Yesterday, we showed you the first 4 of our 8 critical factors affecting the San Mateo real estate market in 2010. Today, we’re going to give you the rest.
The Final 4
- Climbing Interest Rates
- Stricter FHA and Fannie Mae Underwriting Rules
- Rising Foreclosure Levels
- Loan Modifications Fail
Climbing Interest Rates
The cycle aberration of 5% money ends and by the 2nd quarter of 2010. San Mateo mortgage interest rates will begin to rise and the days of cheap money will be a historical footnote. Buyers who hold fast to the notion that rates will drop again will lose that bet. For buyers, this means mortgage money will be more expensive and qualifying for a new loan will be more difficult as rates climb ever higher. Sellers who think that waiting until spring 2010 to sell will discover a smaller pool of financially qualified buyers. For sellers, this means longer marketing times and fewer qualified buyers.
For a more detailed look at where San Mateo mortgage interest rates are headed in 2010, check out Chris Williamson’s post San Mateo Mortgage Interest Rates Predicted to Rise in 2010.
Stricter FHA and Fannie Mae Underwriting Rules
The financial problems for FHA, Fannie Mae and Freddie Mac will become acute as the impact of insufficient cash reserves and debt-to-equity ratio weighs heavily. As mortgage defaults and foreclosure levels increase, losses will mount as FHA, Fannie Mae and Freddie Mac impose more stringent underwriting guidelines and tighter appraisal standards. Banks will become more adamant about loaning money only to the most credit worthy borrowers. Condominiums will be particularly vulnerable to value erosion as all condominiums must now be on the FHA or Fannie Mae approved list to be eligible for bank financing.
Rising Foreclosure Levels
A new wave – the 2nd of 3 – of mortgage defaults will bombard the market as a glut of ARM loans recast or reset beginning about the 2nd quarter of 2010. Many of these home owners will find their monthly payment unaffordable and fall behind with no hope of refinancing as interest rates rise. Foreclosures will spread into the mid-tier price ranges. Interestingly enough, while distressed homes and foreclosures represent a significant portion of the housing inventory in many other parts of California. In the past 6 months, only 27% – 654 of the 2,408 homes sold – are either short sales or bank owned properties. By far, the bulk of the distressed homes sold (541) were sold for less than $600,000 and they were generally concentrated in three lower income Mid-Peninsula areas.
Loan Modifications Fail
Currently about half of the loan modifications made in the past 12 months are delinquent, and it’s predicted that 80% will fail. The U.S. Treasury reports that even thought loan modifications reduced mortgage payments on average by 40%, many of these loans are in deep trouble. Clearly, more loan modifications will be anticipated as the sub-prime meltdown continues through the 2nd and 3rd wave of ARM recast and resets. What does this mean for home owners in trouble? Don’t wait; Talk to an attorney, real estate professional and a reputable tax advisor now. Waiting will only exacerbate your problem.
Never Forget…All Real Estate is Local – Really Local!
Each micro-market within San Mateo County will perform differently as seven critical factors affect the performance of each. Ignore the national data and the mainstream media’s reportage of regional activity. All real estate is local — I mean really local. Applying national statistics to your local housing market is a little like asking your Dentist to do brain surgery because he’s in the area? Home buyers and sellers can best understand what’s going on in their local area by using the most recent local market data because it’s the only market that matters – to them.
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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.
Tags: Belmont CA, Redwood City CA, san carlos ca, san mateo ca
Raymond Stoklosa, Broker/Co-Owner
Chela Stoklosa, Realtor/Co-Owner
