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CAR: Rent-to-owners? 826,000 renters could buy

CAR: Rent-to-owners? 826,000 renters could buy
Many renters believe 20% down payment needed to purchase

A lack of financial literacy, from how many dollars are needed for a down payment to available government loan programs, is keeping many families from buying a home, according to a new report.

An estimated 14% of renters — about 826,000 of the 6 million — in the state could afford to buy a home in the community where they live, but a lack of education or misconceptions stop them from purchasing, according to the California Association of Realtors.  

About half of renters able to buy are white (51%), 27% are Latino, 12% are Asian and 6% are black.

Almost three of every four (73%) of renters believe a 20% down payment or more is required to buy a home, and 72% are not aware of government loan programs that offer down payment assistance. Many of these renters (69%) would buy if they could get approved for a mortgage with a smaller down payment, according to the CAR report.

‘Misconception about what it takes to become a homeowner’

“While many renters earn the income and have the credit required to buy a home, they have misconceptions about what it takes to become a homeowner, which is holding them back from buying a home or causing them to give up on their American dream,” says CAR president Jared Martin. “Prospective first-time buyers should be aware that there are many down payment assistance programs offered by local housing agencies and low down-payment programs from the Federal Housing Administration, U.S. Department of Agriculture and the Veterans Administration.”

For example, the California Housing Finance Agency (CalHFA) has several programs to help low- to moderate-income families looking to purchase their first home. Income limits range from $118,550 in lower-priced and rural counties to $228,300 in the Bay Area.

But even with government-guaranteed and low down payment programs, affordability remains a major concern and an obstacle for many would-be buyers, according to CAR. Only 28% of families could afford the median-priced home in the state during the fourth quarter. The report is based on income, regardless of whether consumers own homes or rent.

Photo of For Rent sign in front of Southern California house by Simone Hogan/Shutterstock

Flipping home profits drop, but remain solid in Central California

Home-flipping may be a big hit on the little screen, but it’s becoming a much tougher way to make a living.

Nationally, almost 208,000 homes and condos were flipped in 2018, a 4% decline compared to a year earlier. And the average home-flipper had a gross profit of $65,000 in 2018, down 3% from $66,900 in 2017, and the smallest profit margin since 2014, according to ATTOM Data Solutions. The figure is based on the original purchase price against the selling price, and does not include improvements and renovations to the property.

The average net profit nationwide declined to 44.8% in 2018, compared to 50.3% a year earlier — and far from the record 51% in 2016.

In many California communities, the average net profit missed the national rate. For example, home-flippers in Los Angeles-Long Beach had an average net profit of 27% — and some communities in Los Angeles County had rates below 10%. Moving up the coastline, profits ranged from a barely break even 4% in Santa Barbara and 3% in Carmel to San Francisco’s 33%.

But move inland where lower-priced homes are easier to find, profits soared to 355% in Arvin (near Bakersfield), 110% in Fresno and 62% in Sacramento.

The higher home prices and mortgage rates are definitely affecting home-flippers.

“With mortgage rates remaining strong and people staying in their homes longer, we have started to see a bit of a flipping rate slowdown,” says Todd Teta, chief product officer at ATTOM Data Solutions. “However, this isn’t to say home flipping is going away. The market is still ripe with investors flipping and bargains still await, especially in the lowest-priced areas of the country where levels of financial distress remain highest.”

About the author
About the author

Ron Trujillo, an award-winning business journalist-turned-public relations executive, is the editor-owner of CalHomeNews and can be reached at ron@cahomenews.com.

CoreLogic: Q4 equity up $20,000, but slows

California homeowners enjoyed hefty equity gains during the fourth quarter compared to a year ago, but the increase has definitely slowed.

The average homeowner’s equity improved $20,000 during the final three months of 2018, the third-largest increase in the U.S., behind Nevada ($29,000) and Idaho ($25,000), according to CoreLogic.

But the fourth-quarter equity increase is dramatically lower than the $44,5000 for the same three-month period in 2017 — and the impressive $51,000 in first-quarter 2017.

Even at a much-slower rate, California’s equity growth of $20,000 easily outpaced the nationwide average of $9,700.

California’s big increase in home prices have allowed more homeowners to become equity rich, with almost 44% owing less than half of the market value of their home during fourth-quarter 2018, according to ATTOM Data Solutions.

The dramatic boost in equity during the housing boom has almost eliminated foreclosures and negative equity in California, according to CoreLogic. Only 2.4% of homeowners in the state are dealing with an underwater mortgage.

San Francisco has the lowest percentage of negative equity mortgages at 0.7%, followed by third-place Los Angeles at a still paltry 0.5%.

Berkeley is best suburb in state

California’s arguably most liberal city is also its best suburb.

Berkeley — best known for the University of California, Berkeley and protests — earned an overall grade of A+, thanks largely to the commute, diversity, being a good place for families, health and fitness, and top-notch public schools.

But the city, across the bay from San Francisco, earned low marks for cost of living, housing and crime, according to the annual Niche report on the Best Suburbs.

Regardless, Berkeley outpaced Santa Monica, Albany, Mountain View and Manhattan Beach, which finished in second- through fifth-place.

The second half of the top suburbs in the state were Palo Alto, Solana Beach, Irvine, Los Altos Hills and Hermosa Beach.

Photo of Sather Tower in Berkeley by Chao Kusollerschariya/Shutterstock

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