SubscribeWhy Borrowers Default - Interesting Reading
June 5, 2009
I saw this on a blog on the Wall Street Journal, but a recently released paper by the Federal Reserve Bank of Atlanta looked at loan defaults on loans with a high mortgage payment to income ratio, and found that rising interest rates DID NOT significantly correlate to default rates.
The two main indicators of a borrower’s likelihood of defaulting were (drumroll please . . . ):
- Unemployment
- Declining future home prices
Uh, oh, that sounds familiar here in Silicon Valley where unemplyment is 10.9%, and home prices in even the most resilient neighborhoods are off 10%. The article goes further to quote some numbers from the study:
“The Fed paper estimates that a 1-percentage-point increase in the unemployment rate boosts the chance of a 90-day delinquency by 10%-20%, and a 10-percentage point fall in house prices raises the probability of a default by more than half. A 10-percentage-point jump in the debt-to-income ratio, meanwhile, increases the chance of a 90-day delinquency by 7%-11%.”
So, the 5% increase in unemployment over the last 18 months translates to a 50% increase in the likelihood of default. The 10-20% drop in local housing prices translates to a 14% - 22% increase in the likehood of default. Wow . . .
Thursday’s announcement that delinquencies and foreclosures have hit all time highs underscores the relevance of this study. The authors of the Fed paper recommend programs to assist borrowers who have lost their jobs get through their temporary economic challenge. The WSJ authors have an alternative solution; boosting short sales to get borrowers out of their homes.
Which do I think will come to pass? Well, I have been getting training on short sales the last couple of months, and I have already seen two short sale listings in Los Altos this month.
Read it at the source. Here is the WSJ blog article, and HERE is the Fed paper. Read ‘em and weep.
Thanks for reading . . .
Tags: Atlanta Fed, avoiding foreclosure, foreclosure, loan modification, short sale, Wall Street JournalThe Market Report - June 2009
June 5, 2009
I send my clients a monthly market update and thought I’d share it with the blogosphere. If you agree and think that I’m a genius, please comment below. If you disagree and think I’m an idiot, keep your thougths to yourself. You can send me an email to subscribe to your city of interest (Atherton, Los Altos, Los Altos Hills, Menlo Park, Mountain View, or Palo Alto), and I’ll add you to my monthly update list. The commentary is as of June 1, 2009, that data is real-time.
May brought a ray of light into the local real estate market, as consumers, boosted by the rising stock market and low interest rates, began buying up homes on the market. Both Pending Sales and Pending Prices are up (see attached chart for a historical comparison), absorption numbers have outpaced new inventory both statewide and locally, and multiple offers on homes in Los Altos and Palo Alto have come back into play. At the low end, investors are superheating the Santa Clara and San Jose markets for single-family homes under $500,000, with many bank owned properties getting 20 – 30 mostly cash or all cash offers.
In general, prices are at about 2004 levels, and interest rates continue to hover near historic lows, with conforming loans under 5% for 30 years, and Jumbo loans staying around 6%. The big question on everyone’s’ mind is, “How long will this last?”
This past week we saw rates on the 10 year bond jump 0.5%, putting upward pressure on mortgage rates, which responded by rising for the different conforming loans. To get some additional input on whether this is short-term volatility or a longer term trend, I called my favorite mortgage bankers, who all had the same opinion, and all disagree (with all due respect) with Fed Chairman Bernanke that we will be out of the woods by the end of 2009.
The abridged version is that the government is subsidizing rates on loans backed by Fannie Mae and Freddie Mac (who are backed by taxpayers), so long-term mortgage rates are unsustainably low. The funds being used to subsidize these loans are finite, and limited, so there is upward pressure on the various conforming rates to rise to the real market rate of 6% as we are seeing in the Jumbo market.
Unusually, BOTH Buyers and Sellers are facing threats from market forces, creating compelling arguments to act now:
Sellers:
- Rising interest rates cut the purchasing power of Buyers, reducing the pool of potential Buyers for a given property
- The threat of rising unemployment and continuing slowing of the economy reduces consumer confidence and spending, especially on big-ticket items like cars and houses
- The current tax incentives for buying homes are limited to 2009. Reduced government from taxes due to lower incomes and corporate earnings makes it less likely that these are extended in 2010.
