What Are Accessory Dwelling Units and How Can They Benefit You in Simi Valley?

What Are Accessory Dwelling Units and How Can They Benefit You?

Maybe you’re in the market for a home and are having a hard time finding the right one that fits your budget. Or perhaps you’re already a homeowner in need of extra income or a place for loved ones. Whether as a potential homebuyer or a homeowner with changing needs, accessory dwelling units, or ADUs for short, may be able to help you reach your goals.

What Is an ADU?

As AARP says:

“An ADU is a small residence that shares a single-family lot with a larger, primary dwelling.”

“An ADU is an independent, self-contained living space with a kitchen or kitchenette, bathroom and sleeping area.”

“An ADU can be located within, attached to, or detached from the main residence. It can be created out of an existing structure (such as a garage) or built anew.”

If you’re thinking about whether an ADU makes sense for you as a buyer or a homeowner, here’s some useful information and benefits that ADUs can provide. Keep in mind, that regulations for ADUs vary based on where you live, so lean on a local real estate professional for more information.

The Benefits of ADUs

Freddie Mac and the AARP identify some of the best features of ADUs for both buyers and homeowners:

  • Living Close by, But Still Separate: ADUs allow loved ones to live together while having separate spaces. That means you can enjoy each other’s company and help each other out with things like childcare, but also have privacy when needed. If this appeals to you, you may want to consider buying a home with an ADU or adding an ADU onto your house. According to Freddie Mac:

“Having an accessory dwelling unit on an existing property has become a popular way for homeowners to offer independent living space to family members.”

  • Aging in Place: Similarly, ADUs allow older people to be close to loved ones who can help them if they need it as they age. It gives them the best of both worlds – independence and support from loved ones. For example, if your parents are getting older and you want them nearby, you may want to buy a home with an ADU or build one onto your existing house.
  • Affordable To Build: Since ADUs are often on the smaller side, they’re typically less expensive to build than larger, standalone homes. Building one can also increase your property’s value.
  • Generating Additional Income: If you own a home with an ADU or if you build an ADU on your land, it can help generate rental income you could use toward your own mortgage payments. It’s worth noting that because an ADU exists on a single-family lot as a secondary dwelling, it typically cannot be sold separately from the primary residence. But that’s changing in some states. Work with a professional to understand your options.

These are a few of the reasons why many people who benefit from ADUs think they’re a good idea. As Scott Wild, SVP of Consulting at John Burns Research, says:

“It’s gone from a small niche in the market to really a much more impactful part of new housing.”

Bottom Line

ADUs have some great advantages for buyers and homeowners alike. If you’re interested, reach out to a real estate professional who can help you understand local codes and regulations for this type of housing and what’s available in your market.

Why Home Prices Keep Going Up in Thousand Oaks

If you’ve ever dreamed of buying your own place or selling your current house to upgrade, you’re no stranger to the rollercoaster of emotions that changing home prices can stir up. It’s a tale of financial goals, doubts, and a dash of anxiety that many have been through.

But if you put off moving because you’re worried home prices might drop, make no mistake, they’re not going down. In fact, it’s just the opposite. National data from several sources says they’ve been going up consistently this year (see graph below):

Here’s what this graph shows. In the first half of 2022, home prices rose significantly (the green bars on the left side of the graphs above). Those increases were dramatic and unsustainable.

So, in the second half of the year, prices went through a correction and started dipping a bit (shown in red). But those slight declines were shallow and short-lived. Still, the media really focused on those drops in their headlines – and that created a lot of fear and uncertainty among consumers.

But here’s what hasn’t been covered fully. So far in 2023, prices are going up once more, but this time at a more normal pace (the green bars on the right side of the graphs above). And after price gains that were too high and then the corrections that followed in 2022, the fact that all three reports show more normal or typical price appreciation this year is good news for the housing market.

Orphe Divounguy, Senior Economist at Zillow, explains changing home prices over the past 12 months this way:

“The U.S. housing market has surged over the past year after a temporary hiccup from July 2022-January 2023. . . . That downturn has proven to be short lived as housing has rebounded impressively so far in 2023. . .”

Looking ahead, home price appreciation typically starts to ease up this time of year. As that happens, there’s some risk the media will confuse slowing price growth (deceleration of appreciation) with home prices falling (depreciation). Don’t be fooled. Slower price growth is still growth.

Why Are Home Prices Increasing Now?

