Is it too hard to get a loan nowadays?

Mortgage lenders are easing up on credit, but not much…. 

“Credit is expanding very, very slightly from absurdly tight levels”  said Laurie Goodman, Ph.D., Director of Housing Policy at the Urban Institute.  (see CAR's magazine - Nov/Dec 2015).

The Institute’s Housing Credit Availability Index (HCAI) measures the probability of a loan ever going 90 days delinquent.  Based on the Index, the fourth-quarter 2015 default rate was 5.6%.  As a comparison, the average default rate for the whole mortgage market in the years 2001 to 2003 was 12.5%, and considered standard. 

Lenders are taking much less risks nowadays, and it shows in the current process that buyers have to go through right now in order to get their loan.  Underwriters have to show that they have been super careful.  As loose criteria lead to abuses - as we have seen too well 6-8 years ago, this is a good thing. But current criteria are too tight for some, who would like to see more "willing and able" buyers have access to home ownership.  Indeed the renting alternative can be brutal and in some cases more costly, actually. 

"Current criteria" also include the lack of bridge loans, which were so prevalent up until the financial crisis.  In my opinion, this is one of the main reasons why the market is currently so tight: most people who would like to move up, or down, do not have the means to qualify for both houses, which is what lenders currently demand.   Before the crisis, banks would only ask the buyers to qualify for their new purchase, not both the new purchase and the currently owned home.  All they wanted to see was some proof that the currently owned home was going to be sold (i.e. a listing agreement with a Realtor).  But this is not the case any more.
The reason why bridge loans are not available is a mystery to me: there is no risk at all for the banks in the Bay Area (and many other appreciating areas, see my last blog on underwater properties), to lend money on a move-up or down purchase. The demand for housing is so strong that the previous home will sell very fast.  More houses sold means more loans made by the banks, doesn't it?
These new tight lending rules certainly contribute to the lack of inventory, which also make it harder for buyers to make a purchase.  I have several clients would have moved by now if real bridge loans were available.

As is often the case, the pendulum swung too far the other way in my opinion.

Thanks for reading,
Francis

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates
A worthy local non-profit to remember: Community Services Agency in Mountain View - our last event there.

Bay Area: some relief for homebuyers?

As demand for housing remains quite strong locally in the San Francisco Bay Area and the Silicon Valley, are homebuyers going to see some relief coming their way soon?

Inventory is key to this equation.  Look at the situation the way it was last year, and what it is today, in the cities around Palo Alto and Los Altos:

Inventory for all houses, condominiums & townhouses, a year ago,
-------------  on March 31, 2015 ----- Inventory today - April 6 2016:
Los Altos:...............27               - - - - - - - - - -        29
Palo Alto: ...............45               - - - - - - - - - -        51
Mountain View:......26              - - - - - - - - - - -       43
Sunnyvale:..............46              - - - - - - - - - - -       82
Menlo Park: ...........21              - - - - - - - - - - - -     30
Cupertino: ..............31              - - - - - - - - - - - -     67
For Mountain View, Sunnyvale and Cupertino, this is almost twice as many homes for sale now than last year.  This could mean some relief for homebuyers.

From the trenches, dealing with the market on a daily basis, I think many agents would agree that the activity shows signs of leveling a bit - but we have to characterize this with a few caveats: buyers still need to be completely pre-approved, and very motivated.  It's just that where we could expect 10 offers, it seems that we are seeing, say, half that amount lately.  Several factors are in play here, influencing activity:

- overpriced listings will stay on the market for a while, (& there are a few more lately),
- the increase in price is not as high as it has been until now,
- the best properties (most desirable) will always be the ones with the most activity,
- more homes are coming now on the market, and this is normal for the time of the year,
- inventory is -still- not a lot higher in PA, Los Altos and Menlo Park,
- and finally, some buyers have been priced out of the market (hence, a bit less competition).

Whether you are a buyer or a seller, I think a real estate professional has never been so important in helping you see more clearly, and separate the hype from the facts.

Stay tuned! as things change pretty fast here in the Silicon Valley!

Thanks for reading,
Francis

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates
A worthy local non-profit to remember: Community Services Agency in Mountain View - our last event there.

"under water" properties at their lowest level in a long time!

