday during the National Association of REALTORS®’ annual Real Estate Forecast Summit. Next year, mortgage rates are expected to stabilize while home sales and prices moderate after recent highs, according to NAR’s forecast. However, the details could be different from region to region.

Some housing markets may see an uptick in homebuying activity at the beginning of the year, especially if mortgage rates continue receding from a recent high of 7%. Housing inventory is expected to remain tight in 2023, with housing starts below historical averages and fewer homeowners willing to sell, said NAR Chief Economist Lawrence Yun. The ongoing housing supply challenges will prevent home prices from falling, though price appreciation will slow, he added. “I see many hopeful signs for early next year,” Yun said.


But first, the market has to close out 2022, a year when inflation soared to a 40-year high and rapidly rising mortgage rates put the brakes on what had been a pandemic-era

home buying frenzy. Existing-home sales are expected to end the year 16% down from the same time period in 2021, marking their lowest level since 2014, Yun said. Annual new-home sales likely will be down 17% for 2022, returning to pre-pandemic levels.


Yun predicts home sales to fall by 6.8% in 2023 compared to 2022, with the brunt of the slowdown to occur in the first quarter of the new year. Some of the softening can be attributed to homeowners who are unwilling to trade in a higher mortgage rate, as well as economic uncertainty. Meanwhile, home prices in 2023 are forecast to reach $385,800, an increase of 0.3% compared to 2022.

“After a big boom over the past two years, there will essentially be no change nationally” in home prices in 2023, Yun said. “Half of the country may experience small price gains, while the other half may see slight price declines.” He pointed to markets in California, like San Francisco, that may be the exception. The Bay Area could register double-digit price drops of 10% to 15% next year, Yun added.


“Mortgage rates are the lifeblood that drive home sales,” Yun said. For the last four weeks, rates have been dropping after reaching 7.08% in November. On Tuesday, the Consumer Price Index offered hope that inflation is further cooling, prompting the Federal Reserve to start slowing the hikes to its benchmark interest rate.

Yun said he believes mortgage rates may have already peaked. He points to an “abnormally high spread” between 30-year fixed-rate mortgages and the Treasury, which historically are more closely tied together. “As the mortgage market normalizes, it will be an opportunity for rates to decline even further,” Yun said, adding that he expects mortgage rates to settle at 5.7% by the end of next year.

Still, mortgage rates are more than double what they were a year ago, ramping up rapidly this fall and walloping housing affordability. But if inflation continues to slow and rates stabilize, that could bring more buyers back to the market and boost demand for housing, Yun said.

Other leading housing economists also gave their take during NAR’s Real Estate Forecast Summit about what’s in store for the real estate market in 2023.


Realtor.com®: Bullish on Home Prices

Realtor.com® Chief Economist Danielle Hale was upbeat about the prospects of property appreciation, projecting a 5.4% increase in existing-home prices for 2023. “We think price growth will be half of what it was in 2022, and we may see some months of year-over-year declines,” Hale said. “But overall, we believe prices will be higher. [Housing] shortage conditions are still going to be present in the market.”

She said she expects home shoppers to continue to grapple with housing affordability in the new year. Realtor.com® predicts mortgage rates to average 7.1% by the end of 2023—considerably higher than NAR’s prediction of 5.7%. Home buyers still will face sticker shock, Hale said, “but they will have more time to make a decision and more options.”

NAHB: Sharp Contraction in Construction

Danushka Nanayakkara-Skillington, assistant vice president of forecasting and analysis at the National Association of Home Builders, said she expects housing starts to drop by double digits in 2023. Then, “as the economy improves in 2024, the housing market will gradually come out of this slump that is expected from the next year,” she added. 

Builder confidence has fallen over the last 11 months as mortgage rates rose and buyer traffic slowed dramatically. Fifty-nine percent of builders have reported using incentives, like mortgage rate buydowns and price cuts, to try to win buyers back, Nanayakkara-Skillington said.

