SubscribeTales From the Front 1/31/2010 – The Return of the Tulips
January 31, 2010
I have been patting myself on the back over the results of my contrarian marketing of 842 Sycamore Drive in Palo Alto.
It sold in a week with 14 offers, when the average Days on Market for a home in that area and price range is about 100.
Part of my contrarian marketing was to put it on the market during January, before the “traditional” beginning of the spring market, which is the week after SuperBowl Sunday. With the recent sales activity, I’m expecting a number of homes to come on the market starting in mid-February, as most agent “hold” listings until then. I have confirmed this with a number of my colleagues who are big “listing agents” meaning they hang signs in front of a lot of houses. (Most of my work is with Buyers).
Another house on Greer in the same neighborhood on and price range (listed at $979,000), received 12 offers and sold for very near what Sycamore did. Both homes had over 100 visitors to the open houses and the offers landed in the same ranges.
One question that came up immediately was “These are so similar, I wonder how many buyers are writing offers on both homes?” I haven’t been able to confirm anything, but I have a sneaking suspicion that the same 12 – 15 people were writing offers on both of these homes.
If this is the case, then the entry level market in Palo Alto is like a game of musical chairs. The same 12 – 15 people are going around writing offers on homes, and with every sale one drops out. After 12 rounds or so, they all have homes and the market stops.
So, when the conventional wisdom listings hit the market in February, there will be a flood of inventory, and choices, so the number of offers per home will likely drop off as buyers have more choices and less of a feeling of scarcity. In the case of the homes mentioned above, that would have resulted in a loss of thousands of dollars in proceeds to the sellers, but great news for the buyers of those homes.
This is all speculation now, but worth keeping an eye on over the coming months as we wait to see if the market is returning, or if we are seeing a short-term blip driven by a very limited supply in shortage to a relatively limited demand.
Thanks for reading . . .
Tax Credit Extended, Markets Further Stabilizing and Real Estate Ideal Hedge
November 11, 2009
Tax Credit and Conforming/FHA Loan Limit Extended
Made official on Friday, the tax credit for home purchases was extended through July 1, 2010 and the important details are exactly as they were in my post on Friday the 30th of October, which was summarized as follows:
· Effective on binding real estate contracts from December 1, 2009 through April 30, 2010, The tax credit would be $8,000 for first time home buyers and $6,500 for move-up buyers who have owned their current home for at least five years
· The tax credit expires on April 30, 2010; however, if a binding contract is reached by April 30, 2010, buyers have an additional 60 days to close the deal and still be eligible for the tax credit
· For purchases made in 2010, taxpayers would be able to claim the credit on their 2009 income tax return
· The income limits for both first time home buyers and move-up buyers would be $125,000 for single return and $225,000 joint return.
· Cost of the home may not exceed $800,000 to be eligible.
Remember that a tax credit has about THREE TIMES the impact of a tax deduction, which allows someone earning $125,000 per year to be taxed on about $102,000*. And since other items like interest and property taxes are also deductible*, that same individual may be looking at less than half of their earnings being fully taxable..!*
Add the above news to the fact HUD also extended the conforming loan limit of $729,750 in the Bay Area to December 31, 2010, and you have a “perfect storm” for every qualified first-time buyer in the Bay Area.
S&P Case-Shiller Confirming Further Improvement of Housing Prices
Released last week, the S&P Case-Shiller index confirms that housing prices continue to improve, especially in areas like San Francisco where the index moved another 2.8% in August to 132.47. This marks the seventh straight month of improvement.
Zillow also reported that their index reflected further stabilization for the third quarter, with over 26% of the metropolitan statistical areas showing signs of improvement.
Real Estate as an Ideal Hedge to Both the “W” Concern and Inflation
You may recall from my last post that we are seeing far more application activity for purchases in the $1mm+ range, especially the $1.5mm to $4mm range. These applications have been coming from our more financially-minded clients, as they not only see tremendous opportunity to obtain a more valuable home, but they are very concerned about a “W”-shaped economic recovery and subsequent inflation. As such, obtaining an upgraded home for less, cheap financing and hedging against inflation make buying a larger home an ideal move. All things being relative, the reality is that the S&P 500 currently has a rather high price-to-earnings ratio at about 19.52 versus the historical average of 15.7. As such, if we were in average economic circumstances, it’s arguable that the stock market is overvalued by about 25%. Given the fact that our current economy is FAR from being in average condition, it’s anyone’s guess just how overvalued the stock market is. All I know is that my savviest, financially-minded clients think that the stock market is due a correction and that real estate is a great asset to have as a hedge against both a market correction and inevitable inflation.