One reason why home prices are going back up is because there still aren’t enough homes for sale for all the people who want to buy them.

Even though higher mortgage rates cause buyer demand to moderate, they also cause the supply of available homes to go down. That’s because of the mortgage rate lock-in effect. When rates rise, some homeowners are reluctant to sell and lose their current low mortgage rate just to take on a higher one for their next home.

So, with higher mortgage rates impacting both buyers and sellers, the supply and demand equation of the housing market has been affected. But since there are still more people who want to purchase homes than there are homes available to buy, prices continue to rise. As Freddie Mac states:

“While rising interest rates have reduced affordability—and therefore demand—they have also reduced supply through the mortgage rate lock-in effect. Overall, it appears the reduction in supply has outweighed the decrease in demand, thus house prices have started to increase . . .”

Here’s How This Impacts You

  • Buyers: If you’ve been waiting to buy a home because you were afraid its value might drop, knowing that home prices have gone back up should make you feel better. Buying a home gives you a chance to own something that usually becomes more valuable over time.
  • Sellers: If you’ve been holding off on selling your house because you were worried about how changing home prices would impact its value, it could be a smart move to work with a real estate agent and put your house on the market. You don’t have to wait any longer because the most recent data indicates home prices have turned in your favor.

Bottom Line

If you put off moving because you were worried that home prices might go down, data shows they’re increasing across the country. Let’s connect so you can understand how home prices are changing in our local area.

How Inflation Affects the Housing Market In Simi Valley, CA

How Inflation Affects the Housing Market In Simi Valley, CA

Have you ever wondered how inflation impacts the housing market? Believe it or not, they’re connected. Whenever there are changes to one, both are affected. Here’s a high-level overview of the connection between the two.

The Relationship Between Housing Inflation and Overall Inflation

Shelter inflation is the measure of price growth specific to housing. It comes from a survey of renters and homeowners that’s done by the Bureau of Labor Statistics (BLS). The survey asks renters how much they’re paying in rent, and homeowners how much they’d rent their homes for, if they weren’t living in them.

Much like overall inflation measures the cost of everyday items, shelter inflation measures the cost of housing. And for four consecutive months, based on that survey, shelter inflation has been coming down (see graph below):

Why does this matter? Well, shelter inflation makes up about one-third of overall inflation, as measured by the Consumer Price Index (CPI). So, when shelter inflation moves, it leads to noticeable moves in overall inflation. That means the recent dip in shelter inflation might be a sign that overall inflation could fall in the months ahead.

That moderation would be a welcome sight for the Federal Reserve (the Fed). They’ve been working to get inflation under control since early 2022. While they’ve made some headway (it peaked at 8.9% in the middle of last year), they’re still trying to get to their 2% goal (the latest report is 3.3%).

Inflation and the Federal Funds Rate 

What’s the Fed been doing to lower inflation? They’ve been increasing the Federal Funds Rate. That interest rate influences how much it costs banks to borrow money from each other. When inflation climbed, the Fed responded by raising the Federal Funds Rate to keep the economy from overheating.

The graph below shows the relationship between the two. Each time inflation (shown in the blue line) starts to climb, the Fed raises the Federal Funds Rate (shown in the orange line) to try to get it back to their target of 2% (see below):

The circled portion of the graph shows the most recent spike in inflation, the Fed’s actions to raise the Federal Funds Rate to fight that, and the moderation of inflation that happened in response to that hike. As inflation gets closer to the Fed’s current 2% goal, they may not need to raise the Federal Funds Rate much further.

A Brighter Future for Mortgage Rates?

So, what does all of this mean for you? While the actions coming out of the Fed don’t determine mortgage rates, they do have an impact. As Mortgage Professional America (MPA) explains:

“. . . mortgage rates and inflation are connected, however indirectly. When inflation rises, mortgage rates rise to keep up with the value of the US dollar. When inflation drops, mortgage rates follow suit.”

While no one can predict the future for mortgage rates, it’s encouraging to see the signs of moderating inflation in the economy.

Bottom Line

Whether you’re looking to buy, sell, or just stay informed about the housing market, let’s connect.

Housing Market Forecast for the Rest of 2023

 

Housing Market Forecast for the Rest of 2023

Some Highlights

  • Want to know what experts say will happen in the rest of 2023? Home prices are already appreciating again in many areas. The average of the expert forecasts shows positive price growth.
  • Where mortgage rates go for the rest of the year will depend on inflation. Based on historical trends, rates are likely to ease as inflation continues to cool.
  • Even though low inventory continues to be a challenge, experts project 5 million homes will still sell this year. That pace should pick up if rates come down.

