Mortgage Mania 25 – What’s Next?

November 3, 2009

Last week I attended a lecture given by economist Chris Thornberg of Beacon Economics on the economic forecast for 2010. The event was sponsored by accounting firm Petrinovich ,Pugh and Co., and Bridge Bank. You can view Dr. Thornberg’s recent presentations on the Beacon Economics website, and his talk from last week HERE.

The digest version is that we will continue to see positive economic news and growth through 2010, but much of that will be driven by the various government funded stimulus packages, which will be ending next year. Since these programs can’t go on forever, Dr. Thornberg predicts that we will see stagnation in 2011 due to the double whammy of unemployment and defaults in the commercial real estate market. Yes, the hits just keep on coming!

We continue to see the following strata in the single-family home market across our area. Here is how the Palo Alto market is currently behaving:

Under $800,000 we continue to see some multiple offers and some homes selling briskly for over the list price as buyers are enticed into the market by low down payment (3.5% down), FHA backed loans up to $729,750. New home builders are adding pricing and rate incentives, with some offering 3% rates, if you use their lender, their contract, their terms.

Palo Alto $1M - $1.25M, Oct. 2009 vs. Oct. 2008

$800,000 – $1,500,000 homes are selling more slowly as buyers need 20% – 25% down payments and substantial cash flow to qualify for mortgages in this price range versus the FHA backed loans mentioned above.

Palo Alto $1.25M - $2M, Oct. 2009 vs. Oct. 2008

$1,500,000 – $2,000,000 has had an uptick in sales activity in the last month relative to Summer, as buyers in this price range have come back out and absorbed much of the available inventory.

$2M - $3M Oct. 2009 vs. Oct. 2008

Homes in Palo Alto over $3M, 10/09 vs 10/08

Over $3M, Oct. 2009 vs. Oct. 2008

Over $2,000,000 we are seeing fewer sales and some homes selling at large discounts from listed prices as those owners are overextended and are under financial pressure to sell. Recently, there was a $3.3M short sale in Los Altos, and a $1.8M foreclosure sale in Palo Alto.

Armed with this information, if you are considering selling, early 2010 is the time to take advantage of the current consumer optimism and positive economic news and sell in a relative high (Relative compared a year ago that is, not compared to 2006). As mentioned above, inventory is low relative to demand, especially for updated, attractive homes, and those priced under $2 million are selling. The market above $2 million is moving, but more slowly.

Written by Chris Iverson, Realtor · Filed Under * Top Category used for navbar, * Type of Content, Articles, Buyer, Buyer and seller tips, Buyers, Consumer, Financing Process, For sellers, Industry, Loan Application, Market updates, Mortgages, Palo Alto, Prequalification