Buyers:
- That unemployment thing
- Qualifying for mortgages is getting more difficult, and the regulation of the process has tightened, adding new hurdles to the underwriting and appraisal process as the market overcorrects for the Wild West of the last few years.
- Rising rates cut purchasing power
Wow, kind of heavy stuff for a Friday. The good news is that summer is less than 3 weeks away!
On to the numbers:
Atherton:
Currently, the Median Price of a Single Family Home in Atherton is $3,996,500 with a range of $899,000 to 16,800,000. 48% (versus 41% last month) of the homes in Atherton have had price reductions, as Sellers are accepting that the market has shifted, and the average number of Days on Market has risen to 133 days from 114 last month, meaning that we should see more price reductions as the market searches for equilibrium.
Los Altos:
Currently, the Median Price of a Single Family Home in Los Altos is $1,999,900. 36% (up from 32% last month) of the homes in Los Altos have had price reductions, as Sellers are learning that the market has shifted, and the average number of Days on Market has dropped slightly to 98 days versus 96 last month.
Los Altos Hills:
Currently, the Median Price of a Single Family Home in Los Altos Hills is $3,146,500. 36% (up from 23% last month) of the homes in Los Altos Hills have had price reductions, as Sellers are learning that the market has shifted, and the average number of Days on Market has dropped to 173 days versus 187 last month.
Menlo Park:
Currently, the Median Price of a Single Family Home in Menlo Park is $1,447,000. 38% (versus 37% last month) of the homes in Menlo Park have had price reductions, as Sellers are resisting that the market has shifted, and the average number of Days on Market has risen to 127 days from 116 last month.
Mountain View:
Currently, the Median Price of a Single Family Home in Mountain View is $899,000. 55% (versus 38% last month) of the homes in Mountain View have had price reductions, as Sellers are learning that the market has shifted, and the average number of Days on Market has decreased to 121 days from 127 last month.
Palo Alto:
Currently, the Median Price of a Single Family Home in Palo Alto is $1,595,000. 41% (versus 43% last month) of the homes in Palo Alto have had price reductions, as Sellers are resisting accepting that the market has shifted, and the average number of Days on Market has risen to 99 days from 94 last month.
Pendings, Applications and Multiple Offers all UP
May 15, 2009
Fellow contributor sent this to me, and I thought is was worth sharing. I’ll have Administrator Kevin re-post this under his authorship when he has a minute….
We are finally seeing seeing a little sunlight through the economic gloom, both nationally and locally. Take a look at these new statistics, and some anecdotal data from here in Palo Alto.
On a seasonally-adjusted basis, pending home sales in the US were up 3.2% last month (3.9% in the West) and 1.1% over last year (1.7% for the West)
On a non-seasonally-adjusted basis, pendings were up 28.2% last month (23.9% in the West) and 3.2% over last year (4.3% in the West)– wow
What’s significant about this is not only the fact that we continue to see more homes selling, but the index itself is running at volumes similar to what we saw in 2001! Further, this activity helps to stabilize the market, which leads to:
- more available lending, especially for the non-conforming (jumbo’s equity lines, construction financing) market
- helps the conforming market by enabling the MI companies to insure up to 95% again, as opposed to the 85% that they’re at now
- appraisal report concerns reduce
- reduces the emotional aspect of the sale that has created a tremendous amount of tension in the marketplace, as both buyer and seller feel more comfortable about moving forward
A factor that could be contributing to this increased volume is REO’s since Fannie and Freddie had a moratorium on foreclosures from December through March. As such, we may see a slight decrease in the median home price for the month of April. That written, it’s been the first-time homebuyers who have been driving this market, and first-timers don’t prefer to buy REO’s due to the headaches and lack of disclosure involved.
Purchase Applications Continue to Increase
Up 5% over last week on purchase applications, with no signs of slowing down. Refi’s are naturally very volatile as rates fluctuate with supply and demand. Overall, the conforming-level loans applications take the majority of overall applications but we have seen non-conforming application double this month over last.
