Big Bear Real Estate: Encouraging Developments

As usual there has been no shortage of real estate related news lately, much of which affects our unique Big Bear real estate market. To describe the overall market as ‘nervous’ these days would be an understatement. However there have actually been some very encouraging developments of late with respect to the possibility of home prices stabilizing sooner rather than later.

The biggest of these came about when Federal Government took over Fannie Mae and Freddie Mac. For potential buyers looking to capitalize on the major price corrections which have occurred in the Big Bear real estate market, this was fantastic news as it provided confidence in the loan market and interest rates dropped significantly as a result. Not long ago we were looking at 30-year fixed rates approaching 7%; whereas, earlier this week, a client of mine locked a 30-year fixed loan paying only ¼ point at 5.5%.

For a potential buyer, this means a few things. To illustrate, let's use a purchase price of $450,000, with 20% down, putting the loan amount at $360,000. The difference in payments between a rate of 7% and one at 5.5% would be roughly $350 a month -- a significant reduction in your cost-to-own. Looking at it another way, you could buy a $530,000 house at 5.5% for roughly the same payment as a $450,000 house at 7%. Or, a $385,000 house at 7% is roughly the same payment as buying a $450,000 home at 5.5%. 

	The lower the interest rate, the lower the monthly payment for the same house.
	$450,000 @ 7.0% $2,395 / month $450,000 @ 5.5% $2,044 / month
	DIFFERENCE = $350 / month

Many experts expect that rates will begin to rise again as demand creeps back into the market.  This is happening right now in Big Bear real estate as evidenced by the increasing number of transactions taking place.  Many think prices in the Big Bear housing market will continue to drop. Unfortunately, no one knows for sure what the future holds. What is interesting is that, from a monthly payment perspective, a rise in rates of 1.5% essentially erases a 15% decrease in home prices.  So, even if prices do end up declining further (they are currently off more than 30% in many areas of Big Bear), and you wait to buy whatever is left to choose from for $380K at 7%, you will be making the same payments as if you had bought a $450,000 home at 5.5% now.

What does all this mean? It is always a good time to buy the ‘right’ piece of real estate.  But, now in particular, is a great time to be looking to buy because:

    -    rates are low - below 6%,

    -    prices in many areas of Big Bear have seen dramatic declines,

    -    there is a large selection of inventory available and

    -    winter, our ‘money making’ season for vacation-rental investors, is quickly approaching.

I can take the guess work out of your search and save you money in your purchase, so just let me know if you are ready to start looking at real estate in Big Bear.

• Big Bear Real Estate
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