Home sale decline presents opportunity for buyers
With rare exceptions, like Palo Alto and parts of San Francisco, the San Francisco Bay Area home sale market is soft both in terms of prices and especially in terms of the volume of sales. Home sale volume in the Bay Area was off in the 30 to 40% range in 2007, depending on location. This could present an opportunity for buyers who were priced out of the hot seller’s market that peaked in 2006. However, it’s difficult to generalize about an area as diverse as the San Francisco Bay Area. Residential real estate is a local phenomenon. For example, in Contra Costa County, the median sale price of homes sold in February 2008 was down over 20% from February 2007, according to DataQuick Information Systems. Even so, well-priced homes in pricey Orinda sold quickly. Contra Costa County is vast and includes cities like Concord that has a huge inventory of unsold homes and a higher foreclosure rate than some of the upper end communities in the county. The same can be said for the large county of Alameda, where the median price of homes sold in February was down 13% from a year ago. Yet, a desirable house in the Lincoln Heights area of Oakland that went on the market in February set a high price for the neighborhood, selling with four offers and for significantly more than the asking price.

Price decline can vary from one property to another
The residential home sale market is not only local, it’s house specific. The best properties, offered at the best prices are selling relatively quickly in today’s market. Some, as in the above example, are selling with more than one offer. Home buyers are far more selective than they were several years ago. When home prices appreciate at a fast pace, buyers tend to be less picky. They’re confident that they’ll make good money on the investment, so they’re willing to compromise. Today’s buyers know that they won’t see higher home prices anytime soon. In fact, the home they buy today could lose value before the market stabilizes. This buyer sentiment puts the great houses that have everything buyers are looking for at an advantage. These are the houses that buyers gravitate to, and that sometimes sell with more than one offer. Houses that don’t measure up to most buyers’ wish lists, or that have incurable defects, are at a disadvantage in this market. An incurable defect is something that can’t be remedied, such as a location on a busy street or near a freeway, too many stairs from the street to the front door, an awkward floor plan that can’t be easily fixed or no yard and no possibility to create one. These houses sit on the market unsold unless they are priced to accommodate for defects.

Higher conforming loan limit to help high priced areas
Changes in the finance markets have made it more difficult for buyers to find jumbo financing at reasonable interest rates. Jumbo financing refers to mortgages in amounts over the conforming loan limit for FHA, Fannie Mae and Freddie Mac secured loans. HUD recently announced that the current limit of $417,000 is being increased to $729,750 for high priced areas like the San Francisco Bay Area. The higher conforming loan limit should help ease financing for Bay Area home buyers and homeowners who want to refinance. Bay Area counties that qualify for the $729,750 loan limit are Alameda, Contra Costa, Marin, San Francisco and San Mateo. The new limit will be in effect through 2008. There is a possibility that the increase will be made permanent pending legislation.

A popular financing vehicle for borrowers seeking loan amounts over the conforming limit is to combine a conforming first mortgage, which carries a lower interest rate than a jumbo loan, with a second mortgage. This strategy gives the borrower a blended interest rate that is lower than the rate would be on one mortgage for the entire amount. Be aware that many lenders will only offer a second mortgage if they also provide the borrower with the first mortgage.

For help with all your real estate needs, call Dian Hymer, CRS, Associate Broker, #1 Agent in the Oakland/Piedmont Coldwell Banker Office. 510-339-4777 (office); 510-816-7076 (mobile); E-mail: dian@dianhymer.com.