On conforming loans ($ to $729,750) no matter how hard the government (taxpayers) works to throw money into the system, demand continues to outstrip supply driving rates higher.
On non-conforming loans, rates are driven by deposit rates, which have remained low this year. The 30-year is running about 6% with the 10/1 about 5.5%, the 7/1 about 5.25%, the 5/1 about 5% and the 3-year at 4.75%
Any mortgage rate below 7% is beating the average over the last 40 years.
Multiple Offers Coming Back
Last night one of our clients was the successful bidder of FOURTEEN total contracts submitted- wow! And, yes, this was on a $1.3mm home in Palo Alto. The important thing to remember is that going the old strategy of “as is” with “no contingencies” against multiple offers should be used with high caution when there’s a loan involved and the loan-to-value limits are applicable. Why? The due-diligence process on loans is 4X what it used to be, and appraisal reports are highly scrutinized; as such, it’s recommended that only the most qualified buyers consider proceeding as above.
Mortgage Process, Guidelines and Discretion
Did you know that a loan is actually NEVER officially committed until it funds? In most of the US, the financing contingency runs all the way to funding.
For the first time in 10 years, underwriters are using discretion to determine an applicant’s ability to replay a loan; as such, guidelines are just that—guidelines—and transactions may be in jeopardy if the process is rushed. A good example are those borrowers who have had a bankrupts in the past. Individuals who file bankruptcy once are 80% likely to do so again in their lifetime. An underwriter may see that a credit score requirement is met, but if the overall profile of the applicant’s repayment history is highly questionable, the request could be severely altered or declined.
The process is far more involved than it’s ever been, for both good and bad reasons. As such, we all need to keep in mind that closing dates need to be flexible. Additional due diligence is required on every transaction, and the verification process alone is one that can make the difference between a deal closing and a deal blowing up. A solid, reliable lending source will always provide proper guidance and multiple solutions
In a nutshell, BofA and Morgan Stanley are ranked at the bottom with Citibank and Wells in the middle, JP Morgan and Goldman at the top… The need to raise additional capital places stress on the system and essentially forces rates up since investors know that additional capital is required and will therefore demand a premium for it. For a 4-page version of the results, check out RBC’s summary.
Tags: 4---mortgage-mania, loan, Mortgage Forgiveness Debt Relief Act of 2007, mortgage rates, Mortgages, palo alto real estate market, Stress testMortgage Mania 26 - …And Henry Giveth Again
November 25, 2008
You would have to be living under a rock to have missed this today, so here is a newsflash for all you subterranian dwellers. Henry Paulson’s latest bailout plan now consists of borrowing $800 Billion from The Fed to buy up mortgage assets, consumer credit card debt and car loans.
In his article, “Fed bets $800 billion on consumers“ on CNNMoney today, writer Chris Isidore shares Uncle Henry’s latest plans:
“The Federal Reserve and Treasury Department on Tuesday unveiled a plan to pump $800 billion into the struggling U.S. economy in an attempt to jumpstart lending by banks to consumers and small businesses.
The government hopes that these initiatives will enable more money to flow to consumers in the form of loans than has occurred so far in previous bailout plans.
One program will make $200 billion available from the Federal Reserve Bank of New York to holders of securities backed by consumer debt, such as credit cards, car loans and student loans.
The Treasury Department will allocate $20 billion to back that lending in order to cover any losses that the New York Fed might suffer.
In addition, the Federal Reserve, announced it will purchase up to $500 billion in mortgage backed securities that have been backed by Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and Ginnie Mae, the three government-sponsored mortgage finance firms set up to promote home ownership. It will also buy another $100 billion in direct debt issued by those firms.”
Hmmm, buying mortgage backed securities . . . wasn’t that how TARP was sold to Congress in the first place? The idea of the US Government buying up toxic mortgage assets in an attempt to get the three remaining solvent banks to start underwriting mortgages is enough to get any red-blooded Realtor’s blood pumping again. If this restarts the housing market, let’s all be sure to thank the lobbyists working for NAR, and remember them on our Christmas lists.
The Fed goes the original plan one better by setting aside $200 Billion to buy securities backed by auto loan and credit card debt. Hmmm, let me see if I get this straight . . .