How Inflation Affects Mortgage Rates In Simi Valley, CA

How Inflation Affects Mortgage Rates In Simi Valley, CA

 

When you read about the housing market in the news, you might see something about a recent decision made by the Federal Reserve (the Fed). But how does this decision affect you and your plans to buy a home? Here’s what you need to know.

The Fed is trying hard to reduce inflation. And even though there’s been 12 straight months where inflation has cooled (see graph below), the most recent data shows it’s still higher than the Fed’s target of 2%:

While you may have been hoping the Fed would stop their hikes since they’re making progress on their goal of bringing down inflation, they don’t want to stop too soon, and risk inflation climbing back up as a result. Because of this, the Fed decided to increase the Federal Funds Rate again last week. As Jerome Powell, Chairman of the Fed, says:

“We remain committed to bringing inflation back to our 2 percent goal and to keeping longer-term inflation expectations well anchored.”

Greg McBride, Senior VP, and Chief Financial Analyst at Bankrate, explains how high inflation and a strong economy play into the Fed’s recent decision:

“Inflation remains stubbornly high. The economy has been remarkably resilient, the labor market is still robust, but that may be contributing to the stubbornly high inflation. So, Fed has to pump the brakes a bit more.”

Even though a Federal Fund Rate hike by the Fed doesn’t directly dictate what happens with mortgage rates, it does have an impact. As a recent article from Fortune says:

“The federal funds rate is an interest rate that banks charge other banks when they lend one another money . . . When inflation is running high, the Fed will increase rates to increase the cost of borrowing and slow down the economy. When it’s too low, they’ll lower rates to stimulate the economy and get things moving again.”

How All of This Affects You

In the simplest sense, when inflation is high, mortgage rates are also high. But, if the Fed succeeds in bringing down inflation, it could ultimately lead to lower mortgage rates, making it more affordable for you to buy a home.

This graph helps illustrate that point by showing that when inflation decreases, mortgage rates typically go down, too (see graph below):

As the data above shows, inflation (shown in the blue trend line) is slowly coming down and, based on historical trends, mortgage rates (shown in the green trend line) are likely to follow. McBride says this about the future of mortgage rates:

“With the backdrop of easing inflation pressures, we should see more consistent declines in mortgage rates as the year progresses, particularly if the economy and labor market slow noticeably.”

Bottom Line

What happens to mortgage rates depends on inflation. If inflation cools down, mortgage rates should go down too. Let’s talk so you can get expert advice on housing market changes and what they mean for you.

Sellers: Don’t Let These Two Things Hold You Back In Oxnard, CA

Sellers: Don’t Let These Two Things Hold You Back In OXnard, CA

 

Many homeowners thinking about selling have two key things holding them back. That’s feeling locked in by today’s higher mortgage rates and worrying they won’t be able to find something to buy while supply is so low. Let’s dive into each challenge and give you some helpful advice on how to overcome these obstacles.

Challenge #1: The Reluctance to Take on a Higher Mortgage Rate

According to the Federal Housing Finance Agency (FHFA), the average interest rate for current homeowners with mortgages is less than 4% (see graph below):

But today, the typical 30-year fixed mortgage rate offered to buyers is closer to 7%. As a result, many homeowners are opting to stay put instead of moving to another home with a higher borrowing cost. This is a situation known as the mortgage rate lock-in effect.

The Advice: Waiting May Not Pay Off

While experts project mortgage rates will gradually fall this year as inflation cools, that doesn’t necessarily mean you should wait to sell. Mortgage rates are notoriously hard to predict. And, right now home prices are back on the rise. If you move now, you’ll at least beat rising home prices when you buy your next home. And, if experts are right and rates fall, you can always refinance later if that happens.

Challenge #2: The Fear of Not Finding Something to Buy

When so many homeowners are reluctant to take on a higher rate, fewer homes are going to come onto the market. That’s going to keep inventory low. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains:

“Inventory will remain tight in the coming months and even for the next couple of years. Some homeowners are unwilling to trade up or trade down after locking in historically-low mortgage rates in recent years.”

Even though you know this limited housing supply helps your house stand out to eager buyers, it may also make you feel hesitant to sell because you don’t want to struggle to find something to purchase.

