Harpal Harika, Fremont Realtor

30 year fixed rates are hovering at lower 5% and Variable rates are in mid 4%. Should the interest rates fall further in order to jumpstart the home sales ? A lot of people are of this view that the rates will dip once more in next few weeks. It would be interesting to get the view of real estate experts on this topic. Why would make the rates fall in comming weeks ? Aren't they already too low ?

I hear different opinions from different people when discussing this topic. I have talked to people who have owned a house in the Bay area for a number of years, people who bought at the peak, People who bought in recent months and people who are sitting on the fence waiting for just the right time to buy. All of them have different opinion, dased on the catagory (above) into which, a person falls.

Since this discussion can be very long if I start talking about all the catagories of buyer. I will keep this discussion limited to first time home buyers and will keep the discussion limited to the Real Estate market in the SF Bay area.

Federal Reserve has reduced the key interest rate to almost 0%. It cannot go lower than this. It has already driven mortgage rates down since yesterday. There is an anticipation of further reduction in mortgage rates. There is a TAX $7500 credit to first time home buers. Although it is really a 0% interest rate loan from the Government. The prices in good school areas of San Ramon / Fremont have pretty much gone down by 15 - 20 %.(Mission San Jose / Cupertino still seems to be an exception). If government comes up with a plan to stop forclosures, then the price might stabilize here. An year ago it was un-imaginable to find a housein Ardenwood for less than $600,000. Now you can find a good house for mid $500,000. I am talking about something like 1400 sqft, 4 bedroom house, in Ardenwood. A lot more people are able to afford mortgage with the loans going under Jumbo Range, for this kind of price.

With rents gone up in last 2 years. Finally it has started making sense to buy, rather than rent. For instance, one of my client rented a 2 bedroom appartment in Fremont for $1700 / mo. I showed him a 3 bedroom Townhouse with attached 2 car garrage listed for $300,000 and he did not even blink an eye before making an offer. It made perfect sense to buy. With a 3% down FHA loan. He needs only $9000 as down Payment and his monthly P & I payment will be roughly $1562.

Another oppertunity for first time home buyers is REO / Bank Owned Houses. There are Bank Owned houses in Fremont in good school areas that are listed $50,000 - $100,000 less than the market price. The only reason these houses are not selling is that the first time home buyers do not want to get into the trouble of fixing the house. Most of the times they are un-aware of how easy it might be to fix these houses. Most of these forclosure houses need cosmetic upgrades, like new carpet, new paint, Maybe bath / kitchen upgrade. But the money required to do these upgrades is nothing compared to the reduction in price.

The buyer is the king at this time. If you have cash to pay at least 10% down with documented income and good credit history, all you need to do is to pick your deam home and offer a price you like. Don't wait for the market to bottom out before you make a decision. Don't look at others. Look at your situation and make a decision. historically, Real Estate in Bay Area has always appreciated more than inflation rate. If you plan to stay in the house for 5 years, chances are that your house will be worth more than it is today.