The idea behind mortgage backed securities was that they were safe because they were backed by the houses those mortgages were written against, and the logic was that those were APPRECIATING assets. This worked great until housing prices started falling, and the underlying assets were worth LESS than the loans on them.
A car drops 20% in value the minute you drive it off the lot, so you are already upside down on the loan if you put down less than 20%. The car ads are all touting $0 down, so let’s assume that most buyers today are putting down less than 20%. So . . . is this Groundhog Day?
Don’t get me started on buying credit card debt . . .
This is another reason I don’t work in the Treasury Department. That, and that pesky question about blog articles that would embarrass the President.
You can read the full text of the article HERE.
Thanks for reading . . .
Tags: 2008 real estate market, Fed bailout, mortgage bailout, mortgage crisis, mortgage maniaMortgage Mania 25 - Now What?
November 14, 2008
Henry giveth, and Henry taketh away . . .
When Treasury Secretary, Henry Paulson asked Congress for $750 Billion (yes, that’s with a B) financial bailout package, the justification was to buy up distressed mortgage assets so that banks would start lending again, and hopefully the epidemic of foreclosures sweeping the nation would be stalled.
The new plan doesn’t include that, of course, which has led to everyone asking, now what?
Lately, I have been holding open houses in Palo Alto pretty regularly, and almost everyone coming in asks me the same question: How is the Market? We discuss the market trends of homes taking longer to sell, increasing numbers of price reductions, the importance of pricing and preparation, etc.
The big shift we are seeing now is the effect of the stock market crash last month. Much of the wealth in Silicon Valley is tied to the stock market (options, grants, etc.). It’s how we pay our executives and employees, reward performance (bonuses), and fuel the venture capital engine. When the market drops over 30%, suddenly, potential home buyers are faced with the prospect of selling stock that is devalued by 30% to pull together the down payment on a home that is priced 5 - 10% off its high (typical Palo Alto home, your results may vary). That is pretty tough to justify, and in many cases potential buyers don’t have enough in their portfolios any more to cover the 20 - 30% down needed for that typical Palo Alto home.
So, we are seeing a bunch of Buyers exiting the market, while the inventory of homes for sale in Palo Alto is about double what it was at this time last year. The result is a Buyer’s Market. Good news if you are a Buyer, bad news if you are a Seller.
Many people in Palo Alto don’t NEED to sell their homes. They may be retired and wanting to move to a smaller home or relocate, or they may be a growing family needing more space. With the exceptions of people relocating out of the area, moving into retirement homes, or those who are selling for financial reasons, many sellers can afford to wait for the market to turn in their favor.
In the short-term, I predict that we will see the inventory of homes for sale drop, even more than the usual seasonality, as potential sellers wait out the market. The big threat to sales and prices is interest rates rising. Remember, that if the rate on a loan goes from 6% to 7%, the payment goes up about 15%. That is a big hit when you are talking about $1M loans, and a economy falling into recession.
For the longer term outlook, I’ll defer to this article that was recently in Money magazine that discusses how the credit crisis nationally is affecting ALL real estate, even here in Palo Alto. We Realtors love to say “All Real Estate is Local”, which is great unless the money to buy that local real estate is affected but national events. This time around, the events are international.
Be sure to follow the links above to see the latest market data for Palo Alto and the surrounding communities, but you may want to fix a drink first. Or, you can register to receive updates on the market in local communities delivered to your email weekly at: www.REMarketReports.com
Thanks for reading . . .
Tags: 2009 forecast, 2009 interest rates, home prices, housing market, housing market turnaround, palo alto economy, Palo alto housing market, palo alto real estate market, recessionMortgage Mania 19 - The Jumbo Strikes Back
September 9, 2008
Amid all the celebration and hullabaloo associated with the recent drop in conforming interest rates as a result of the Treasury Department taking over management of GSE’s Fannie May and Freddie Mac, there has been scant analysis of the elephant in the room, namely Jumbo (aka non-conforming) loans that are part and parcel of home purchasing here in Silicon Valley.
