Silicon Valley Housing Market Squeezing Buyers… and Sellers

Statistically high median prices in Silicon Valley’s housing market continue to belie soft market conditions, including falling home prices, swollen inventory and tight mortgage money in some areas.

According to the San Jose Mercury News, real estate agents say an “inverse” market has emerged, forcing sellers to cut prices for buyers who are having a tough time finding California home loan financing.

The median price of single-family homes in closed sales in June, $867,500, was only slightly off the record-high median $868,406 set back in April, according to the Bay Area Real Estate Market Newsletter.

The current median is nearly $50,000 more than it was a year ago, but that doesn’t mean the greater San Jose housing market is booming.

Far from it.

A higher median price has been boosted by home sales this year concentrated in the more expensive housing sub-markets where California mortgage loan money remains more readily available.

Conversely, buyers looking for affordable homes in less expensive areas are finding the home mortgage well has just about run dry.

Buyers opting for lower-cost homes are typically cash-poor first-timers with less money down, young or tainted credit, a lower credit score and other conditions that a year ago wouldn’t have posed a problem.

For years, special adjustable-rate subprime and non-traditional mortgages flowed like water, pouring on high-leverage, low- and zero-down terms that generated affordable monthly payments.

However, one mortgage company after another has since closed the tap on the home loans now deemed as too risky. Those that do trickle out today come with tight qualifying restrictions younger buyers can’t overcome.

The restrictions are part of the fallout from foreclosures, largely on those same easy-to-get home loans that turned on homeowners with ever higher adjusting interest rates breaking young buyers’ budgets.

In June, foreclosures were up 87 percent nationwide, compared to the number in June 2006, with nearly one in four of the nation’s 164,644 foreclosure filings - 23.6 percent - in California alone.

Silicon Valley real estate thus far has been largely spared high monthly numbers of foreclosures, yielding only 502 in June compared to 343 a year ago, but most months this year show foreclosure rates in the 600s, 700s or 800s.

It’s not entirely certain how much additional pressure recent federal rules - effective immediately - will have on the market, but federal monetary regulators’ “Statement on Subprime Mortgage Lending” codified what many lenders had already been doing–tightening the purse strings of risky home loans.

Continue reading this article in the San Jose Mercury News …