Fannie’s New Program: Deed for Lease
Announced on November 5, Fannie Mae is helping those qualified applicants to essentially sell and lease back their current home. This program is also applicable to investment-property owners who are facing foreclosure and wish to deed the property over to the lender and allow the renters to continue renting at market levels.
Rates and Activity
- Rates continue to run as low as 3.75%, depending on a number of different factors, with the conforming 30-year at just under 5% and the jumbo 30-year at about 4.75%
- 71% of our transactions last month were purchases, and the average loan was in the $500k range.
- As mentioned above, we’re seeing a heavy trend in purchase applications for the move-up market, but inventory is turning off a majority of those buyers
- We closed a deal in TWO weeks, but we still recommend a 30-day closing period
- If you or someone you know prefers to pay cash for a purchase, then finance that purchase within 90 days to protect valuable tax advantages, we can help, as we have programs that DO NOT require 6 months seasoning and pricing is based on purchase money, NOT a cash-out refinance
* Does not constitute tax advice. Please seek any qualified tax professional for proper guidance.
Tales From the Front – The World of Palo Alto Area Real Estate 10/16/09
October 16, 2009
Today was re-tour day in Palo Alto. When the price of a home is reduced, or the listing agent is trying to generate some interest in a stale listing, they “re-tour” it, or have it on broker’s tour again. Today we visited three great properties that are looking for new owners and are on tour following price reductions.
First up was a Crescent Park contemporary at 1012 Forest Avenue, listed by Alan Dunckel and Derk Brill of Alain Pinel Realtors in Palo Alto. Since there isn’t an actual Alain Pinel at that office, if you ask for him, you will be connected to Alan Dunckel, who is a nice guy and a good agent and his name is close enough. They have just reduced the price on this home from $2,395,000 to $2,195,000. Not bad for a 4 year old home in that neighborhood. It will have an open house on Saturday and Sunday from 1:30 to 4:30.
Next we moved a little South to 2145 Emerson Street in equally shi-shi Old Palo Alto. This newer traditional home is listed by Lisa Liu of Alain Pinel Realtors for $2,095,000, down from $2,295,000. At 2248sf on a 5000sf lot, it’s a cozy home, with great details, and great natural lighting. Open Sunday from 1:30 to 4:30.
Saving the best for last is my Intero colleague David Troyer’s listing at 75 Coronado Avenue in Los Altos. This new home is 6721 square feet on two levels on a 14233sf lot. Using modern Craftsman architecture and high ceilings, even the basement feels open and spacious, and it has great finishes and details throughout. Normally shown by appointment only, I’ll be there this Sunday from 1:30 to 4:30. Please stop by!
If you would like more information on any of these or other homes for sale in the area, send me an email, or call me at 650-450-0450.
Have a great weekend!
Activity off the Charts, Tighter Guides, Tax Credit Extension– Weekly Comments for October 9, 2009
October 12, 2009
With the number of mortgage applications on purchases surging another 13% last week, combined with conforming-level rates remaining at sub-5% levels and pending home sales rising for the seventh straight month, who in the real-estate world doesn’t need an extra shot of espresso in the am! But not all is rosy with tighter guidelines and the Fed ready to raise rates as necessary to control inflation.
Applications and Rates
With total mortgage applications up 16% last week (13% for purchase applications), how is it that rates are lower if demand for loans is up? The answer is that rates are affected when loans are locked. So if applications are submitted, but processing times are extended and applicants are holding off locking their loan, rates will be lower until real demand (locking the loan) kicks in. The current trend seems to indicate that rates are moving higher, but not significantly. As such, if you are looking for that conforming 30-year fixed under 5%.., it’s still available. Non-conforming rates are also cooperating as they are tied more closely with savings rates than market fluctuations, and we all know how low those CD rates are right now.
What is important to note is that the Fed is concerned about the level of “slack” left as it relates to loose monetary policy, which suggests that tightening monetary policy (raising rates is one way to tighten the screws, but not the only way) has become the focus for the Fed.