The Advice: Broaden Your Search

If fear you won’t be able to find your next home is the primary thing holding you back, remember to consider all your options. Looking at all housing types including condos, townhouses, and even newly built homes can help give you more to choose from. Plus, if you’re able to work fully remote or hybrid, you may be able to consider areas you hadn’t previously searched. If you can look further from your place of work, you may have more affordable options.

Bottom Line

Instead of focusing on the challenges, focus on what you can control. Let’s connect so you’re working with a professional who has the experience to navigate these waters and find the perfect home for you.

Explaining Today’s California Mortgage Rates

Explaining Today’s California Mortgage Rates

If you’re following mortgage rates because you know they impact your borrowing costs, you may be wondering what the future holds for them. Unfortunately, there’s no easy way to answer that question because mortgage rates are notoriously hard to forecast.

But, there’s one thing that’s historically a good indicator of what’ll happen with rates, and that’s the relationship between the 30-Year Mortgage Rate and the 10-Year Treasury Yield. Here’s a graph showing those two metrics since Freddie Mac started keeping mortgage rate records in 1972:

As the graph shows, historically, the average spread between the two over the last 50 years was 1.72 percentage points (also commonly referred to as 172 basis points). If you look at the trend line you can see when the Treasury Yield trends up, mortgage rates will usually respond. And, when the Yield drops, mortgage rates tend to follow. While they typically move in sync like this, the gap between the two has remained about 1.72 percentage points for quite some time. But, what’s crucial to notice is that spread is widening far beyond the norm lately (see graph below):

If you’re asking yourself: what’s pushing the spread beyond its typical average? It’s primarily because of uncertainty in the financial markets. Factors such as inflation, other economic drivers, and the policy and decisions from the Federal Reserve (The Fed) are all influencing mortgage rates and a widening spread.

Why Does This Matter for You?

This may feel overly technical and granular, but here’s why homebuyers like you should understand the spread. It means, based on the normal historical gap between the two, there’s room for mortgage rates to improve today.

And, experts think that’s what lies ahead as long as inflation continues to cool. As Odeta Kushi, Deputy Chief Economist at First American, explains:

“It’s reasonable to assume that the spread and, therefore, mortgage rates will retreat in the second half of the year if the Fed takes its foot off the monetary tightening pedal . . . However, it’s unlikely that the spread will return to its historical average of 170 basis points, as some risks are here to stay.”

Similarly, an article from Forbes says:

“Though housing market watchers expect mortgage rates to remain elevated amid ongoing economic uncertainty and the Federal Reserve’s rate-hiking war on inflation, they believe rates peaked last fall and will decline—to some degree—later this year, barring any unforeseen surprises.”

Bottom Line

If you’re either a first-time home buyer or a current homeowner thinking of moving into a home that better fits your current needs, keep on top of what’s happening with mortgage rates and what experts think will happen in the coming months.

Why Homeownership Wins in the Long Run In Camarillo, CA

Why Homeownership Wins in the Long Run In Camarillo, CA

Today’s higher mortgage rates, inflationary pressures, and concerns about a potential recession have some people questioning: should I still buy a home this year? While it’s true this year has unique challenges for homebuyers, it’s important to think about the long-term benefits of homeownership when making your decision.

Consider this: if you know people who bought a home 5, 10, or even 30 years ago, you’re probably going to have a hard time finding someone who regrets their decision. Why is that? The reason is tied to how home values grow with time and how, by extension, that grows your own wealth. That may be why, in a recent Fannie Mae survey, 70% of respondents say they believe buying a home is a safe investment.

Here’s a look at how just the home price appreciation piece can really add up over the years.

Home Price Growth over Time

The map below uses data from the Federal Housing Finance Agency (FHFA) to show just how noteworthy price gains have been over the last five years. And, since home prices vary by area, the map is broken out regionally to help convey larger market trends.

If you look at the percent change in home prices, you can see home prices grew on average by just over 56% nationwide over a five-year period.

Some regions are slightly above or below that average, but overall, home prices gained solid ground in a short time. And if you expand that time frame even more, the benefit of homeownership and the drastic gains homeowners made over the years become even clearer (see map below):

The second map shows, nationwide, home prices appreciated by an average of over 290% over a roughly 30-year span.

This nationwide average tells you the typical homeowner who bought a house 30 years ago saw their home almost triple in value over that time. That’s a key factor in why so many homeowners who bought their homes years ago are still happy with their decision.

