“Renters are the next Mortgage Crisis.” That’s the premise of this thoughtful article in Forbes. The recent bad press over homeownership may be making more people consider renting over owning. But what’s the long term outlook for the renter class? I plan on retiring to a paid-off home with no payments to fuss about in my golden years. I’ll get there by paying off my 15 year mortgage at a low fixed monthly rate. If I was renting, I’d end up after 15 years with nothing but a stack of rent receipts. And rents are going up. All the time. I don’t want to be worrying about that uncontrolled rent inflation when my income may be limited. Don’t get me wrong, renting is a good answer for some people. And if you timed it right, to sell in 2005 and rent till today, good for you! But the market timing now favors the buyers. Don’t screw up your retirement. It’s tough to make it up later.

For us, much of this year has been filled with working for first time homebuyers who did the math. Low prices coupled with extremely low mortgage rates equals an unbeatable value. And it was better to buy than rent in 74% of the top 50 cities surveyed by Trulia.

The greener the bubble, the better the ratio for buyers. According to Trulia’s methodology, a ratio under 15 was a clear Buy signal. In San Francisco, it remains better to rent at 21, while Sacramento was much better to buy at 8. So what would our ratio be?

According to redding.com the median price for a home in Shasta County was $155,000 in June (although that number felt high to us). It seems to us that renting a nice home around here is about $1200.

$155,000 / $1200 X 12 = 10.7

Not as good a ratio as Sacramento perhaps, but still clearly it is better to buy around here than rent. Factor in that rents go up over time, but mortgage payments remain fixed for years, and it gets even better.

Of course many factors make this an individual equation. If you don’t plan on living in the house for several years, and have no savings, you should remain a renter. If your personal circumstances fit, the time has seldom been better to buy. And that’s true in lots of places in the US, not just around here.

A typical rate on a 15-year fixed mortgage has fallen to its lowest level in memory, according to USA Today. The rate for 15 year option dropped to 3.54% this week from 3.66% last week.

We have always recommended the 15 year mortgage if you can afford a bit higher monthly payment. You’ll save a ton of money over the 30 year loan. That’s the one we pick.


In this scenario, the buyer saved $107,457 in interest payments over the course of the loan! Plus, enjoying 15 more years mortgage free. Here’s a link to that 15 year versus 30 year  mortgage calculator, so you can try your own scenario. Everybody’s circumstances are different, and maybe the 30 year mortgage means you get the house you want, and 15 isn’t an option. But you should know the cost.

Mortgage Banker Pete Metz of Megastar sent over this interesting interest chart that shows rates over the last 20 years for a 30 year fixed loan. Obviously, current rates are at historic lows. That will save you much over the term. Click to enlarge.

Even if real estate prices continue to decline, if interest rates increase, your savings will vanish. If you are thinking of purchasing a home, you may want to consider doing so now while there are good choices of inventory, and location, and rates.

We like Pete. Give him a call.

Big changes are in store for the mortgage market. They have to be. One of the ideas getting more notice is that a big cause of the real estate bubble explosion was the easy availability of home loans requiring nothing, or little downpayment. It’s a quick choice to walk away from an underwater home with no money at risk. At least when it’s not your money, apparently. It turned out to be taxpayer money, but that’s another story. This article talks about the return of the 20% downpayment, and the implications. First Tuesday is an excellent source of insider info on the real estate industry. They pull no punches.

I’ll have to admit, we’ve had several clients recently who could not have purchased with a 20% downpayment hurdle to overcome. Buying a home in the current depressed market was good for them, and good for the market, so it’s hard to argue that increasing barriers is prudent. But it seems to me that the 20% medicine will serve the ailing housing market best in the long term. Short term, it will be tough medicine to swallow.
Link to the 20% down article here.

“Watch out for more real estate scams….coming north.. Con artists sending letters to homeowners stating that they need to send their mortgage payments to a fictitious company that has been assigned your mortgage. Be sure to let your clients know that if they receive any mail of this sort to contact their mortgage company immediately.”
This message was received by all local Realtors, from the Shasta Association of Realtors. We hear about many scams, most in more urban areas. Eventually, they make their way to the Northstate. Keep your ears and eyes open for this one.

Upside down on your home? You might turn your Second Mortgage into unsecured debt with a bankruptcy. That’s the upshot of this brief article from the San Jose Mercury News. From what we can tell, this strategy may be worth knowing for some Northstate homeowners who find themselves upside down on their mortgage (owing more than the current market value of their home).

“Bankruptcy laws prevent homeowners from eliminating the debt of a first mortgage if they plan to stay in their home. But second mortgages are treated differently. They can be declared unsecured debt when there is no equity to cover them, as is the case for millions of houses that are now worth far less than a few years ago.”

“A few years ago” there were ads all over the place, imploring homeowners to free up the bubble “equity” in their homes. The many that followed that siren song now find themselves in an untenable financial position. While the idea of eliminating a debt without paying it carries moral hazard and an ethical price, the entire Second Mortgage industry bears blame as well. This may be an effective strategy worth knowing. Read more at the financial article below.

I can offer you no legal, or tax advice as a real estate agent. But this article looked intriguing.