Pending Home Sales Up 22.3% Over Last Year
August is typically a slower month for real estate sales, but August 2009 sure bucked the trend with the West reporting a 16% increase over last month and a 22.3% increase over last year—the index now stands at 130.5 in the West. For those still uncertain about whether low rates and tax credits are not doing their part to stabilize the housing market, this latest data is sure enlightening.
Even new construction purchases were up in August with new-construction inventory shrinking for the 28th consecutive month.
Fannie and Freddie Cutting DTI Allowances to 45%?!
Last quarter, Fannie and Freddie cut debt-to-income (“DTI”) allowances for their loans by 16% to 55%. Now, Fannie and Freddie have indicated that DTI allowances will be cut again to 45% DTI—an additional 18.2% cut! What this means is that borrowers who could afford a $500k home today will have to settle for a $400k home in the future. As if there aren’t enough motivating factors for first-time homebuyers already—low rates, low prices, tax credits– here’s another reason…
And speaking of the tax credit, let’s all keep our fingers’ crossed that it at least gets extended and hopefully improved!
Condodealz Update
If you know of anyone interested in purchasing a new condo in Palo Alto at sizeable discount, register yourself at condodealz.com as soon as practical, as a deal is currently in the works.
We’re working this weekend as we do every weekend, so please feel free to contact us at 650.543.8001 or 800.517.LOAN (5626).
Cheers,
Eric
Tales From The Front – My world in real estate, October 9, 2009
October 9, 2009
I’m going back to some of our original content here on 3Oceans and providing some commentary on selected homes I saw today on Broker’s Tour that are worthy of mention to me. Thanks to JT for driving today, and Steve for navigational assistance.
I dragged my Los Altos compatriots to Palo Alto today to see a couple of fine homes from the 1930’s. Being an old house nut, 320 Kellogg Avenue, listed by Tim Trailer of Coldwell Banker in Palo Alto really captured my attention with its period details, classy kitchen remodel and the big soaking tub in the master suite. Set on nearly half an acre of Old Palo Alto, this fine property will only set you back $9,750,000.
Moving downmarket to 2050 Waverly Avenue, listed by Bonnie Bjorn of Coldwell Banker in Menlo Park is this beautifully restored Dutch Colonial, offered with the reduced price of $4,995,000. It’s less house and less land than Kellogg, but you don’t have the train noise, and I actually like the neighborhood better. Plus the almost $5million in change will get you a nice little place overlooking the fairway at Pebble Beach, or a small winery in Sonoma . . .
The highlight for me today was this newer Palo Alto Hills estate, listed by Grace Wu of Alain Pinel for $4,299,000. Almost two acres of land, sweeping views of the Hills, and a 3 car garage (must have!) make this a winner. No open houses, but I can set up a showing if you are interested.
Finally, a big shout out to David Chung of Alain Pinel for rocking his new Audi R8 on broker’s tour today! I think he is the new winner in the sexy Palo Alto Realtor Car competition. Eat your heart out Ken!
If you would like to see any of the homes I wrote about today, let me know.
Thanks for reading . . .
The Innovator’s Dilemma in Real Estate Redux: Redfin Proves You Can Turn a Profit Even With Lower Commissions
July 19, 2009
In Redfin CEO’s Glenn Kelman’s inimitable “Aw Shucks” writing style, he announced recently that the discount online hybrid brokerage has turned its first monthly profit. While one month certainly a trend does not make, it is an important milestone in the company’s development. If Redfin can make money while a) charging a lot less than its competitors and b) serving a market segment that the traditional industry is wary of … then Redfin’s prospects going forward just got a whole lot brighter.
Exercising my blogger’s prerogative to quote myself, here is what I said some two years ago, applying Harvard professor Clayton Christensen’s thinking on “The Innovator’s Dilemma:”
His theory, put forth in his books The Innovator’s Dilemma and The Innovator’s Solution posits that new entrants into an industry often take advantage of a disruptive technology to enter the marketplace at the lower end, catering to the low-margin customers that the established players aren’t that interested in serving.
…
If the new entrant succeeds, it starts to take market share from the incumbents, who finally wake up — often too late — and discover that the “cheap, undesirable” part of the market is both larger and more lucrative than they previously thought.
