La Jolla Real Estate: La Jolla Luxury Homes

The Buyers Market Is Hot For First Time Luxury La Jolla Home Shoppers

For years rapidly rising prices kept many first-time luxury La Jolla home buyers out of the housing market. But as home values slide further downward and interest rates hover at relatively low levels, it may be time to start looking to buy that first luxury La Jolla home.

That is, if you have a secure job, can afford higher down payments than were required a few years ago and can meet lenders' much stricter income and credit requirements.

"Lenders aren't cutting everyone off. They're reverting to sanity after years of making bad loans," says Dick Lepre, senior loan officer at Residential Pacific Mortgage, in San Francisco.

The U.S. median home price was $201,000 in January, down 4.6% from January 2007. The S&P/Case-Shiller national home-price index for the fourth quarter was down 8.9% from a year earlier, the biggest drop in its 20 years. Prices have plunged 10% to 12% in troubled markets like Florida and California, and many economists predict an overall slide of 20% or more before the housing market bottoms.

• There was a 10-month supply of existing homes for sale in January, up from just under five months during boom times.

If you are about to get into the housing market, this is all good news. But before you begin visiting open houses, recognize that the old home-buying rules no longer apply. You want to approach buying your first house with a financially realistic point of view.

Remember: You're investing in a place to live, not speculating in the stock market or even putting money into a savings account. So keep it simple. Buy smarter. Buy cheaper.

• Determine what you can afford. "The days of easy money are over," says Jeff Bogue, a financial planner in Wells, Maine. Mortgage lenders have tightened their standards and are requiring larger down payments. Typically, they want buyers to spend no more than 28% of their gross monthly income on mortgage payments, real-estate taxes and home insurance.

To figure out how much you can afford, use online calculators at realestatejournal.com, dinkytown.com or bankrate.com and "get preapproved or preauthorized for a loan," Mr. Bogue says.

Be sure you also have cash for closing costs like legal fees and title charges. The total typically reaches 2% to 3% of the house price, but differs by state and mortgage product, says Ilona Bray, co-author of "Nolo's Essential Guide to Buying Your First Home." Also be prepared to pay for moving expenses and ongoing maintenance.

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