Labor shortages combined with lot shortages, higher material costs and lending issues for builders are all compounding factors preventing more construction. And while lumber prices have eased from record highs, construction costs remain 14% higher due to shortages in other supplies, like gypsum and steel. “All of these issues will keep homebuilding down,” Nanayakkara-Skillington said. “We don’t see these issues being resolved in the near future either.”

Bright MLS: The Great Reset

“We believe 2023 will bring lots of variability in how housing markets adjust,” Bright MLS Chief Economist Lisa Sturtevant said. “There will be a lot of resetting expectations for both buyers and sellers.”

Sturtevant predicted variations from market to market, with the greatest risk for price declines likely to occur in pandemic-era boomtowns—communities that saw some of the largest increases over the last two years. “In places where buyers bid up prices, they will have to reset—and in some places, they could see prices fall significantly from their peak,” she said. “Regardless, in almost every market, we believe prices will still remain above 2019 levels. So even if prices do come down, we should still be ahead of where we were prior to the pandemic.”

Sturtevant added that many consumers could take a wait-and-see approach as they digest higher mortgage rates and come to terms with the changing market. Bright MLS data shows 40% of sellers have adjusted their home price downward or offered concessions. “This period of acceptance will take some time,” she said. “Sellers have to process all of this, and that is underway now. It’ll take a little time—probably into the first quarter of next year—to fully digest it.”

CoreLogic: ‘A Crisis of Consumer Confidence’

“There is a different sentiment happening: I call it a crisis of consumer confidence,” said Selma Hepp, CoreLogic’s interim chief economist. “Sellers are contending with not wanting to reduce their prices. Buyers are seeing the headlines saying that prices will come down but are also finding their purchasing power has been diminished by higher mortgage rates. They’re wondering: ‘Should I even enter the market? I may end up with negative equity.’”

Annual home price growth is expected to slow to 8% by December—and then 0% by the spring of 2023, according to CoreLogic data. “We believe this will vary greatly across the country, and the rate of growth and decline will depend on the region,” Hepp said. For example, markets like San Francisco, Seattle, Las Vegas and Phoenix, all of which saw surging home prices during the pandemic, could experience the most pronounced price declines of up to 12%, she added. “Housing markets will continue to struggle with the loss of consumer confidence.”



Dec. 14, 2022

Do You Qualify for a Home Loan? Let me tell you

How many of you thought you may like to buy a house but there is no way to qualify for a mortgage?, you would be surprised how many people have told me this and we did get them that mortgage. Let my team of mortgage brokers review your financials and see what they say. They will also tell you the best way to show your finances to put your best foot forward.

Click below and watch this short video about qualifying for a mortgage. I am the professional, let me tell you what I think about you getting that home loan.


Dec. 12, 2022


7 Steps To Sell Your Home in the Fastest Time and at Top Dollar

Let me guide you through what to do when getting your house ready to sell. Please take a look at this video that will lay out the steps for you. Please click on the picture below, I did put a little humor in so enjoy





Oct. 12, 2022


Is it a Good Time to Buy a House? Or Should I Wait Until 2023?

A looming recession, inflation, and rising mortgage rates have made plenty of homebuyers wary of entering the market. According to a recent National Housing Survey, only 20% of consumers believe it’s a good time to buy a home. Some potential buyers wonder if falling home prices are on the horizon - and whether it makes sense to wait.

There are benefits and drawbacks to buying a home while the market is in flux: here's what you need to know.

Mortgage Rates Are Up - But Perspective is Important

Mortgage rates rose rapidly this year as the Fed looked for ways to tamp down inflation. After reaching historic lows of under 3% last year, average 30-year rates are now closer to 6%. When the rates were low, buyers eager to take advantage of cheap borrowing flooded the market. Now that rates have risen, many buyers have backed off as they saw their estimated monthly mortgage payments jump by hundreds of dollars.

But there are a few reasons that rising interest rates aren’t as bad as they seem.

Of course, it’s going to sting to see mortgage rates rise from a record low of 2.7% to 6.4% where they are now (and perhaps higher as the year progresses). This dramatic jump means that homebuyers have to cope with a more limited budget, and larger, newer homes in desirable neighborhoods are further out of reach.