…
Even more interesting is that as the new entrant grows, its clients’ needs often change over time — to the point where the new entrant now also provides more of a “traditional” experience. Think back to Charles Schwab: its early customers were drawn in by the prospect of significantly less expensive stock brokerage services. The Charles Schwab of today still provides that, but also provides a higher-touch, higher-cost service, akin to that of the Merrill Lynches.
Exercising another of my blogger’s prerogatives — that of making wild generalizations — many of Redfin’s clients are tech-savvy, data-hungry, 30-ish first-time home buyers for whom Redfin’s data-rich site is like crack cocaine … and for whom the company’s 50% buy-side rebate is like, well, crack cocaine on steroids. These folks are do-it-yourselfers who think — rightly so — that much a traditional Realtor’s tasks (educating clients about neighborhoods, taxes, the transaction process, etc.) can be done on their own, in their pajamas, in the comfort of their home office, on their favorite Macbook.
Think about these same folks five to ten years hence … they’ll be wealthy(ier) tech-savvy, data-hungry customers, perhaps with a kid or two in tow … looking to sell their existing home and buy a newer, larger one. They’ll probably be more pressed for time, perhaps less concerned about getting a rebate … and voila! Redfin will be there to hold their hand again, perhaps operating like a traditional brokerage, charging more.
Prediction: Within 2 years, Redfin will launch a “Redfin Deluxe” service which will look and feel an awful lot like a traditional full-service real estate experience, with no or little rebate. If they can make a profit giving back half the commission, imagine their bottom line when they apply those efficiencies to the full-service market!
Other commentary on this event:
- Techcrunch, predictably, painted the event as causing “shudders” in the real estate industry. Even more predictably, the post attracted the usual scrum of Realtor-hating consumers, with Reba Haas pretty much single-handedly keeping them at bay.
- Nearly-the-same-last-name-as-mine Brian Boero of 1000 Watt Consulting notes that Redfin works by concentrating on three things that many traditional brokers ignore: talent, transparency, and technology.
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.
Buydowns and the Bottom
March 31, 2009
If you were in the market to buy a $2,000,000 home home in the Bay Area, would it make a differnce to you if the monthly investment was less than $5,000 with a 30% down payment? And I’m not just talking about the mortgage payment, I am talking about complete, tax adjusted cash flow including a 4.25% 30-year mortgage fixed for 10 years, property taxes and homeowners insurance. Sound too good to be true? It’s not. And yes it beats market rental rates by thousands.
Interest-rate buydowns are one of the most effective methods for both buyers and seller to obtain what they want, which of course is value. For the sellers, buying down an interest rate can have up to 8X the power over a price reduction, depending on the cost to buy the rate down. For buyers, a lower rate means higher qualification and bragging rights of having the lowest mortgage rate on the planet. In the example above:
- If the buyer was qualified up to $1.8mm at 5.5%, they are now qualified at $2mm at 4.25%
- The seller only needs to invest four points or $56,000 to move the buyer $200,000; thus a $56,000 investment saves the seller about $144,000, which is therefore about FOUR TIMES more effective than reducing price
I use the example above since I have been receiving a tremendous amount of inquiries about what’s happening at the higher end, which are those homes selling at $1.5mm+, and whether creative financing has been more common than not. What we’re seeing is that creative financing, like interest rate buydowns and seller financing, are definitely more common at all price points. But what’s been rather fascinating to watch is that many sellers are becoming less inclined to reduce price, despite the fact that prices are off by between 7% to 17%, depending on which city the property i located. Yet, sellers have been very open to concessions that help them keep their price, despite the net proceeds being reduced. One of the reasons for this, in my opinion, is the fact that buying activity has skyrocketed on the last few weeks, which is obviously encoraging to sellers.
So what’s drivng the buying activity? Well, for starters, it seems like many buyers properly sensed that we’ve hit the proverbial “bottom” of the real estate market, which was recently confirmed ed by the exisitng home sales figures that came out last week. That’s right, not only are sales of both exisiting and new homes up significantly (4.7% and 5.1% respectively), the US median price and average price were both up in February over January. Add this data to the fact that interest rates have set a new low record, plus further validation from one of most respected economic forecasting sources avalable, the UCLA forecast, that 2010 will be a year of recovery, and it becomes clearer and clearer that there couldn’t be a greater opprtunity to buy real estate.
Mortgage 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 . . .
Mortgage 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 . . .