Just read on RisMedia:

One million borrowers regained equity in 2015, bringing the total number of mortgaged residential properties with equity at the end of the 4^th quarter of 2015 to approximately 46.3 million, or 91.5 % of all mortgaged properties, according to a new CoreLogic® analysis.  Nationwide, borrower equity increased year-over-year by $682 billion in Q4 2015. 

The total number of mortgaged residential properties with negative equity (“under water”) decreased 19.1 % year over year from what it was at the end of last year.

Interestingly, Miami-Miami Beach-Kendall, Florida, had the highest percentage of mortgaged properties in negative equity (22% of the total).

San Francisco-Redwood City-South San Francisco, CA, had the highest percentage of mortgaged properties in a positive equity position, at 99.3%.    Houston, then Denver followed SF in that category.

To read the full article on RisMedia.

Thanks for reading!

Francis

The 2016 French Fair is coming to Palo Alto:

March 19th - Lucie Stern community Center

1305 Middlefield Rd - Palo Alto.

http://www.frenchfair.org/
See you there, for French food, fashion, dance, live music, art, company!

Try out neighborhood before buying. What a novel idea!

Didn't you ever wish you could try out your neighborhood - before buying your home there? 

What a novel idea!:

Realtor.com’s new partnership with Airbnb, which launched in June 2015, aims to allow just that. 

A buyer thinking about buying in a specific neighborhood can “try out” the area by renting a place for a few days through Airbnb. 

Such recommended accommodation can be found on realtor.com in the same area as the home listing they are viewing.  “Real estate professionals are finding that buyers are more likely to be happier if they are able to try out a neighborhood before choosing to buy” says a Realtor.com spokesperson.

Checking out noise levels, culture, overall vibes gives prospective condo and single-family home owners important information as they make their decision.

Thank you for reading!

Francis

The 2016 French Fair is coming to Palo Alto:

March 19th - Lucie Stern community Center

1305 Middlefield Rd - Palo Alto.

http://www.frenchfair.org/
See you there, for French food, fashion, dance, live music, art, company!

Fewer first-time buyers...

The share of first-time home buyers declined for the 3rd consecutive year and remained at its lowest point in nearly three decades, according to the NAR (National Association of Realtors^®). 
The overall strong pace of home sales in 2015 was driven more by repeat buyers with dual incomes, according to NAR's annual survey.

In the past 5 years, this is the share of new buyers among all the buyers of real estate:

To continue on with this survey, this is how buyers responded overall to the question: Why buy now?

"Homes affordable" was not popular...  ;-)
It is refreshing to see "Right time" come up so much in the results - isn't it the best reason to buy?

Thanks for reading!
Francis

Silicon Valley real estate

Trends: Local prices and graphs.
A worthy local non-profit to remember: Community Services Agency in Mountain View

Report from the trenches - The Silicon Valley & SF Peninsula real estate activity.

Our latest "report from the trenches", from the Coldwell Banker office managers all along the Peninsula:

SF Peninsula – ...  In her decades of experience in this area, our Menlo Park manager has never seen the market so low on inventory – even for this time of year.  Buyers are out in droves yet after last week in the equity markets, they are a bit in a wait and see attitude.  Properties are still moving quickly but there are more buyers than actual ‘bidders’ right now, she says. Anything under $1.4 million is getting a lot of attention and selling quickly. $5-6 million homes are becoming more and more common in Menlo Park. Inventory is seasonally low in Palo Alto, but demand is still there. Amazingly there is still an incredible lack of inventory all over the Peninsula, says our Redwood City manager. Because of this almost all offers are multiple offers. There still are a lot of buyers with sufficient funds to purchase but due to the lack of inventory there is a tremendous amount of frustration. More inventory is hitting the San Mateo area market, our local manager says. Agents have a number of listings inked and ready to come on in the next couple of weeks. The market is “moribund” right now in the country offices, reports our Portola Valley-Woodside manager.  But she says that this area always seems slow to start the new year.

