Do you dream of owning your own home? Increased demand and fewer homes available have caused prices to skyrocket. If you’re wondering if you should buy a home in Rancho Cucamonga, CA, now or wait, here are some things to consider and a few tips to get started.
Mortgage Interest Rates
The Federal Reserve raised interest rates six times in 2022 in an effort to prevent a repeat of the 2007-2009 recession. The hope is that higher interest rates will decrease demand, allowing supplies to increase and encouraging lower prices. This is true for everything from eggs and milk to credit cards and mortgage loans. As a prospective homeowner, this could mean monthly payments out of your range, especially if you go with an Adjustable-Rate Mortgage.
If you’re asking, “Is now a good time to buy a home in Rancho Cucamonga?” The answer may be, “it depends.”
Rancho Cucamonga Housing Market
There are two primary reasons a home enters the market: someone wants to sell the home they have, or a new one is built. The housing market bubble of 2006 resulted partly because lenders were lax when writing loans, and more people were buying investment properties, not homes for themselves. Today’s market struggles for different reasons.
New Homes
New home construction has lagged in the last decade, and this slowdown likely contributed to the significant deficit the market experiences today. Building timelines and costs have gone up since COVID for many reasons:
Lending Guidelines – Homebuilders, particularly smaller organizations, have difficulty borrowing the money needed to build due to tighter lending guidelines.
Lot Availability – About a year’s supply of lots is likely available. However, it’s estimated that two or three years of lots are needed to reduce demand.
Lagging Laws and Regulations – California’s new density mandate for single-family homes took effect on January 1, 2022. This ended single-family zoning and changed what developers and local governments can and cannot do.
Building Materials – Shortages and increased expenses for lumber, windows, garage doors and other commonly used building materials cause delays and higher home prices.
Skilled Labor – Finding skilled construction workers, plumbers, electricians, and other positions has become difficult, especially in hot building markets. The lack of workers can extend the time needed to complete new homes, increasing expenses.
Existing Homes
Due to supply chain issues, existing homes make up most of the current homes for sale. Many homeowners have decided to keep their current homes until market conditions become more favorable. However, the smaller supply of homes available means open houses experience a constant stream of potential buyers.
Thanks to rising interest rates, the market is stabilizing. Although residential real estate prices are higher than in 2021, they have dropped somewhat in the last few months, and this is good news for homebuyers. According to the California Association of Realtors, Southern California has experienced a considerable drop in annual single-family home sales. In addition, the time it takes for a home to sell has increased from 34 to 43 days, although “hot” homes may sell in as little as 23 days.
As interest rates increase, so do the monthly mortgage payments. Since this has resulted in cooling the real estate, many homeowners with a property on the market may make you a deal to unload it quickly. If your finances and credit score are in good shape, you might benefit and buy a home that was out of your price range previously. Refinancing if/when interest rates drop could then lower your monthly payments.
Is it Time to Buy?
Homeownership is expensive, from taxes to buying furnishings and daily upkeep. If you’re looking for a home in Rancho Cucamonga and have a very tight budget, consider putting off buying a home. Give yourself time to build a savings account that can help you get a house you want, not just one you can afford. Here are signs indicating that now is a good time to buy a home.
Steady Income – If you have a regular paycheck and have had consistent income over the last few years, mortgage lenders may find your financial situation favorable. Most lenders ask for proof of employment history for at least two years.
Down Payment – A typical down payment could require as little as 3% and up to 20% of the home’s purchase price. Closing costs and other related expenses can add up quickly. If you have saved for a down payment, you might be one step closer to homeownership.
Future Plans – Selling a home is much more work than breaking an apartment lease. Buying a home that meets your current or expected needs may make sense if you have decided to start a family or are making long-term plans to keep you in the Rancho Cucamonga area. If you are already considering relocating in the next few years, waiting to purchase a home is more practical.
Favorable Location – Just because you can afford to buy a home doesn’t mean you can afford one where you want to live. Do you want a house close to where you work? Perhaps you prefer a suburban location with a big yard. Make a list of “wants” and “needs,” then consider which items you are willing to compromise. If you can afford a home that checks all the necessary boxes, this may be a good time to see how much a financial institution will lend you.
Buying a home is a very personal experience, and only you can decide if now is the right time to buy. Owning a home is expensive and overextending your budget on a home could cause issues in other areas quickly. Take the time to get all your financial ducks in a row before heading to the bank. This could start with a review of your credit report. Clean up any discrepancies and consult a professional who can guide you through the process to help ensure you can qualify for the mortgage amount you need.