In context, though, mortgage rates today are low. In 1980, you would’ve been paying close to 15% for a 30-year mortgage, and in 1990, the rate hovered around 10%. The overall average since 1971 has been 7.77%, according to The Mortgage Reports. Perspective is key when it comes to evaluating the current mortgage rate. 

Second, rates are not set in stone the way home prices are. If you stay in your home for the entirety of the 30-year term, there’s a fair chance that mortgage rates will dip again. If they do, you always have the option of refinancing your loan in order to take advantage of the lower rate. Although refinancing does come with a processing fee, it can often save homeowners thousands of dollars overall. 

Homebuyers also have the option of doing an Adjustable Rate Mortgage. Though these got a bad rap during the last housing crisis, they can actually be a useful way to receive a lower rate - especially if you don't plan on living in your house for the entire 30-year term.

Third, mortgage rates and home prices tend to work like a balancing scale. When one goes up, the other goes down. With fewer people seeking to buy homes, competition eases - leading to fewer bidding wars that drive prices sky high, and more pressure on sellers to accept reasonable offers. 

Fourth, many homebuyers are asking: will rates fall again, allowing for cheaper borrowing in 2023? According to Business Insider, experts believe rates aren't likely to drop again until the end of 2023 or into 2024. And even then, you shouldn't bet on rates reaching those historic lows again.

Make no mistake: homeowners are definitely paying more in interest now and will have to adjust their budgets accordingly. Rising interest rates aren't easy to deal with. But when it comes to whether or not waiting to buy a home makes sense - waiting won't bring back the historically-low rates that were an anomaly.

"Even with interest rates constantly fluctuating, being able to buy a home is always a financially smart decision,"





Chart showing historical primary mortgage rates (via Freddie Mac)

A Market Shift = More Inventory

Sellers realize that the window for maximizing their profits is closing. As they watch listing after listing in their local area do price reductions to the tune of several thousand dollars, more and more sellers have been entering the market in an attempt to get in before the hot market dissipates completely. 

In June, Realtor noted that there was YoY inventory growth for the first time since mid-2019, with the market seeing a 6.3% increase in newly listed homes since last year. And according to the National Association of Realtors (NAR), "The inventory of unsold existing homes rose to 1.26 million by the end of June, or the equivalent of 3.0 months at the current monthly sales pace."

This is big news, because the incredibly low inventory of homes on market has been a major driver of rising prices. The increase in inventory gives buyers more options - and more leverage. Home value gains will be much more modest now that sellers are receiving one or two offers in many cases, not 20. 

It wasn't like this a year ago. Before, buyers would have very little to no say in negotiations, but now with the market shifting, buyers have some leverage on sellers who want to overprice their home.

National inventory is trending upward, and that's been true, while that bodes well for homebuyers today, one benefit of waiting until 2023 is the potential for an even greater shift in inventory, which could put more power in the hands of buyers.

Although inventory is slowly rising, it’s still far below the 6-month supply which indicates a balanced market (Washington DC's supply of housing inventory rose 20% in June YoY, for example, but that only took it from 1 month to 1.2 months' supply). Make no mistake, it will still be a seller’s market for the next several months, if not several years. 

Buyers today, though, should feel more comfortable and confident when it comes to asking for home inspection and financing contingencies - the likes of which were tough to come by in 2021’s crazy market conditions. 

In my local area I am seeing some changes. Some pockets of homes are staying on the market a little longer, with prices of homes going down - a year ago or during COVID times, they would have easily sold for asking price and been on the market less than a week.


Rising Inventory for 2022 (Realtor.com) 

Escaping Rising Rental Rates

If you're not buying a house, there's a good chance you're renting in the interim. Unfortunately, there is no hiding from rising housing costs. Even if you decide to rent instead of buy for another year or two, rental prices have skyrocketed around the country. On average rent rose 11% last year, and some metro areas experienced average rental increases of up to 40%. 

