Debbie Brodie’s Chico Real Estate Blog

A few years ago, a first time home buyer was able to buy their dream home on the first go-round. Even if it was a little too expensive, they could stretch into a loan to pay for it. For some it worked out, but for many it has led to disaster.

 In today’s market, a buyer has to qualify for their loan. It is back to the basics. The loan is connected to the amount of income coming in, the down payment and the credit scores.

 Before starting to shop for a home, a buyer should have a complete loan package submitted to a lender. The lender will then be able to explain how much they can afford to pay for their house. Once this process is complete, then go shopping.

 In Chico, a first time buyer may not be able to get their dream home right away. But, they can opt for a starter home. Maybe one that needs some fixing, or that can be added on to over the years.

It may be worth the work to buy a  short sale or REO. The 8000 tax credit is also a great incentive to get that first home now.

 Here are seven bits of wisdom from economists and financial planners for anyone contemplating a home purchase today, as published in the New York Times:

• Old-fashioned basics are more important than ever. The safest way to purchase a home is to put down 20 percent on a fixed-rate, 30-year (or less) mortgage.
• Don’t become overconfident about income growth. Even though buyers in their 20s and 30s will likely see their incomes grow more quickly than previous generations, it is important to act sensibly when borrowing.
• Anyone contemplating adding children to the family should calculate whether they could live on one income because having both halves of a couple work may turn out to be impractical.
• Include a maintenance budget. Even new homes need upkeep and repairs.
• Buyers who can’t afford their dream home now should opt for a starter home where they can save money each month for what they really want.
• Consider a property that can be expanded and improved down the road when money is available.
• No two buyers are the same, but they should all feel confident with the loan they enter into, no matter the size of the mortgage.

Source: The New York Times, Ron Lieber (09/12/2009)

When you look back at MLS data from one year ago, things are very much the same in Chico-save one item. The number of homes on the market has decreased, by around 50 homes, or about 15%.

Through this market shift, Chico has never been overloaded with homes for sale.  Our biggest fear is running out of them again. What can I say, people want to live here.

Even the average listing  price is identical.

If you look deeper, you may find that the median price of sold homes is lower, but this number is confusing. In our area it means that more smaller homes are selling than larger ones.  More smaller homes have been “on sale” due to foreclosure activity.

This is easy to understand when you think of your first house. You don’t have much to put down, so you are more at risk if the market changes. As you move up in life and buy a larger home, you have more equity. Not always, but more often.