June 1, 2005

Now…or later?

By Donna Nardi
Special to the Times

With the real estate market on such a high note, many potential buyers are asking themselves whether they should purchase their home now or wait “it” out. What is the “it”?

There is a misconception that the housing market will crash and burn, the bubble will burst, it will take a dive, or the bottom will fall out, and so forth.

We must take a realistic look at the entire picture.

We are currently in a transition period. Earlier this year, we were in a very strong seller’s market. We realtors representing buyers were truly at a disadvantage when presenting any reasonable offer.

The offers on homes under $800,000, usually had accepted offers MUCH higher than the asking price. To see 20-plus offers per home was the norm. Now that the inventory level is higher, the buyers are beginning to have a stronger advantage. But, what about the future?

The housing market is always cyclical. There will always be an ebb and flow. But a “dive?” Hardly. Why?

The price of homes in Santa Clara County averaged an increase of 19 percent over the past year. That’s an incredible jump! If a buyer decides to save up money to enable a more substantial down payment, they are at a disadvantage once again. Unless the buyer is really raking in the dough, they cannot save more than the average price increase in the year! That’s quite discouraging.

I spoke with Nicole Santizo at First Horizon Home Loans. She had some interesting information to add.

Due to the incredible appreciation of homes in our area, lenders are allowing interest-only loans, 100 percent financing, stated income, no “doc” loans and other specialized programs.

Since Santa Clara County has such a high cost of living, the lenders typically allow a higher debt-to-income ratio. They also offer jumbo loans up to $5,000,000—yes that’s MILLION! We live in such a desirable area, lenders know the risk of loss is much lower than in other areas of the country. Even lenders see the high value of real estate in our area! They also want to cash in.

When a potential buyer decides to wait “it” out, they miss out on several ways to earn money:

1) They pay rent to a landlord, which is of no value for their future.

2) They miss the wonderful tax advantages.

3) They forgo the equity they would have gained.

4) They miss out on pride of ownership and the satisfaction of being in your own home.

Now let’s look at the same potential buyer should they go ahead with a purchase instead of waiting “it” out.

1) They are settled in and enjoying their own space.

2) They have locked in the price of their home forever.

3) They are already enjoying the tax advantages.

4) They are paying a monthly mortgage, which has a return for the future.

5) They can use their home’s equity to purchase other properties, or to gain wealth in other ways.

6) They can decorate, remodel, modify, or dance all night long in their home—it’s theirs to enjoy whatever way they see fit.

So, we come down to defining “it.” The definition of “it” is very personal. What is delaying your decision to purchase a home? Is it an obstacle that can be overcome? That decision is entirely up to you. Only you can answer that. Whatever your decision, I wish you the best for your future. 

Donna Nardi is a full-time Realtor with Prudential California Realty in San Jose.

You can reach her at (408) 918-4410, donna.nardi@prurealty.com, or www.happywayhome.com.