While buying a home might be a costly endeavor in the short term, in the long term it sets you up with predictable expenses and a hedge against inflation. Even though rent will continue to rise year by year, your mortgage payment will increase more gradually (the actual amount you pay to the lender is pre-determined if you have a set rate - but property taxes will go up in time). 

And of course, when you pay rent, you ultimately pay off your landlord's mortgage. When you pay for your home, that's equity toward your future. 

Let's say your current monthly rent is $1,200, and your estimated monthly mortgage payment is $1,500. If you do the math too quickly, it might seem like you "save" $300 per month by continuing to rent - and this can be tempting. But at the end of the rental year, you net $0 from all those payments.

On the other hand, if you buy your home? By the time a full year rolls around, you'll have already paid $18,000 toward your home loan balance - and you don't need to worry about your landlord hiking your rent by $500 because "that's the market value now."

Should I Wait to Buy a House Until 2023?

Many potential home buyers are asking themselves whether it’s a good idea to wait until 2023 to buy a home, or whether it's better to buy a home now. There are benefits and drawbacks to both approaches.

If you buy a home in 2023, you get more time to save for a down payment, which might help to lower your monthly payment once you get a mortgage. You may also benefit from a further increase in housing inventory, which means more choices and fewer bidding wars that drive up prices. And if you haven't quite figured out a 5-year plan (which is advisable when you buy property), waiting until 2023 buys you additional time to figure things out. Not everyone is in the right situation yet to buy a home - and that's okay! 

On the other hand, home prices are expected to continue rising - just at a less blistering pace. CoreLogic is predicting an increase of 5.6% in average home prices over the next year. If this holds true, a $400,000 home today will cost approximately $422,400 a year from now (which may negate any money you save while waiting).

Additionally, you miss out on the benefits of owning a home today (not having to answer to a landlord, building your equity, avoiding crushing lease increases).

Regardless of whether you plan to buy a home now or in 2023, don't bank on dramatic price reductions à la 2008. 

Homebuyers waiting for a market crash will be disappointed. Today's market is different from the Great Recession housing bubble, as supply and demand are the driving forces behind home prices - and lenders follow more stringent guidelines today for loan approvals, but now as we see a slow shift in the market, the competition for buying a home is going down."

Oct. 11, 2022

Southern California Housing Market Forecast 2022 & 2023

Southern California Housing Market Forecast 2022 & 2023

September 21, 2022 

Home prices & sales are moderating across the Southern California housing market. In Southern After a two-year housing boom, the housing market in Southern California is finally moderating. In August 2022, the median house price in Southern California declined 1.6% from July. Still, the median was 4.6 percent more than it was a year ago, thanks to a brief reprieve in interest rates in July and mid of August.California, the median home price is not rising by double-digits anymore. That trend is over.

This year, mortgage rates have risen from the low 3 percent and topped 6%. Rising mortgage rates made houses even less affordable for many people in Southern California. It has significantly increased the monthly cost of a property and diminished the loan amounts available to borrowers. As fewer individuals are house hunting, houses are remaining on the market for longer, offering the remaining buyers greater alternatives.

According to the latest C.A.R. report, the sales of single-family homes in the Southern California housing market posted a decline of 28.8% from last year. However, sales grew 7.8% from the previous month. The Southern California median home price — the point at which half of the homes sold for more and half for less — is 795,000, 4.6% more than last August when it was $760,000. Sales of condos and townhomes also dropped from a year earlier.

According to the California Association of Realtors, home prices statewide and in Southern California are projected to decrease by approximately 7% in 2023 compared to 2022, in part because mortgage interest rates are anticipated to remain elevated due to rising inflation.

<<<Also Read: California Housing Market Forecast: Will Price Drop?>>>

Southern California Home Sales Fell in August 2022

The Southern California housing market has slowed significantly in recent months, owing to rising mortgage rates, which have priced many would-be buyers out of the market. Here's how individual counties of Southern California are setting or matching price records as compared to last August (Data released by C.A.R.).

