San Francisco Home Prices Fall by 41% due to Foreclosures

[May 21, 2009.]

 

San Francisco area home prices have fallen 41% compared to prices in April 2008. Foreclosures are blamed for the decline, which highlights opportunities for homebuyers to get great deals while mortgage rates remain low. Not surprisingly, home sales have increased approximately 13% over the last year.  Although there are great deals to be had, many potential buyers are postponing home purchases due to ongoing concern over employment stability and continuing declines in home prices due to foreclosures. Bay area homebuyers often need jumbo loans (Loans over $417,000) to finance their homes, and jumbo loans are no longer readily available.

Mortgage Loans: Buyer's Market?

Anyone considering buying a home should only do so because they want to buy a home, and not because "now is the time to buy." Financial readiness and ongoing commitment to the responsibilities of homeownership are essential to avoiding problems later. The additional costs of owning a home include paying taxes and insurance, and the costs of maintenance and repairs. It's important to budget for all of the costs of owning a home instead of getting a mortgage that stretches a homeonwer's budget to its last dime.

Big Mortgage, Big Purchase, Big Responsibility

When contemplating a home purchase, it's a good idea to consult a financial planner to assist in determining affordability based on long and short term goals, lifestyle, and retirement plans. Incorporating a home purchase into overall financial planning can assist in identifying mortgage loans that are appropriate for the "big picture" that lasts far beyond getting the keys to a new home. Low mortgage rates are important, but additional considerations include:

• Compare mortgages: As with the popular ice cream store that offers a lot of flavors, mortgage loans offer a wide array of features that affect how a mortgage loan performs. Low mortgage rates make it easier for homebuyers to qualify for the old standby--the 30 year fixed rate home loan. Sometimes plain vanilla is the best choice.


• Shorter repayment term can $ave bundles: Homebuyers can use free mortgage calculator tools to estimate potential savings by choosing a mortgage with a shorter repayment term. The shorter the term, the higher the monthly payments, but it's possible to save thousands of dollars by choosing a 15 year mortgage.


• Watch out for prepayment penalties: Avoid home loans that allow for a prepayment penalty if the loan is paid off before a certain date. Prepayment penalties can reduce the potential benefit of refinancing, and if they apply to home sales as well as refinancing, they can also reduce sale proceeds. 

Finding an ideal mortgage before shopping for a home can help homebuyers focus on affordable homes, and getting pre-approved for a mortgage is helpful when making an offer.

 

About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.