From the Desk of Pete Sabine & Leslie Whitney
- Real Estate Market insights and expertise
A Housing Correction May Be Coming,
Not a Crash…
Almost everyone is wondering if a housing crash is on the horizon. However, most experts think the real estate market is headed for a softer landing. It's true that the market has slowed over the last few weeks. In fact, 12% of homes for sale had a price drop in the four weeks ending April 3 based on recent data.
That's up from 9% as compared to 2021. Rising mortgage rates are also putting some would-be homebuyers' plans on the backburner. But as the real estate market cools, its foundation of record-high home equity and housing prices is probably going to keep the market relatively healthy.
After a survey of a wide number of Bay Area Realtors, it is clear that the Bay Area real estate market has begun its shift cooler, not surprising with interest rates up a shocking 69% in 2022, the volatility of stock markets, and the increase in media coverage of negative economic/market issues.
Though not every Bay Area region has seen the same trends, and the trends are preliminary and not universal, these reports were repeated over and over: less traffic at many open houses, fewer offers on many new listings, some buyers dropping out or becoming much more selective, and some sellers moving their listing dates earlier.
The San Francisco Bay Area Real Estate Trend Report reveals the incredibly heated market sales statistics through April, 2022. The preliminary shifts in market psychology and dynamics that are generally not yet reflected in the closed-sales statistics.
Pete Sabine & Leslie Whitney
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Help for first-time homebuyers
The State of California is offering forgivable loans of up to 10% of a dwelling’s purchase price; aim is to give working families a hand in making down payments.
Seeking to chip away at an ambitious goal of boosting home ownership in California, the state has launched a new program of forgivable loans for first-time home buyers. The program, Forgivable Equity Builder Loan, allows qualified, first-time buyers to borrow up to 10% of a home’s purchase price, and have the debt forgiven if the buyer lives in the home for five years.
The loans are available to middle-income families making less than 80% of their county’s annual median income, below $120,000 in all Bay Area counties. California lawmakers earmarked $100 million in the state budget for the first-time homeowner loans. The goal is to help working families with enough income to pay a mortgage but not enough savings to ante up for a down payment.
Eric Johnson, spokesman for the California Housing Finance Agency, said the state wants to encourage families to build generational wealth through long-term home ownership. The gap in generational wealth has been particularly wide in Black, Hispanic and some immigrant communities. “The down payment and closing costs are a real hump,” he said.
The new effort comes as Bay Area housing costs hit record highs, and rising interest rates have pushed monthly payments up hundreds of dollars. The median price of a Bay Area home in March was $1.4 million, according to the California Association of Realtors. Raising a standard down payment of 20% — more than $200,000 for many starter homes — is beyond the reach of many would-be buyers.
Affordability for first-time buyers has been particularly challenging, according to CAR surveys. About two in five Bay Area residents could afford the median-priced single-family home at the end of 2021. The minimum qualifying income was $150,000 for a typical home priced at just over $1 million. Zillow senior economist Jeff Tucker said a program boosting a buyer’s payment by 10% “makes a meaningful difference.”
The forgivable loan allows a home owner to develop equity much faster, and could help a first-time buyer refinance to a lower interest rate after the five year period is up, he said. But, Tucker noted, first-time Bay Area buyers face a challenging market.
After two years of record low interest rates, mortgage costs have shot above 5%. Between rising rates and accelerating home prices, Bay Area buyers in March paid 37% more in monthly costs than a year ago. “That is not affordable to most people,” he said.
California’s forgivable loan program has already received about a dozen applications, Johnson said. The agency does not limit the size of the loan. It requires buyers to attend a first-time home owner class, and use a recommended loan officer familiar with state programs.
The first step is to speak with a preferred loan officer listed on CalHFA’s website. Eligibility for the loans in the Bay Area ranges from an annual median income of $119,000 in Santa Clara County to $107,000 in San Francisco, San Mateo, Alameda and Contra Costa counties, according to Fannie Mae.
The California Department of Housing and Community Development also announced $66 million in new grants to boost home ownership for low-income residents. The program will provide funding for 33 low- and moderate-income housing projects across the state. In the Bay Area, $5 million will go to the Santa Clara County Housing Authority, $5 million to Santa Clara County, $2.5 million to the Housing Authority of the County of Marin, and Habitat for Humanity will receive several grants for projects across the region.
The grants are aimed at helping low-income residents become homeowners, or renovate and remain in their existing homes.
BY LOUIS HANSEN LHANSEN@ BAYAREANEWSGROUP.COM