Orange County led the pack again with the highest price increase of 9.1% over last year. San Bernardino is the most affordable with a median price of $472,750 for existing single-family homes. Orange County is the most expensive real estate market in Southern California with a median sales price of $1,200,000. Sales declined in all counties of Southern California by more than 20 percent.

·       In Los Angeles County, the median price rose 3% to $854,960 in August, while sales decreased by 29.1%.

·       In Orange County, the median price rose 9.1% to $1,200,000, while sales decreased by 30.2%.

·       In Riverside County, the median price rose 8.8% to $620,000, while sales decreased by 27.4%.

·       In San Bernardino County, the median price rose 8.7% to $472,750, while sales decreased by 32.6%.

·       San Bernardino County also had the highest decline in sales among all six counties.

·       In San Diego County, the median price rose 6% to $885,000, while sales decreased by 27.7%.

·       In Ventura County, the median price rose 3.6% to $884,000, while sales decreased by 24%.

A Zillow home price measure that attempts to account for such changes in the mix of homes selling shows that the price of a typical home in Orange County is still above $1 million, and overall prices in Southern California haven't fallen as much as the median indicates. San Bernardino County has experienced a 0.5% loss since the peak, while San Diego County has experienced a 2.6% decrease.

Home prices in every county are higher than they were a year ago, an indication of the robust demand that existed before interest rates skyrocketed. Regionally, the median sales price is 4.6% more than it was a year ago; when combined with rising interest rates, this makes housing significantly less affordable than it was in 2021.

Southern California Housing Market Forecast 2022 & 2023

The housing market in the United States, and notably in Southern California, has been impacted as a direct result of rising mortgage rates. As a result of falling sales and rising inventory, a growing number of potential buyers and sellers are pondering whether or not home prices will fall in 2022 or 2023. According to some experts, both national and Southern California prices will fall next year, owing in part to the increasingly expected recession.

As the recession comes closer, some industry analysts feel the scenario is becoming more realistic, and some of them have even modified their predictions to call for price cuts in 2023.  These forecasts are a divergence from those made earlier this year when the vast majority of industry professionals were of the opinion that increased mortgage rates would only postpone price appreciation. That is, home prices would proceed to go up, but at a more gradual pace compared to those seen in the preceding two years in Southern California.

A significant number of industry professionals maintain the view that a scenario involving slower development is the one that is most likely to occur. There are very few well-known analysts who anticipate price declines on par with those that were seen during the Great Recession if any at all. However, the rapidity with which the housing market is transforming is shown by the fact that a number of prominent analysts have already predicted that prices will fall in the Southern California real estate market, which is something that has not occurred for more than a decade.

Home prices are going to fall in California, according to Jordan Levine, chief economist for the California Association of Realtors. In response to falling demand, an increasing number of home sellers have reduced the prices at which their houses are placed for sale. If overall sales prices are to fall in the future, this is the first step that must be taken. Levine anticipates the California median sales price to rise 9.7% year on year in 2022, a substantial decrease from the over 20% growth projected in 2021.

Then in 2023, he expects the Federal Reserve’s actions to fight inflation will cause a mild recession, and the combination of job losses and higher rates will cause the statewide median price to fall 7.1% compared with this year, with similar declines in Southern California housing market specifically. Southern California home prices will either decline or should be largely flat over the next few years.

The job recovery trend is good, and the prospect of resuming all jobs lost due to the pandemic is becoming more tangible. Despite greater inventory levels and rising borrowing costs, the Southern California housing market is nevertheless operating strongly. However, the frenzied rate of activity during the last 18 months or so will reduce, but not to an alarming degree. The market remains favorable to house sellers, and they remain in control.

Will Home Prices Drop in Southern California Real Estate Market?

The following analysis of select counties of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner.

Southern California Home Sales

·       In the second quarter, 47,596 homes were sold, a 19% decrease from the previous year but a 13.1% increase over the first quarter.

·       Pending house sales, which are a predictor of future closings, were slightly lower in the second quarter than in the first.