The GSEs hold or have securitized nearly half — roughly $5 trillion — of all mortgages in the U.S., and in the current environment with private lender constraints, they account for the vast majority of all new mortgages in California.
This bailout (oops, did I say bailout?) removes much of the risk to lenders of writing mortgages for under $729,000 locally, decreasing to $649,000 next year, because they can resell these loans to the government backed and now managed GSE’s.
But what about loans over $729,000? Well, Wall Street and the secondary market will still be willing to buy those that are considered low risk (excellent credit score, low loan-to-value ratio, verifiable income), but they will demand a risk premium for those loans, meaning that rates are likely to go up, taking us back to the bifurcated market for rates that we have seen in previous years.
On his way to the SILVAR Golf Tournament yesterday, co-contributor and local mortgage banking hotshot Eric Trailer of Absolute Mortgage Bank in Palo Alto gave this quick analysis of where he sees rates going (paraphrased here):
If you know you can sell off a loan to a government backed agency, you have very low risk, so you demand a low interest rate. However, as risk increases you will demand a greater “risk premium” to hedge against not being able to sell that loan, or the buyer defaulting on that loan. Right now we are seeing investors who are willing to lend the 20% to take a buyer from a 20% down, 80% loan to a 100% loan, but at 15% with 5 or 6 points. That’s expensive money, which is why it is dubbed “hard money”, but it offsets the risk to the lender.
Eric thinks we could see Jumbo rates heading to the 8 - 9% region, which is still lower than in the 80’s, but the difference between a 6% loan and a 9% loan on $1,000,000 is $2500 a month just in interest.
Let’s do some math. If you have an 80% mortgage on a median priced home in Palo Alto ($1,921,214, source Altos Research). That is a mortgage of $1,536,971, and payments increasing from $7685 @ 6% to $11,527 @ 9%. That’s a lot of $4.25 a gallon gas!
So, if you are planning on buying a new home and you need to borrow more than $729,000 you may want to get out there looking sooner rather than later.
To learn more about the takeover of Fannie Mae and Freddie Mac and what it means to your home purchase, check out a new video featuring California Association of Realtors Executive Vice President Joel Singer at http://www.car.org/newsstand/video-js-gse. In “Fannie and Freddie: Why They Matter to You,” Joel explains the often confusing but critical role Fannie Mae and Freddie Mac play in the housing market in clear and concise terms.
Thanks for reading . . .
Tags: 2008 loan limits, 2009 interest rates, 4---mortgage-mania, bailout, Fannie Mae, Freddie Mac, interest rates, Jumbo Loans, mortgage bailout, treasuryMortgage Mania 18 - Can You Say Taxpayer Bailout?
September 9, 2008
What The Government Seizure of Fannie Mae and Freddie Mac Means To You
Unless you have been hiding under a rock the past couple of days, you couldn’t miss the announcement that the U.S. Department of the Treasury has placed government backed mortgage companies Fannie Mae and Freddie Mac into a conservatorship. Under the terms of the deal, the federal government is authorized to take up to an 80 percent stake in the companies, and, as part of its duties under the conservatorship, will review both Fannie’s and Freddie’s financial condition quarterly, as well as inject money into the operations as needed.
Tommy Fehrenbach of Stern Mortgage in Palo Alto had this to say about the Treasury Department’s move.
“To promote market stability, the companies will be allowed to buy more mortgages through the end of 2009. However, starting in 2010 the number of mortgages they own will gradually be reduced at a rate of 10% per year, eventually stabilizing at about $250 billion.”
As part of this weekend’s action, both CEOs were relieved of their duties and Herbert Allison, former Merrill Lynch vice chairman, and David Moffett, former U.S. Bancorp CFO, were selected to lead Fannie Mae and Freddie Mac, respectively.
The markets cheered the move with the NYSE and NASDAQ rallying on the news, and mortgages rates for conforming loans (under $650,000 in 2009) fell almost half a point.
All great news, mortgage rates fall, and the housing slump is averted, right? Not so fast there partner . . .
