Silicon Valley Real Estate Market Trend Report:

Santa Clara County (SCC): Slowly We Turn, Step by Step, Inch by Inch

The Silicon Valley real estate market slowed a bit this summer. Multiple offers, while still the norm, have slowed from 10-15 offers per house to “only” 2-3.

Also, from the trenches, we are hearing some sellers are more willing to negotiate. They are accepting contingencies, paying for repairs, or negotiating price.

Of course, this all depends upon the house and the neighborhood. The most highly regarded properties – schools, location, price, are still getting a high number of offers.

Statistics confirm the anecdotes: sales are down, inventory is up, the sales price to list price ratio is falling, and prices are weakening.

The next question becomes is this the start of a trend or just an aberration. That is something only time will tell.

In the meantime, mortgage rates peaked in May and have been declining since.

The median price for homes peaked at $1,450,000 in March and is now at its lowest level since January. It was still up 14.9% year-over-year.

The average price for homes also peaked in March and is at its lowest level since January. It was up 15.3% over last July.

The sales price to list price ratio, or what buyers are paying over what sellers are asking has been declining and is now at it’s lowest level since July 2017. Nevertheless, it remains at triple digits: 105.6%.

Days of Inventory rose nine days to forty-one days in July. That’s the highest the indicator has been since January 2017. Since January 2000, Santa Clara County has averaged ninety-four days of inventory.

It is taking nineteen days to sell a home. Home sales were down, year-over-year, for the third month in a row. Sales fell 16.6% from last July.

The number of homes for sale is at its highest level since October 2016.

As of August 5th, there were 1,151 homes and 413 condos for sale in Santa Clara County.

July 2018 Sales Statistics (SCC)

* Total inventory is active listings plus pending listings. Active listings do not include pending.

More information is available in our on-line report at http://avi.rereport.com/market_reports

Mortgage investors want to make it easier for gig economy workers to get loans (SCC & SMC)

The two biggest sources of home-mortgage money in the country — investors Fannie Mae and Freddie Mac — are quietly working on ways to make qualifying for a home purchase easier for participants in the booming “gig” economy.

The gig economy refers to hundreds of income-earning activities that allow workers to set their own hours, work for as long or as little as they choose, and function as independent contractors or freelancers as opposed to salaried employees. Prominent examples include people who work as drivers for Uber or Lyft, assemble Ikea furniture through TaskRabbit and offer rooms in their homes on Airbnb.

Estimates vary, but anywhere from just under 20 percent to 30 percent or more of the U.S. workforce participates in some way in the gig economy. Last year, Intuit, which owns TurboTax, estimated that 34 percent of the workforce earned money in gig pursuits and projected that this could rise to 43 percent by 2020.

But when buying a home, the challenge for these workers is to make their gig-sourced earnings count as income for mortgage-qualification purposes. Lenders typically look for stable and continuing income streams: two years of documented income plus reasonable prospects that those earnings will continue for another several years. Lenders also routinely obtain tax-return transcripts from the Internal Revenue Service to confirm an applicant’s self-reported income.

Gig income often doesn’t fit neatly into these boxes. It can be sporadic and variable, depending on how much time an individual is able to devote to the work. Gig earnings can be substantial — thousands of dollars a month — but if that money can’t qualify as “income” under existing mortgage-industry guidelines, it may not help in buying a home with a standard mortgage.

“We’re seeing gig income becoming more and more prevalent, especially among the younger demographic — first-time buyers who have embraced things like Uber and Airbnb as a means to make money,” John Meussner, executive loan officer for Mason-McDuffie Mortgage in San Ramon, Calif., told me.

Yet those earnings may not qualify for conventional mortgages.

Enter Fannie Mae and Freddie Mac.

Fannie recently surveyed 3,000 lending executives and found that gig income on applications is increasingly common, but 95 percent said it’s difficult under current guidelines to use these earnings to approve borrowers’ applications. Two of every 3 lenders said better treatment of this income would either “significantly” or “somewhat” improve “access to credit” for many buyers.

Fannie and Freddie are actively pursuing projects that would do just that. The tricky part for both companies: Whatever solutions they develop must still produce high-quality loans with low risks of default at the end of the process, and ideally must be automatable — that is, borrower information could be entered into Fannie’s and Freddie’s electronic underwriting systems at the application stage.

Freddie’s efforts come under its “borrower of the future” initiative. Terri Merlino, vice president and chief credit officer for single-family business, told me the company is studying automated solutions “outside the box” to validate income from different sources for self-employed and gig-economy earners. Neither Freddie nor Fannie was able to discuss details on what they’re considering, but Freddie confirmed its partnership with high-tech software company LoanBeam, which provides automated verifications of multiple income streams of self-employed and other borrowers.

