Silicon Valley Real Estate Market Trend Report:

Santa Clara County (SCC): Home Prices Slip

After setting new highs in March, the median and average prices for single-family, re-sale homes have been showing weakness.

The median price for homes peaked at $1,450,000 in March. In June, the median price was down to $1,402,000. Nevertheless, the median price was up 18.8% year-over-year.

The average price for homes peaked at $1,745,230 in March and was at $1,712,500 in June. It was up 18.6% year-over-year.

The median price for homes has been higher than the year before by double-digits twelve months in a row. The average price was up by double-digits for the eleventh consecutive month.

This is also the 76th month in a row the median price has been higher than the year before.

Multiple offers continue to be the norm. The sales price to list price ratio, or what buyers are paying over what sellers are asking remains at triple digits: 107.8%. Of note, that is the first time since February the ratio has been below 110%.

The ratio has been over 100% for homes since March 2012 and for condos since April 2012.

Homes and condos are flying off the shelf. It is taking only seventeen days to sell a home, on average. Condos are taking thirteen days.

All this is due to an incredible lack of inventory. Since January 2000, Santa Clara County has averaged ninety-four days of inventory. Last month it was thirty-two.

Condos have averaged eighty-seven days since 2000. Last month it was twenty-three.

As of July 5th, there were 1,066 homes and 302 condos for sale in Santa Clara County.

That’s the first time since May 2017 home inventory has been over 1,000 units.

June 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

HOME PRICES CONTINUE THEIR UPWARD TREND ACCORDING TO S&P CORELOGIC CASE-SHILLER INDEX

NEW YORK, JUNE 26, 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 April 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 www.homeprice.spdji.com. Additional content on the housing market can also be found on S&P Dow https://goo.gl/PVyfFk

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San Mateo County (SMC): Home Inventory Rises

The inventory of single-family, re-sale homes was up year-over-year for the first time since October 2016. Nevertheless, at 440 homes for sale, we’re still only at one-third the average amount.

The median price for homes was up 15.7% over last June to $1,651,500. That is a $118,500 drop from the record high set in April.

This is also the 27th month in a row the median price has been higher than the year before.

The median price for condos was up 21.1%. The average price for condos was up 20.4% over last June.

Multiple offers continue to be the norm. The sales price to list price ratio, or what buyers are paying over what sellers are asking remains in the triple digits: 111.3% for homes and 110.1% for condos.

The ratio has been over 100% for homes since April 2012 and for condos since June 2012.

Homes and condos are flying off the shelf. It is taking only eighteen days to sell a home, on average. Condos are taking fifteen days.

All this is due to an incredible lack of inventory. Since January 2003, San Mateo County has averaged eighty-three days of inventory. Last month it was thirty-two.

Condos have averaged ninety-two days since 2000. Last month it was twenty.

As of July 5th, there were 440 homes and 84 condos for sale in San Mateo County.

june 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.