new home for sale

Buying a new home – how to spot a real estate bubble

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When it comes to buying a new home, there are many factors that will influence when you buy, the type of property, and the location in which you choose to purchase. One factor which people don’t always consider when buying a new home, however, is whether there is a real estate bubble in place. A bubble is when property prices are artificially inflated for any of a number of reasons, and this carries the risk that when conditions change the value of properties can fall rapidly, potentially resulting in negative equity and, in extreme cases, foreclosures. Property bubbles can be national in nature – caused by broader economic conditions – but they can also be localized. Here are some of the warning signs that the real estate market may be entering a bubble or prone to a crash.

1.     Look out for shaky loans– Loose lending practices in the past have included interest-only loans and adjustable-rate mortgages which borrowers may not be able to afford if interest rates go up. These and other forms of so-called subprime lending were prime factors behind the 2008 housing crash and subsequent global financial crisis. While lenders have almost universally tightened up lending practices in the years since, it still pays to keep an eye on a rise in more “creative” lending products and practices as a sign of a pending bubble.

2.     Decreasing down payments– Simply put, the more money you put down as a percentage of the purchase price when buying a new home, the smaller the risk to the mortgage lender in the event that either housing values crash or the borrower can’t keep up with the repayments. Conversely, smaller deposits equal higher risk. If the real estate market shifts to homebuyers putting down smaller down payments, it could be a sign of an approaching bubble.

3.     Cost of living outstripping salaries – Real estate bubbles can occur when living expenses start rising faster than salaries. Where runaway price inflation outstrips wage growth, there is the potential for a real estate bubble and subsequent crash. This can be particularly evident in fast-growing cities.

4.     Flipping and real estate investment– At times and in locations where a lot of people are buying property to renovate and flip, or are purchasing a new home for saleto lease out rather than live in, that can have a big effect on driving up house prices and creating a real estate bubble. Once again, widespread house flipping and investment purchases were the norm in the years leading up to the 2008 property crash.

5.     Rising interest rates – Lower interest rates make mortgages more affordable for would-be homebuyers, and help keep real estate market demand high. Rising interest rates, on the other hand, cause housing demand to fall, sinking the housing market and potentially signaling the end of a property market boom.

While most experts agree that we aren’t currently in too much danger of a national property bubble – interest rates are still relatively low and tighter lending practices in the past few years have acted as a brake to higher-risk lending – it’s still worth keeping an eye out for the factors outlined above before making a decision to buy a new home for sale.

Are you looking for a multigenerational new home?

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According to figures from the Pew Research Center, around 51 million Americans live in a home with at least two adult generations, or a grandparent and at least one other generation. There can be any number of reasons why multiple generations of families might choose to live together – it may be for financial reasons, driven by an event such as a job loss or house foreclosure. Or it may simply be driven by a desire to live as a closer extended family unit. Whatever the reason behind it, this type of arrangement is often referred to as multigenerational living, and is becoming an increasingly important consideration when people are looking to buy a new home.

The reasons for multigenerational living have also shifted over the years. While in the past it would have been more likely to be the older generation’s financial position that necessitated moving in with younger relations, today it is more likely to be the younger generation struggling to keep up with the modern costs of living and home ownership. According to a 2012 survey by a national home builder, 32 percent of adult children expect to end up sharing their house with a parent.

While it’s true that financial necessity is often the driver for multigenerational living, many families find there are many emotional and practical advantages in multiple generations living in the same house. That might take the form of built-in elder care or child care, or simply more hands to help out with cooking or other household chores.

Some housebuilders have begun to specifically make provisions for multigenerational living in their plans for new developments. It is becoming more common for a new home for sale to have features such as two master bedrooms, a downstairs room that can be converted into a guest room, or other flexible floorplans that can be utilized to adapt to changing family needs.

The new homes for sale in our development at Miraval at Mesa Verde have floorplans that feature a full-sized master bedroom on the first floor, ideal for an extended family with elderly parents. From the creators of the award-winning communities of Collective, Westreef and Miraval in Costa Mesa, phase two of our Miraval at Mesa Verde development offer spacious single-family houses designed for a contemporary coastal California lifestyle ideal for an extended family.

If you are looking to buy a new home for multigenerational living, Miraval at Mesa Verde offers a range of attractive features for any potential homebuyer. Our original Miraval community sold all of its units quickly, and was awarded the National Association of Homebuilders Gold Award for Best Architectural Design in its class Nationwide for 2017. 

Taking contemporary design influences from local coastal Southern California, Miraval brings exceptional attention to detail to every new home for sale in our development. We pride ourselves on the fact that we don’t just build homes, we build vibrant, family-friendly communities. For more information regarding sales, please call or text our realtor Valerie Torelli on 714-313-3241.