·       Orange County reported the greatest loss in sales, while other areas suffered substantial drops.

·       Nonetheless, the spring market was in effect in San Diego, Los Angeles, and Orange counties, which saw double-digit percentage gains in sales over the previous quarter.

·       Listing activity has increased across the region, providing buyers with additional options.

·       That may explain, to some extent, why pending sales have slowed; purchasers are not feeling as pressed as they were when inventories were extremely low.

Southern California Home Prices

·       Home prices in the second quarter rose 10.9% compared to a year ago and were 5.4% higher than in the first quarter of 2022.

·       There was double-digit price growth in every county other than Los Angeles.

·       Riverside County led the way with prices rising by 16.7%.

·       The rest of the region also saw very impressive sales price growth.

·       Compared to the first quarter, median list prices are still up an average of 8.7%, suggesting that sellers remained rather bullish.

Southern California Days on Market

·       The average time it took to sell a property in Southern California in the second quarter of 2022 was 16 days.

·       It was 2 days less than a year before and 5 days less than in the first quarter of the year.

·       San Diego County homes continue to sell quicker than in other markets in the region.

·       Except for San Bernardino, where properties took one day longer to sell than a year before, other counties witnessed a decrease in market time.

Sept. 19, 2022

We’re entering the next stage of the housing market downturn—3 things to expect heading forward



Back in June, Fed Chair Jerome Powell made it clear: The housing market would go through a “reset.”

“I’d say if you are a homebuyer, somebody or a young person looking to buy a home, you need a bit of a reset. We need to get back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again,” Powell told reporters.

Whenever a central bank moves from monetary easing to monetary tightening, there’s going to be an impact on a rate-sensitive sector like real estate. That impact, of course, is going to be even greater when monetary tightening comes after the asset class—residential real estate—spiked 43% in just over two years. Powell admitted that much in June. However, Powell was noncommittal as to whether the rate shock would push home prices lower.

Fast forward to September, and we no longer need to question if the housing “reset” will affect home prices. Back in June, the U.S. housing market was still just in the early innings of a sharp drop in housing activity. Since, we’ve seen housing activity, including home sales and home construction levels, go much lower. But as data rolls in for August, we now have clear evidence that the housing market downturn has moved beyond that first stage (i.e. a sharp drop in housing activity) and into the second stage (i.e. falling home prices).

“The longer that [mortgage] rates stay elevated, our view is that housing is going to continue to feel it and have this reset mode. And the affordability resetting mechanism right now that has to happen is on [home] prices. And so there are a lot of markets across the country where we’re forecasting that home prices are going to fall double-digits,” Rick Palacios Jr., head of research at John Burns Real Estate Consulting, tells Fortune.

Let’s take a deeper look at the three elements that’ll shift as we move into the second stage of the housing market downturn

1. The home price correction is spreading.

 As mortgage rates spiked—going from 3.2% to 6.3% this year—industry insiders knew it'd cause a sharp contraction in housing activity. However, many housing bulls thought it wouldn't pull prices down. In March, Zillow went as far as to predict another 17.8% jump in home prices over the coming year.

It's clear that housing bulls got it wrong. Among the 148 regional housing markets tracked by John Burns Real Estate Consulting, 98 housing markets have seen home values fall from their 2022 peaks. Just 50 markets remains at their peak.

In 11 markets, the Burns Home Value Index* has already dropped by more than 5%. That includes a 8.2% drop in San Francisco home values. While it's common for median list prices to drop around this time of year, it's not common for home values or "comps" to fall because of seasonality. Simply put: The home price correction is sharper—and more widespread—than previously thought.

A growing chorus of research firms—including Moody's Analytics, John Burns Real Estate Consulting, Zonda, and Zelman & Associates—expect this home price correction to continue into 2023. Peak-to-trough, Moody's Analytics thinks U.S. home prices could soon fall 5%. In significantly "overvalued" housing marketsMoody's Analytics thinks that price drop could range from 5% to 10%. If a recession manifests, Moody's Analytics predicts those price drops would double. But even that scenario would still be below the peak-to-trough U.S. home price decline of 27% we saw between 2006 and 2012.

