Massive Problems in Temecula
In this blog posting video, I wanted to talk about some massive issues in Temecula regarding housing. I don’t see these issues going away anytime soon, so you should understand what is going to be the norm in the Temecula real estate market moving forward, especially if you plan on buying or selling.
Inventory is no doubt going to be a massive issue in Temecula in the coming years. One issue is land. There is not a great deal of it to build on anymore. Temecula is getting more and more popular, and if there aren’t any more places to build new homes, the prices of existing homes will have to go up. Depending on how you look at it, this can be both good and bad. It’s a good thing because population growth will be moderate. The downside? If you’re a home buyer with no land to build new homes, prices will go up and competition will stay high.
New home building incentives and price increases
I learned this firsthand this year. When homebuilders realize there is a lot of competition, incentives get smaller and smaller. Those days of the builder paying for closing costs and giving you free upgrades might become less frequent. Another thing that I have personally seen this year with new home builds is home price increases in each phase. Because home prices have risen so much and so fast, the builder is able to raise prices on each building phase substantially. The home you want to build in three months may cost up to $20,000 more than you anticipated.
Releasing Your Appraisal Contingency
This is a massive issue in Temecula and something I really don’t like my clients did. In this housing market, there is no other choice, especially with pool homes. If you, the buyer, find a desirable home that you love, chances are there are 5 to 10 other people thinking the same way you do. If this is your dream home and the home you need to have, be ready to release your appraisal contingency in your offer.
What Does This Really Mean?
Let’s say you find a home listed at $500,000 that you really love. After looking at comparables, your agent determines that this list price is spot-on with like comparables in the neighborhood. There are six other offers ranging from $520,000 to $540,000. You offer $540,000 and have your offer accepted. Yeahhhhh! Hold up. Your lender is only going to lend what the property is worth, which is $500,000 minus your down payment. You, as the buyer, have to come up with the other $40,000 out of pocket. For many people, this is not a huge issue, but for many first-time home buyers, it gets very demoralizing.
City dwellers with a lot of money
This does not make many Temeculans happy and is definitely an issue not only in Temecula but across the US. Many people in large cities don’t want to live in large cities anymore. Peaceful homes, especially in Southern California, bring millions of dollars in resale. When these people move to the suburbs, they have a lot of cash to play with, and oftentimes they are okay with homes getting bid on and paying higher prices.
Finding People to Do Work
This is a major problem not only in Temecula but throughout Southern California. Finding qualified people to complete good work always seems to be difficult. It seems all the good companies are booked out for months. I see this a lot as a real estate broker. I always have clients who need plumbers, painters, electricians, etc. If you do happen to find somebody who’s really good, it’s going to be expensive. With all the regulations, insurance, red tape, taxes, and workman’s comp, these small businesses need to charge an arm and a leg just to stay afloat. This is not helping homeowners, especially first-time homeowners or younger people who generally don’t have thousands of dollars for repairs they can’t complete on their own.
First-time home buyers
This is a huge problem in Temecula, and this is probably the group of people I care about the most in this market. Many are young and working hard just to save enough money for a down payment and closing costs. Unfortunately, this is frequently insufficient, with homes being bid up above the asking price.
Many people might argue, “Well, just buy a home that has been on the market a while!” Well, it’s not that easy. In this housing market, if the house is on the MLS for over 20 days, there is something wrong. Major repairs and overpricing are two things that come to mind. Again, we are getting into a situation where first-time home buyers don’t have the money to pay the difference on the appraisal or make major repairs. Also, first-time home buyers often go with FHA loans because they require less of a down payment. This loan has strict guidelines on safety or home repairs. Even if you get an FHA loan approval, that doesn’t mean you can buy any house you want. (If you have qualified for an FHA loan, make sure your agent understands the guidelines of the loan.)
This is a massive issue for home sellers in the Temecula Valley. Because the market is so competitive now, it’s hard for many homeowners to sell and move up to a larger home, a pool home, a home on more acreage, etc. Trying to purchase a new home with a sale contingency in your offer is difficult in this market, to say the least. We always seem to get it done, but it’s not easy and can create a lot of stress for two to three weeks.
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