Ups and Downs

Way, way back on September 25…a whole 20 days ago, we had 24 active single family listings in Foster City. Today we have 33. Why there’s been a rush to put houses on the market is a tad confusing to me. Personally, I think there’s so much fear in the marketplace today that sellers will be much better served waiting until January, but hey! I don’t get to make those decisions.  More inventory right now is clearly going to mean far more negotiating leverage for buyers. 33 single family listings marks the high for 2008 in terms of active listing inventory…and I’ll bet that number goes up until some semblance of confidence is restored. Never the less, some of these houses are pretty darn nice and are worth a look:

602 Somerset listed by Mary Bee of Re/Max Today for $1,330,000. Great house in really nice condition and Sea Colony remains a very coveted neighborhood. Nice upgrades too. Here’s some pics:

SomersetPics

201 Spinnaker listed by Robert Reid of Keller Williams for $1,188,888. Good price for this 5 bedroom house. Great neighborhood too. This is a pretty common and popular floorplan and in this location it’ll be interesting to see how this house does. 3 months ago it would sell in the first week on the market.

SpinnakerPics

612 Crane listed by Rumana Jabeen of Coldwell Banker for $940,000. There’s another house on the market in Foster City with this floorplan priced higher and with far less upgrades. This house is really clean and nice and priced really well. Again, a couple of months ago it would have sold really quickly…interesting to watch now. Here’s some pics:

CranePics

When the roller coaster we’ve been in hits the uphill part, when the fear subsides, there’s going to be alot of pent up demand. The question is, will that come sooner or later.

Comments

  1. Jim,

    One reason I can think of for buyers to list before the end of the year is the new jumbo conforming limits. If you recall a new jumbo conforming limit that could be as high as $729,750 for certain areas was put in place on July 1st, 2007 and expires on December 31, 2008. Lenders were slower to act and only introduced products with the new limits earlier this year.

    http://www.ofheo.gov/newsroom.aspx?ID=418&q1=0&q2=0

    The “American Housing Rescue and Foreclosure Prevention Act” permanently increased conforming limits but capped the amount to $625,500.

    http://money.cnn.com/2008/07/26/news/economy/housing_bill_Senate/index.htm
    http://www.house.gov/apps/list/press/financialsvcs_dem/press050608.shtml

    Getting a mortgage is already more difficult that it was just a couple of years ago, but this change in limit could put additional downward pressure on home prices in early 2009.

    Thoughts?

  2. Jim Minkey says:

    Thanks for the comment Asif! Just a small clarification point…a conforming loan is different than a jumbo loan. Jumbo’s are loans over $729,750. Anyway, I’m really not clear about this cap of $625,500. I made some calls to get some clarification and will report back.

    Most of the lenders I work with are selling FHA backed conforming loan products, which have that $729,750 cap and are supposed to expire at the end of this year. In Foster City 30 of the 33 active single family listings won’t be able to get a conforming loan without putting more than 20% down. That happens, of course, but most will not have the extra cash and will need a jumbo. Jumbo’s right now are much higher(7.25%)and I doubt that these sellers are hoping to attract a buyer in need of a conforming loan. I can see some buyers being more motivated to buy a condo or townhouse in FC to beat that deadline however. Honestly, it’s going bto take some extremely big political cojones to not extend that conforming limit into 2009. I’m sure any member of the California congressional delegation will be in favor of that extension, I can’t imagine anybody getting in the way of any type of economic recovery effort right now. If the credit markets loosen up as a result of these cash infusions and the buy back of dubious mortgage backed securities I think we’ll see a reduction of jumbo interest rates and that should help the pricier FC market.

  3. Jim, as you are aware I operate an investment website oriented towards equities and am most likely not as knowledgeable as you are about real estate. Unless I am mistaken, there are three type of loans out there right now,

    1. A true conforming loan that caps at $417,000

    2. A jumbo conforming loan that caps at $729,750 (in certain areas) until 2008 and then resets to $625,500 in 2009. This type of loan is usually 50 basis points higher than a “true” conforming loan. So 6.75% if true conforming is 6.25%.

    3. A jumbo loan that is above $729,750 (or $625,000 in 2009) that is usually 100 basis points higher than a “true” conforming loan. So 7.25% if true conforming is 6.25%.

    Given that Fannie and Freddie eventually end up buying the jumbo conforming loan, I am not exactly sure why the banks are charging 50 basis points more for those loans and I think once the limits become permanent that difference in rate might either narrow or disappear.

    Maybe a mortgage broker could chip into the conversation and offer further clarification.

    With a limit of $729,750, a first time home buyer putting 20% down could potentially buy a home for $911,875. Since this number barely scratches the low end of single family homes in Foster City, the resetting of the limit will mostly affect condos and townhomes but there could be a “filter up” affect on single family homes.

  4. Jim Minkey says:

    You da man Asif! Seriously, good job! I actually have never even thought of a separation in conforming loans, maybe because it’s so very rare for me to see a loan in the 400’s. Your suggestion of a lender participating is a good one. I’m going to call a few this morning and see if they can throw their 2 cents in. Thanks for the good info!

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