There are still some firms that don't think the home price correction—which is driven by an affordability squeeze created by spiked mortgage rates—will carry over into 2023. That includes Zillow. The Seattle-based home listing site acknowledges that 62% of housing markets should see falling home values in the third quarter of 2022. However, Zillow economists predict that only 28.5% of markets are headed for year-over-year declines between August 2022 and August 2023.

2. The housing downturn will soon spread beyond housing.

On a year-over-year basis, the ongoing housing downturn has seen new home sales and existing home sales fall by 29.6% and 20.2%. Real estate firms like Redfin, Realtor.com, and Compass have already issued layoffsHomebuilders are calling off projects, while some mortgage lenders are teetering on bankruptcy.

That said, most of the financial pain of the housing downturn has been contained within the real estate industry. That's about to change.

Researchers at Goldman Sachs recently released a paper titled “The Housing Downturn: Further to Fall.” The investment bank forecasts that U.S. housing GDP will drop by 8.9% in 2022 and another 9.2% in 2023. In the lead-up to the Great Recession—which officially started in December 2007—housing GDP fell by 7.4% in 2006 and 21.4% in 2007.

If Goldman Sachs is right, it'll mean the contractions in the U.S. housing market will soon sprawl out into the broader economy. That's not surprising. After all, the Federal Reserve has upped the Federal Funds rate in an attempt to slow the economy.

As home shoppers across the country put their home search on pause it causes homebuilders to pull back. That sees decreased demand for things like refrigerators, lumber, windows, and paint. Those economic contractions should, in theory, help to rein in runaway inflation.

"It [housing] is not the target, but it [housing] is essentially the target," Bill McBride, author of the economics blog Calculated Risk, told Fortune earlier this summer.


3. Sellers are calling timeout.

As the Pandemic Housing Boom fizzled out this summer, we saw inventory jump across the country. In bubbly markets, like Austin and Boise, that inventory jump was greater than 300% between March and August.

But that inventory spike is already fizzling out.

Active listings on Realtor.com jumped by 106,900 homes in May. That was followed by 102,900 and 128,200 jumps in June and July. However, that slowed in August to just a 31,900 inventory jump. And through the rest of the year, Altos Research predicts inventory will actually fall.

What's going on? For starters, sellers are realizing that buyers are done paying top dollar. Rather than take less, some sellers are simply waiting out the housing downturn.

There's also the rate lock-in effect. The vast majority of outstanding mortgages have rates below 5%—with a big chunk even below 3%. If they sell now, they'd be giving up their historically low mortgage rate. That payment jump is hardly appealing for move-up buyers.

"It's going to be very very hard to persuade people to let go of those insanely low rates," Palacios tells Fortune. While many industry insiders believe tight inventory will help to prevent a housing crash, Palacios says it won't be enough to prevent the home price correction.

Aug. 29, 2022

Home Prices In Southern California Have Dropped and May Continue Falling.

Housing prices are a key component of the Consumer Price Index, when home prices go down this could help drive down inflation

Higher Mortgage Rates Are A Key Factor in Lowering Home Prices

Mortgage rates have continued to rise as Southern California heads closer to the Fall season and that has had an effect on home prices in the area as reported by The Los Angeles Times.

Rising mortgage rates are hardly a local phenomenon but are definitely starting to change the once strong seller’s market into more of a buyer’s market. For a change, buyers have had to start to drop their prices to try and attract an increasingly reluctant pool of buyers into considering a purchase. 

One of the biggest changes are my buyers look at homes and they have some time to think about it now. It’s a normal market.”

According to Forbes.com, mortgage rates are two points higher than they were at the beginning of the first quarter of the year and that was after the rates had already increased more than they had at any other time in the last 28 years. 

Inflation is part of the reason that mortgage rates are increasing after the consumer price index also rose to a historically high level. Part of the reason for this is the Federal Reserve’s attempts to combat inflation by raising the benchmark interest rate. 