In a statement released today by the California Association of Realtors (C.A.R.), concern over the long-term impact of the move was expressed with the following cautionary forecast:
“Without an institutionalized mortgage-backed securities market, mortgage capital eventually will be less predictable and more expensive, and adjustable-rate mortgages could become the standard loan for home buyers, as could higher down payment requirements. The 30-year, fixed-rate mortgage as we know it will no longer be readily available for most home buyers and may effectively disappear. The result could be a dramatic decline in homeownership rates in California and across the nation.”
C.A.R. is concerned that the Treasury, and Fannie Mae’s and Freddie Mac’s new CEOs, will overreact and change the mission and role of the GSEs. Wall Street and investors are understandably reluctant to buy mortgage backed securities (MBS) that are not either originated from or guaranteed by Fannie or Freddie.”
I added the underlining for emphasis because what nobody is talking about is JUMBO loans. Those mortgages above $729,000 (over $650,000 in 2009) that are part and parcel of almost ALL sales of single family homes here in Silicon Valley (the median home price in Palo Alto this week is: $1,921,214, courtesy of Altos Research).
In summary, while this is a good move for conforming loans, and the majority of potential homebuyers across the country, high-cost areas like Silicon Valley may once again be left out in the cold.
Stay tuned for our next edition of Mortgage Mania - The Jumbo Strikes Back
Thanks for reading . . .
Tags: bailout, California Association of Realtors, Fannie Mae, Freddie Mac, housing market, housing market turnaround, Mortgage, Palo alto housing market, silicon valley economy, silicon valley real estate
Good News About Real Estate in the Mercury? Well Sort Of
September 2, 2008
Long-time readers know that I do my newspaper reading online via the New York Times. In a throwback to a quieter time, I do subscribe to the San Jose Mercury News on Sundays as we like to peruse the articles and share witty banter about the headlines over morning coffee. In an interesting twist, I also receive the paper on other random days of the week . . . but I digress.
When I picked up the paper on Labor Day (Second Sunday?), the headline “Home Sales Raising Hopes” bravely attempted to be seen over the front and center HURRICANE HITS GOP main headline. What’s this I thought, positive news about the housing market from the Merc? Really?
I have grown weary and wary of the Merc and its drumbeat of foreclosure of the week, gloom and doom, and reinforcing that real estate is local, and my market in Palo Alto varies just a bit from south San Jose. If you don’t believe me, visit Altos Research and compare the chart for median home price over the last couple of years in these two cities. The results may surprise you . . .
The Merc got my hopes up with an intro and a couple of quotes from brokers saying they were expecting an upturn in sales in the Fall after activity was so low in the summer, and there is usually an upturn in the fall. There is some back and forth, and the article pretty much shot down the “fall uptick” conventional wisdom. Again, Altos to the rescue showing inventory and sales actually DO pick up in Palo Alto fairly consistently every fall before slowing down over the holidays.
To see the article on its entirety, click here to visit the Mercury online. For charts and stats galore, visit the Market Reports page on my website, now in Single Family and Condo!
Thanks for reading . . .
Tags: 2008 real estate market, home prices, Local information, palo alto home prices, palo alto market, San Jose MercuryTiming the Market, A Banker’s Viewpoint
September 1, 2008
Credit for this post really goes to 3 Oceans contributor Eric Trailer who sent me this content in a letter this week. My clients got it last week, and the blogoshpere can now benefit. We can assume that Eric has better things to do on Labor Day than blog. I’m guessing something involving his lovely wife and son . . .
To see current market data and price trends over the past year for local communities and confirm or refute Eric’s prognostications on the local market in Palo Alto and the surrounding communities,
CLICK HERE to see real-time market data, courtesy of our friends at Altos Research.
As you have likely been hearing, there continues to be more and more evidence that it will cost prospective home buyers more to purchase a home in select areas of the Bay Area as they allow time to go by.
Why? Let’s look at the basic reasons, then review an example:
1. The median price across the board in Palo Alto and the surrounding communities has risen since the beginning of the year.
2. On a national basis, the trough of the market was reached in April.
3. The conforming loan limit will DECREASE over $100,000 in 2009 to $625,000.
4. Rates have risen about .5% since the beginning of the year, despite the increase in the conforming loan limit to $729,750
5. Loan qualifications are becoming more restrictive with each passing week.
6. More restrictions on loans and a tighter supply of money forces rates to go up
7. Because loans require more work to process them (requirements today are 4x what they were a year ago), rates will go up.
