Courtesy Tony Guaraldi VP of Mortgage Lending
We’ve got some housing numbers to share with you this week and all of it points to a strong and stable housing market. The Federal Housing Finance Agency (FHFA) House Price Index was reported this week showing values increased nationally by 0.3% in September. The Year over Year is up 8.5% which is a good number for national appreciation of home prices. The Case Shiller Home Price Index for September which tracks closing prices in 20 major cities in the US reported values were up 0.7%. Home Prices are up 13.3% according to them year over year. This is the best number in 7.5 years! Robert Shiller was interviewed on CNBC and although the numbers look good they did not scare him in terms of a potential housing bubble. He explained that those surveyed were not too optimistic which alleviates any bubble concerns he may have had. He noted the rate of appreciation is slowing but this is probably a good thing as 13% appreciation is not sustainable, but there is nothing wrong with 6% appreciation which may be where housing is headed nationally.
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I’ve personally talked to a lot of buyers who fear another bubble so mentioning some of these statics and thoughts from smart people who are not incented to try to sell homes can help. They provide their unbiased opinion of the state of the housing markets. From a loan perspective I find that mentioning to folks that there is a huge difference between loans being issued in 2013 verses 2007 when the bubble burst can really help. In 2007 over 50% of home loans were ARMs and many with negative amortization and qualified with stated income! Basically they didn’t document income to qualify and had a low starting payment that would cause the loan balance to increase every month (negative amortization). When the loan recast in 5 years the payment would often times double or even triple. Additionally many of the loans required zero down payment. With no documented income, time bomb of a loan payment, and little to no down payment it’s no surprise that many of them ended up in foreclosure. That compared to today where you have to document and double check every last detail in a loan file, and that at least 80% of my buyers are taking out fixed rate loans. Even those who take the ARM loans 99% of them are principal and interest so when the recast happens the payment increase will be minimized if at all. We are on much more solid footing from a loan perspective today!
Here in the Bay Area their still seems to be far more buyers than sellers so with strong demand locally and nationally we feel housing is stable and likely continue to appreciation over the next few years at a healthy rate.
Have a great weekend!
Tony Guaraldi VP of Mortgage Lending NMLS ID: 293894
o: 408.841.4953 – m: 408.504.3295 – f: 773.357.4819