Joel Kan, an economist at the Mortgage Bankers Association (MBA) said, as quoted by Forbes.com, “Higher interest rates resulting from the Fed’s efforts to combat inflation, as well as the persistently high rate of inflation, are causing stresses for households and businesses.”

Mortgage rates, for the average 30-year, fixed-rate mortgages were as high as 5.81 in June but have gone even higher in late August. The current 30-year, fixed rate mortgage is 5.90% according to Bankrate.com. 

Countries all over the world are having to do the same to combat inflation but in the United States, financial experts predict a slowdown. Wharton business school professor Jeremy Siegel said, as quoted on CNBC’s “Squawk Box Asia, “I think we only need 100 basis points more. The market thinks it’s going to be a little more — 125, 130 basis points more. My feeling is we won’t need that much because of what I see as a slowdown.” indicating that the Federal Reserve will only have to raise the consumer price index by 100 additional basis points. 

Siegel points out that, according to CNBC, housing prices have dropped and in fact have “gone down by a record amount exceeding any six-month period.” These are one of the key indicators of whether inflation will continue to rise or slow and Siegel believes that this shows that a slowdown is on the way.

June 30, 2022

California Housing Market Report & Predictions

June 26, 2022

California Housing Market

Once again, during May 2022, the housing market in California has seen a reduction in home sales while prices continue to rise.

House prices rose in May by 1.6% and that is up 9.9% in the last 12 months.  Condo sales declined too, and in fact condo prices bucked the upward trend by falling 3.1%, although still up 14.5% vs last May of 2021.

California home prices soared 4.1% higher than March’s levels to a new record again at $884,890. Sales are slowing and fell 1.9% from March and are down 8.5% from last April.

Judging by declining sales which are uncharacteristically slow at peak buying season, Realtor’s latest outlook this month, and expected rising interest rates, the prediction is for a cooling California real estate market. Market velocity is falling at a faster rate.

The average price of a house sold in California reached another all time peak at $898,980.

When Will Home Prices Drop in California?

Californians are constantly asking if and when home prices will drop, just as the outlook for the summer is perhaps for further new records. Mortgage rates have doubled, pushing up mortgage payments, and it is hurting homeowners besieged with other record high costs. Inflation and a souring economic outlook will begin to show in home prices by summer’s end.

Rent prices too, having reached record heights are beginning to show slower growth.  The rental market suffering from exceptionally low inventory will likely not show mercy to Californians for sometime.  New housing development is once again slowing.

Higher priced homes in the state continue to sell well, while the low supply of affordable homes continues to shrink, making purchases less likely. The share of million-dollar home sales rose again in April to reach the highest level on record at 34.7% Homes sold below $500,000 hit and hit the lowest level recorded.

Supply is still a key matter even as prices and mortgage payments soar.  California Realtors are reporting increased activity up to the week ending June 25th.  Looks like a rise in new listing so the picture may be brighter for buyers desperate for a home.

Home sellers are cutting list prices as more buyers take pause: ‘The market is not the same’

Home sellers are increasingly cutting their asking prices as buyers, constrained by higher mortgage rates and overall inflation, have become less willing to jump into the housing market at any cost.

The growing number of price cuts, a trend showing up in data from Southern California and across the nation, is one of the strongest signs yet that the previously red-hot market, fueled by low mortgage rates and all-cash bidding wars, is cooling.

The price reductions don’t mean overall home values are dropping. In Southern California and the wider U.S., they make up a minority of listings, and most homes still sell for more than the list price.

Industry experts, for now, do not see a plunge coming in the housing market, catapulted to record-high prices in the first two years of the pandemic as many people sought out more space and had new savings to spend.

Values could come down modestly, some experts said, if the Federal Reserve’s actions to tame inflation send mortgage interest rates significantly higher — or tip the economy into recession.

For buyers, the market already feels significantly different from the frenzied competition of several months ago.


Posted in Market Updates