8. Inflation is the number one concern of the Fed, and should be the number one concern for all of us.
Let’s say for a moment that you agree that rates are on the rise, but feel as though prices may come down on a $1mm property today; thus, you want to wait. Let’s further assume that you are right and the future price is $950,000, but rates have increased .5% at that future time. Using 20% down, waiting just cost you an ADDITIONAL $117 per month-over $1,400 per year.
But now let’s be more realistic given the appreciation rates of desirable areas of the Bay Area. If rates increase and the $1mm home appreciates to $1,050,000, you are looking at an ADDITIONAL $550 PER MONTH-OVER $6,000 PER YEAR!
What’s the take-away here? Price matters much less than true cost… My motto has always been that it always pays off to buy sooner than later, provided your holding period is greater than four years. And to prove that I walk the walk, I am happy to share my personal situation written as an article titled, “How to Afford a Home in Palo Alto Without a Trust Fund.”
Kindest regards,
Eric
To call Eric on his walking the walk comment, and get a copy of his article, “How to Afford a Home in Palo Alto Without a Trust Fund.”, click on his pretty picture over there in the contributor column to send him an email.
A Housing Rebound? - Looking for the bounce
July 23, 2008
CNN Money is a favorite consumer source for news and sensationalism about issues affecting us financially. A friend uses it as his homepage, and sent me this article on indications that the housing market is pulling out of its downward spiral. Judging by the commentary on the Yahoo news service that picked it up, most people think it is another self-serving article written by real estate agents who want to further dupe consumers into buying homes and further leveraging them selves with unnecessary debt. There, I said it, so you can save your comments.
Here in Sillycon Valley, we are continuing to see variations on the Tale of Two Cities theme, with markets like Palo Alto and Menlo Park holding up strongly (click the links to see current market data), while prices in parts of Sunnyvale and San Jose have fallen off a cliff this year. We won’t mention Sacramento, because it’s not nice to kick ‘em when they’re down.
So, the key leading indicators for monitoring the health of your local housing market are:
- Is the housing stock shrinking?
- Are home prices falling at a slower pace?
- Is it cheaper to rent than own?
- Are houses becoming more affordable (relative to local incomes)?
Locally, we are still kind of bumping along. The current housing stock in Palo Alto is up slightly, but that isn’t unusually during the late Summer. If the trend continues through Fall, it may signal a trend.
Home prices have been stable here, so that is tough to measure, though the multiple-offer / overbid madness is definitely a rarity these days.
Depending on how you measure it, it’s still cheaper to rent than own, but tell that to my clients who were tossed into the housing market when the rental property was sold and they received a 60 day notice from the new owner.
Houses here are still unaffordable, but take a look at the chart at the bottom of the page and compare San Jose and San Francisco. It may be a good time to get into San Jose, especially if you understand foreclosures and short sales. If not, contact 3Oceans contributor Bart Marchioni, aka Mr. Short Sale.
Remember, real estate is local, and be careful what you read on the internet.
Thanks for reading . . .
Tags: 2008 real estate market, housing market turnaround, mortgage crisis, mortgage mania, Palo alto housing market-
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Contributors
Kevin Boer
Broker/Owner
3 Oceans Real Estate
Menlo Park, CA
650.387.2860
(DRE 01404898)
Chris Iverson
Realtor
Ventoux Homes
Palo Alto, CA
650.450.0450
(DRE 01708130)
Christine Kani
Mortgage Broker
Equitas Capital
San Jose, CA
408.200.3816
(DRE 01730869)
Cindy Lin
Stager
Staged4More
Burlingame, CA
650.293.7458
Bart Marchioni
Realtor
Keller Williams
San Jose, CA
408.266.3100
(DRE 01385188)
David Roberson
Attorney
RHRC
San Jose, CA
408.261.4252
Eric Trailer
Mortgage Banker
Absolute Mortgage
Palo Alto, CA
650-493-3600
(DRE 01361721)