Meussner hopes that Fannie and Freddie take a more realistic perspective on gig earnings.

“If someone is pulling income from Uber for only six months” — which won’t qualify under the two-years standard — “they may have been doing similar things for years beforehand” for a different company. “That should be [the] primary focus rather than the exact employer and position that generated the income.” After all, Meussner said, “if someone can make similar income over the course of years doing various things in various places [in the gig economy], it could be argued they’re more dependable than someone with a long history with a salaried position in a field that is being disrupted by tech, in which case the loss of a job would be devastating financially.”

You can bet Fannie and Freddie are listening to recommendations like this.

Bottom line: If you make money in the gig economy, be aware that your earnings may not be “income” for conventional mortgage purposes. But sometime soon, if pilot programs and research now underway at Freddie Mac and Fannie Mae are successful, they just might.

Call or email me if you have any questions.

For further details and a city-by-city breakdown statistics, go to http://avi.rereport.com/market_reports.

Real estate related Articles

California homeowners interested in building accessory dwelling units on their property just caught a break, potentially shaving off thousands of dollars in fees and permits.

In a move proponents say will help ease the Bay Area’s housing crisis, Gov. Jerry Brown on Tuesday signed Senate Bill 1069, making the so-called “granny units” easier and less expensive to build throughout the state.

For more read California eases restrictions on ‘granny units’

and http://www.hcd.ca.gov/policy-research/AccessoryDwellingUnits.shtml

Helpful resource for home owners

Many new home owners or owners who consider remodeling or rebuilding their homes should take advantage of their county Tax Assessor web site. These web site and their respective city building departments web site typically have vest information regarding the process for applying for permits, the impact on their taxes and many other resources that home owners should be aware are available for them.

For the San Mateo County Tax Assessor office visit http://www.smcare.org/default.asp

For Santa Clara County Tax Assessor visit https://www.sccassessor.org/index.php

The Silicon Valley 150 Index Corner

The Silicon Valley’s Real estate market is a derivative of the local economy–it prospers and withers depending on how well the local innovation-based sector performs. The San Jose Mercury News tracks the performances of the largest 150 publicly traded companies headquartered in Silicon Valley through an index called the SV150, which may be found at www.mercurynews.com. Stocks are valued based on several criteria, but one of the more important criteria is a company’s future earnings. Therefore, I see the SV150 as a leading indicator for Silicon Valley’s real estate market.

Investors Corne

 RISE IN HOME PRICES REMAINS STEADY AT 6.4% ACCORDING TO S&P CORELOGIC CASE-SHILLER INDEX

NEW YORK, JULY 31, 2018– S&P Dow Jones Indices today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for May 2018 shows that home prices continued their rise across the country over the last 12 months. More than 27 years of history for these data series is available, and can be accessed in full by going to https://goo.gl/1Q9Wjk

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San Mateo County (SMC): Slowly We Turn, Step by Step, Inch by Inch

The Silicon Valley real estate market slowed a bit this summer. Multiple offers, while still the norm, have slowed from 10-15 offers per house to “only” 2-3.

Also, from the trenches, we are hearing some sellers are more willing to negotiate. They are accepting contingencies, paying for repairs, or negotiating price.

Of course, this all depends upon the house and the neighborhood. The most highly regarded properties – schools, location, price, are still getting a high number of offers.

Statistics confirm the anecdotes: sales are down, inventory is up, the sales price to list price ratio is falling, and prices are weakening.

The next question becomes is this the start of a trend or just an aberration. That is something only time will tell.

In the meantime, mortgage rates peaked in May and have been declining since.

The median price for homes peaked at $1,770,000 in April and is now at its lowest level since May. It was still up 8.1% year-over-year.

The average price for homes peaked in May and is at its lowest level since January. It was up 6.0% over last July.

The sales price to list price ratio, or what buyers are paying over what sellers are asking has been declining and is now at it’s lowest level since November 2017. Nevertheless, it remains at triple digits: 109.1%.

Days of Inventory rose one day to thirty-three days in July. Since January 2000, San Mateo County has averaged eighty-one days of inventory.

It is taking twenty-two days to sell a home. Home sales were up, year-over-year, 10.0%.

As of August 5th, there were 422 homes and 94 condos for sale in San Mateo County.

July 2018 Sales Statistics (SMC)

Call or email me if you have any questions.

For further details and a city-by-city breakdown statistics, go to http://avi.rereport.com/market_reports.