(Of course, if you've got the cash and don't need a mortgage, immediately pass Go, collect the deed to your new home as quickly as possible and relax as the San Francisco real estate market heats up!)
According to a recent Wall St. Journal article: Lenders Loosen Up…with Luxury Buyers
"Home sales using a jumbo mortgage had year-over-year growth of 7.9% through September, compared with 2.7% for non jumbo sales, according to an analysis for The Wall Street Journal by mortgage-technology company FNC."
In San Francisco, a jumbo home loan would be a loan greater than $625,500. Given the price of local real estate, these larger, "non-conforming" home loans are popular with San Francisco home buyers.
Another interesting fact is that the number of luxury home sales have increased substantially more this year vs last year than the rest of the market: 28% vs 8.5%.
"Homes sold in major metro areas with a loan of $1 million or more were up almost 28% through September compared with the same period last year, the highest total since 2008, according to real-estate information company DataQuick. Similar sales with loans of less than $1 million rose 8.5%."
As a local San Francisco real estate agent working with luxury home buyers, I have personally witnessed clients have easier access to jumbo home loans this year as compared to the past couple of years since the credit freeze. And, the rates are seriously AMAZING. For example, we recently helped clients buy a luxury home in Pacific Heights. The home buyers got a $1,300,000 loan at 2.375% fixed for 7 years. Are you kidding me? That is some seriously cheap money. If you could, you'd be crazy not to take advantage of this ultra-low interest rate environment. As real estate economist Ken Rosen says, it cannot last forever.
Another interesting point in the article was about how the luxury real estate market fared better than entry-level housing during the Great Recession.
"When the market tanked, those on the upper price tier were better able to put their house hunting on hold, says Stan Humphries, chief economist for Zillow. Home-value drops were less steep on the high-end as a result: The top third of homes have fallen 21.8%, while the bottom third dropped 32.7%, according to Zillow. Now "they are trading homes with one another again," Mr. Humphries said."
In San Francisco, the difference is quite striking. To demonstrate, I compared Median Single Family Home Sales in San Francisco over the past 3 years.
Single family homes valued at over $1,000,000 rose 11% Q3 2009 vs. Q3 2012, while homes worth less than a million dropped 3%.
Not that a 3% decline is all that bad. Quite the contrary! These figures demonstrate the stability of the San Francisco real estate market. Don't believe me? Ask your friends in Phoenix about their home values!
Bottom line: After years of really tight credit, it is now easier to obtain a mortgage so you can go out and buy some real estate in San Francisco. Note: I did not say "easy" but rather "easier" as it can still be a bit of a pain to deal with the banks.
But the end result, a crazy cheap home loan, is worth the effort. And prospective Home Sellers, we have record low inventory (listings for sale in San Francisco) so if you've been waiting for a better market, it is here, NOW.
