What’s It Mean To San Mateo?

Whether you call it a bailout or a rescue bill, what’s it mean to home buyers and sellers in San Mateo County? Let’s first look back.

Yesterday

Banks established the value of a home based on the owner’s estimate.  There was no appraisal, drive-by or otherwise.  Values were increasing so rapidly that property owners could obtain an equity line via online application or phone call.

The Cause

Interest rates began to rise at the same time thousands of hybrid home mortages were ready to adjust. Homeowners could no longer afford the payments. Property values started to fall.

Lenders got nervous. They inacted more stringent requirements to get a loan: higher credit score, higher downpayment, more documentation. The days of stated income loans – where the borrower simply stated their income without proof – were over. Those on the fringe of being able to afford a home were out of the market, not because of increasing home values but due to the inability of qualifying for a loan.

Homeowners were shocked to learn that their home equity line was arbitrarily reduced.  They started with the self-employed – the accounts with the most risk – and made their way through the rest. If you had a balance on your account, the credit line may have been reduced to that balance; if you didn’t maintain a balance, it was completely withdrawn.

What Happened

Banks loaned money to Joe and Jane Homeowners. They then bundled all of those home loans and sold them to Wall Street. Joe and Jane could no longer make their payments. Banks had no more money to loan. Wall Street started to fall.

The Result

Because so many first-time buyers were unable to qualify, that segement of the market collapsed. That’s why entry-level cities like Pacifica and Daly City, and areas like Shoreview, San Mateo and neighborhoods of Redwood City have seen a high level of short sales and foreclosures.

The Rescue

The taxpayers are now owners of those loans, taking the burden from the banks and Wall Street. The basic principle is that money will again be available to loan, enabling more people to refinance, purchase homes and creating an arena for consumer confidence to return.

Bottom Line

Homeowners will refinance. Buyers will return, so will investors. Inventory will decline. The market will normalize. We’ve started seeing that recently. Short sales and bank owned properties are selling more quickly, some with multiple offers. Inventory is dropping. Daly City is an obvious example.

Are we at the bottom?  The only way we’ll know is when we look back at the data.  When you have the price, you don’t have the data.  When you have the data, you don’t have the price.  

The daily count provides a snapshot:

                     Available for sale             In contract
2008                   191                               102
2007                   261                                35
2006                   147                                55
2005                   115                                62
2004                    66                                 73

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Got a San Mateo County real estate question?   Call me at 650.888.9268 or send me an email Vicki [at] CallVicki.com.