Doom and Gloom News for Buyers in LA

I had to do a post about this because all this doom and gloom about not being able to buy if you're a prequalifed buyer is mostly BS. Of course if your budget is under 500k, then yes, you will have very slim pickings. But you can still buy, you just need to reset your expectations.

My advice? Sit down with a lender and see exactly how much you can borrow. You might be surprised. I had a client who ended up qualifying for 100k more in his purchase price because his lender told him that the he just needed to wait until his car was paid off in a couple of months.

Maybe you need to buy a condo instead of a house? Maybe instead of Silverlake near the reservoir, you need to look into Atwater? Maybe that 1600sf loft you want should in reality be more like a 1000sf loft? You can't expect to have the same stock available to you as 7 or 8 years ago. Prices are up and inventory is low.

And remember, your first home doesn't have to be the end all. My last client who downsized into a smaller house because that was all they could afford, ended up renting out this house and buying a larger forever home. One property became two!

Interest Rates Could Easily Rise to 5% in 2018

We knew the ultra low interest rates wouldn't last forever. But the time is coming for a nearly 5% 30-year fixed.

While still historically low, some surveys by C.A.R. are showing that a small portion of buyers will opt out if rates hit 5%.

Two comments:

1. Buyers who opt out are being very short sighted in my opinion. You're either going to get locked into still historic lows, or you can refinance if the interest rate ever drops again. No brainer.

2. Sellers can anticipate a slight softening of the market due to less buyers. 2019 is expected to have even higher interest rates. Meaning 2018 could be a very good time to sell.

Tax Reform & Real Estate - Basic Things You Need to Know

Overall thoughts: Buyers getting a loan of more than $750k will be hit. This will affect the sale of properties with loans above this amount as some buyers may have become reluctant.

1. Effects on the immediate housing situation:

2. Current homeowners are in the clear. But from 2018 on, anyone buying a new home will only be able to deduct the first $750,000 of their mortgage debt. That's down from $1 million. This $750,000 is across multiple homes, not per home. So if you wanted to buy two homes with a 500k mortgage each, you will have 1Mil in mortgage debt, and you can only deduct 750k of that.

3. Homeowners who sell their house for a gain will still be able to exclude up to $500,000 (or $250,000 for single filers) from capital gains, so long as they're selling their primary home and have lived there for two of the past five years.