Respected Los Angeles-based real estate investor Fred Wehba answers questions relating to 2015 real estate trends.
Q: Have home prices risen this year?
Fred Wehba: Yes, according to a nationwide survey, home prices have risen nearly 6% as compared to a year ago. In fact, in some areas of the country, the growth is so substantial that many economists are concerned about another round of localized bubbles.
Q: Do low mortgage rates and new lending options actually impact the real estate market?
Fred Wehba: Absolutely. Lower interest rates encourage people to begin their home search. And although rates may rise slightly by year’s end, more homes are being sold than this time last year in many parts of the country. Major lenders, such as Freddie Mac and Fannie Mae, have recently introduced more lenient lending options. This, like lower interest rates, encourages buyers to take the first step toward homeownership. Obtaining a mortgage may not be as easy as it was in 2006 and 2007, but it is becoming a more feasible option for the average American.
Q: Why are turnkey properties so in demand?
Fred Wehba: Homes that are move-in ready – or nearly so – are popular because many first-time buyers have a limited pool of cash from which to pull from for improvements. What we’re seeing now is that turnkey properties are selling faster than their fixer-upper counterparts.
Q: Are foreclosure homes still a popular option?
Fred Wehba: Not as much. However, some investors still focus primarily on foreclosure properties. The foreclosure market peaked in 2006 but is now sitting near average historic levels.
Q: Is it more expensive to buy a home than to rent?
Fred Wehba: Typically, yes. Leasing a property used to be the most affordable way to secure housing. That is no longer the case. This is due to a combination of low interest rates, reasonable down payments, and rising property management costs, resulting in larger rent payments. Renters in the United States spend nearly 1/3 of their income on housing as opposed to just 15% by homeowners.