And while you may have heard talk in late 2022 that home prices would crash, it didn’t happen. Even though home prices have moderated from the record peak we saw during the ‘unicorn’ years, prices are already rebounding in many areas today. That means, in most markets, your home should grow in value over the next year.

The alternative to buying a home is renting, and rental prices have been climbing for decades. So why rent and deal with annual lease hikes for no long-term financial benefit? Instead, consider buying a home.

Bottom Line

If you’re questioning if it still makes sense to buy a home today, remember the incredible long-term benefits of homeownership. If you’re ready to start the conversation, let’s connect today.

HOMEOWNERSHIP HELPS PROTECT YOU FROM INFLATION 

Some Highlights

  • Wondering if it makes sense to buy a home today even when inflation is high? When other costs go up due to inflation, buying a home helps you keep your monthly housing expense steady.
  • Rents typically increase with inflation. Maybe that’s why, according to a recent survey, 65.1% of landlords say they plan to raise the rent of at least one of their properties within the next 12 months.
  • Especially when inflation is up, having a stable housing payment can be helpful. Let’s connect so you can learn more and start your journey to owning a home today.

Your Needs Matter More Than Today’s Mortgage Rates In Ventura, CA

Your Needs Matter More Than Today’s Mortgage Rates IN VENTURA, CA

 

If you’re thinking about selling your house right now, chances are it’s because something in your life has changed. And, while things like mortgage rates are a key part of your decision on what you’ll buy next, it’s important to not lose sight of the reason you want to make a change in the first place.

It’s true mortgage rates have climbed from the record lows we saw in recent years, and that has an impact on affordability. With rates where they are right now, some homeowners are deciding they’ll wait to sell because they don’t want to move and have a higher mortgage rate on their next home. As Danielle Hale, Chief Economist at Realtor.com, explains:

“. . . homeowners who locked in a 30-year fixed rate in the 2-3% range don’t necessarily want to give that up in exchange for a rate in the 6-7% range.”

But your lifestyle and your changing needs should matter more. Here are a few of the most common reasons people choose to sell today. Any one of these may be more important than keeping your current mortgage rate.

As Ali Wolf, Chief Economist at Zonda, says in a recent tweet:

“First-time and move-up buyers are both active . . . the latter driven by life changes. Divorce, marriage, new higher paid job, and existing home unsuitable all referenced.”

Relocation

Some of the things that can motivate a move to a new area include changing jobs, a desire to be closer to friends and loved ones, wanting to live in a dream location, or just looking for a change in scenery.

For example, if you live in suburbia and just landed your dream job in NYC, you may be thinking about selling your current home and moving to the city for work.

Upgrading

Many homeowners decide to sell to move into a larger home. This is especially common when there’s a need for more room to entertain, a home office or gym, or additional bedrooms to accommodate a growing number of loved ones.

For example, if you’re living in a condo and decide it’s time to seek out a home with more space, or if your household is growing, it may be time to find a home that better fits those needs.

Downsizing

With inflation driving up everyday expenses, homeowners may also decide to sell to reduce maintenance and costs. Or, they may sell because someone’s moved out of the home recently and there’s now more space than needed. It could also be that they’ve recently retired or are ready for a change.

For example, you’ve just kicked off your retirement and you want to move to somewhere you can enjoy the warm weather and have less house to maintain. Your new lifestyle may be better suited for a different home.

Change in Relationship Status

Divorce, separation, or marriage are other common reasons individuals sell to buy different homes.

For example, if you’ve recently separated, it may be difficult to still live under one roof. Selling and downsizing may be better options.

Health Concerns

If a homeowner faces mobility challenges or health issues that require specific living arrangements or modifications, they might sell their current home to find one that works better for them.

For example, you may be looking to sell your home and use the proceeds to help pay for a unit in an assisted-living facility. 

With higher mortgage rates, there are some affordability challenges right now – but your needs and your lifestyle matter too. As a recent article from Bankrate says: 

“Deciding whether it’s the right time to sell your home is a very personal decision. There are numerous important questions to consider, both financial and lifestyle-based, before putting your home on the market. . . . Your future plans and goals should be a significant part of the equation . . .”

Bottom Line

If you’re ready to sell your house so you can make a move, let’s connect so you have an expert on your side to help you navigate the process and find a home that can deliver on what you’re looking for.