Silicon Valley – New inventory is slow to hit the Cupertino area market. The few new open houses our local agents held had 200-300 visitors in some cases. There are currently 25 homes for sale in Los Gatos, down 40% from the same time last year, reports our Los Gatos manager. The San Jose Almaden market has been more of the same with lower inventory than previous years, although it has increased since December.  Buyers aren’t waiting to write up offers.  Most of the listings are going into contract during the first weekend of open houses.  A 1,330 square foot SFR in Santa Clara (with Cupertino HS) that had a list price of $895,000 received 46 offers and sold for $1,330,000.  With the New Year underway the post-holiday local Willow Glen market is busy although it is still experiencing extremely low listing inventory. The year started with only 23 active listings and dropped to 21 in week two. Open houses are jammed, and multiple offers well over list price are the norm. Agents all have a bounty of buyers they are trying to get into something.

My personal experience has been a difficult market for buyers, even towards the end of the year, when buyers typically are given a break. The transactions I have had in the past two months have been tough, and buyers could not ask for much... 
Such is the market!

Thank you for reading,

Francis

Silicon Valley real estate

Trends: Local prices and graphs.
A worthy local non-profit to remember: Community Services Agency in Mountain View

Median Sales Price - Santa Clara Cnty - did not let up.

Piggy-backing on my September blog looking at the monthly median prices in the County of Santa Clara, I'd like to share what happened next.

At the time, I was speculating that prices may let up a bit, as is usually the case at the end of any given year.  Buyers looking during the last few months of the year could expect a break and have less competition.

My experience from the trenches, reflected in the updated graph below, is that there were a little fewer offerors on homes for sale, but prices certainly did not go down. The competition remained quite strong.  Overall prices stayed at the same level, at the minimum, and I mostly saw an increase in home values, especially in the entry-level category.

Often seen in the past 3 months were:
- Houses offered at a certain price, and if it did not sell for way over, their asking price changed upward,
- offers being shopped around, in some cases what felt like excessively,
- lower cash offers sometimes selected over higher offers needing a loan - (can make sense of course...),
- some of the latter cash contracts being cancelled  right before close of escrow - setting the clock back to zero on the sales process, and triggering plenty of legal questions marks for all.

Be sure to work with an experienced professional if you are thinking of selling, or buying a place in this tense environment.  It is sometimes hard to make sense of it and to navigate a prudent, legally safe line.

Thank you for reading,

Francis

Silicon Valley real estate specialist

Detailed, local trends etc...

Current mortgage rates

A worthy local non-profit to remember: Community Services Agency in Mountain View.

Offshore Buyers Continue to Invest in Bay Area Real Estate

From our Coldwell Banker desk:  

2015 was another very strong year for foreign investment in U.S. real estate, especially here in the Bay Area and particularly from Asian buyers. 

The dollar volume of all foreign investment in the U.S. reached $104 billion for the 12 months ended March 2015, up 13 percent from the same period a year ago, according to the National Association of REALTORS®. More than half of that investment went to California and three other states – Florida, Arizona and Texas.

No one knows for sure exactly how much foreign investment there is in the Bay Area housing market, but anecdotal evidence from our agents and managers in the field tell me it is substantial. And it's probably not surprising, considering the fact that the Bay Area has long been one of the most sought after housing markets for Chinese investors and other offshore buyers.

International investors are attracted by the strength of our local economy, particularly the tech sector in Silicon Valley. They also favor the stability of the U.S. political and financial systems, our strong schools and world-class universities like Stanford and Cal, solid appreciation on homes in the Bay Area, and the relatively affordable prices - yes "affordable" - compared to many other major cities around the world.

If you have any doubt about just how fast Chinese and other Asian investment is growing in the U.S., consider a recent NAR study that found Chinese buyers were the number one international investors in U.S. real estate over the past year with $28.6 billion in sales volume, nearly three times the number two country, Canada. As recently as six years ago, Canadian investment in the U.S. market was more than double China's, which also ranked behind India and the U.K. and was at the same level as Mexico.

In recent years, Coldwell Banker has deployed a very targeted marketing program to reach Asian consumers in a variety of media outlets, both print and digital. We are reaching out to buyers and marketing properties on many of the biggest Asian websites and publications. In addition, our strong international network of offices and agents – the most of any U.S. brokerage – has helped us attract more offshore buyers. Given the interest in the Bay Area housing market from Asian investors and others overseas, I don't see that trend changing anytime soon.

Thank you for reading!

Francis

Silicon Valley real estate specialist

Detailed, local trends etc...

Current mortgage rates

A worthy local non-profit to remember: Community Services Agency in Mountain View.