| Mortgage Madness - A View From The Front Lines | August 15th, 2007 |
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So how will this affect the San Francisco real estate market? I hate answering that question because predictionists are wrong at least 50% of the time. At this point all I really want to deliver is news about what’s happening in my little real estate world. For instance, a couple of my Sellers are holding off on listing their homes until we can understand how this development affects the market. If other Sellers are thinking the same way, there could be less than optimum inventory coming on after Labor Day. This would be a drag for the qualified buyers out looking because there is so little available in this slower summer market. On the buying side, I’m blessed to be working with buyers right now who all have at least 20% down and stellar credit scores. However, when reviewing my sales over the past year, I note that 20% of my buyers would have trouble purchasing today. These clients were all below the $1M threshold and looking at new or newer condo buildings in SOMA or South Beach. I imagine that other agents who sell entry level single family homes are also experiencing some fall-out. ******************************************************** For the buyers I’m working with, I’d hoped this development could help them drive good deals on the things they wanted to buy. To gauge what was happening, I paid especially close attention last week to two new listings that I had two different sets of buyers for. For various reasons my buyers chose not to move forward with offers on these properties, but since other similar homes will be coming available, it was important to see how the market was going to respond. One was a West Portal home with two-plus bedrooms, listed for $999,000. The other was a 3BR/2BA sleek contemporary Corona Height flat listed for $995,000. This second listing had come back on the market due to a buyer that was unable to qualify for financing. Both properties had offer dates set for the middle of last week. The West Portal property received 6 offers and the Corona Heights property received 3 offers. The Corona Heights home went for at least the same price it was in escrow for the first time– from what I understand both properties are in contract for something roughly between $1,050,000 and $1,100,000. ******************************************************** When reviewing offers, the listing agents told me they took extra care to scrutinize the Buyer’s pre-approval letters. It sounded like some of the offers seemed weaker than others because of those letters. To strengthen my Buyers’ offers in the future, I’m returning to my practice of recommending they get pre-approved by a bank as well as a mortgage broker. I don’t want the offer they write to be discounted because our pre-approval letter looks iffy or is from a mortgage broker the agent is unfamiliar with. In the interests of all parties, I’m also going to receommend financing contingencies unless they are all-cash deals. ******************************************************* I am hearing anecdotes about cancelled escrows. The agent with a desk next to me at Paragon just had a deal on a four-unit building fall apart. I’m also seeing listings that would have sold quickly sit longer than expected. A good-looking five-room Victorian flat on Clayton Street with a yard and parking has just been reduced from $1,080,000 to $995,000. And a sexy 1500+ square foot 2BR/2BA home on Acadia in the Sunnyside with vaulted ceilings and great views is sitting on the market for $1,080,000. This seemed like a great price two weeks ago. Now I’m not so sure. . . ******************************************************* Paragon’s next sales meeting is this week and news of how new lending rules are affecting the market is at the top of our agenda. I’ve said before that these meetings offer access to a private brain trust of the best and brightest in the industry. Since the lending climate is a fresh development, anecdotal information from the front lines will be the best data I can give you. Look forward to more updates! ****************************************************** In the meantime, please don’t hesitate to call if you want more information on how this is all shaking out. We are getting constant “email blast” updates from the mortgage brokers and lenders which offer still more personal perspectives. I’m more than happy to pass them along to you if you want more details from those ‘in the trenches.’ And I continue to love your so-called ‘stupid real estate questions’—which are more helpful than you could ever know since they keep me wired into your personal experiences as buyers, sellers and owners. I look forward to touching base next week! In the meantime, please check my website, which has been updated with my latest sales! |
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You probably already know about the mortgage snarls that began hitting our industry about two weeks ago. If you want further education (or have been on vacation in a remote, tropical place), there are links to two good articles on the topic at the end of this email. The upshot is that lenders have become much more cautious about who they will lend to. This means that buyers who might have been able to comfortably buy last year using a no-doc or limited doc application are having to pay higher rates. Buyers with less than 20% down are also affected, as are those with less than stellar credit scores.