Is Housing Really More Affordable in California? Or Are We Just Too Familiar With Prices From The “Bubble” Years?

Is Now The Right Time To Buy A Home?
As sliding home values seem to be the trend in California, many potential homebuyers are wondering if now is the right time to buy. To be honest, if you ask a Realtor or loan agent that question, I’m sure you’ll get a few “It’s always a great time to buy!” cookie-cutter responses. With median home prices in California dropping almost 30% in some areas, it’s probably a better question to ask if housing is actually becoming more affordable.

Homes Are More Affordable, Compared to the Bubble Years
With the holiday shopping season right around the corner, think about the last retail “sale” you saw claiming huge discounts and spectacular savings. You know what I’m talking about–the big and bold 25 to 50 percent off signs hung from every storefront. Unfortunately, some of these huge “discounts” and “sales” are based off the retailers pumped up prices and MSRP.

To some degree, the same can be said of housing within California. You look at all the media and housing reports claiming discounted homes, but if you think about what prices these discounts are based off, you may be surprised at what’s considered a “discount”. By now, most have agreed that home prices in the past years, the bubble years, were supported by lax lending and exotic mortgages. So as home prices keep falling, these huge discounts can be claimed because our reference price are those from the inflated bubble years.

Impulse Shopping and Buyer Emotion
Just like the big discount signs hanging from retailers in the holiday seasons, these housing “discounts” have drawn in their share of interested buyers. While there are definitely great bargain homes to be found in California, I think it’s important to stay calm and avoid this excited buying impulse.

Even If It’s Cheap, Can You Afford it?
Although falling prices means cheaper homes, cheaper homes don’t guarantee affordability for potential home buyers. Even if prices are coming down, buyers should consider how they will be able to pay for these discount homes. With mortgage lending tighter compared to recent years, consumers should make sure their debt to income ratios and qualifying assets meet lender’s qualifications. While the discounts may be enticing, the bottom line remains whether or not you can actually afford to pay for the home.

If you’re considering one of these discount homes, don’t just focus on the “discount” itself. Do a bit of research on the surrounding area, analyze the local housing trends, and compare your “discount” home with others in the area.