According to the WSJ:Turmoil in the U.S. home-mortgage market is starting to pinch even buyers of high-end homes with good credit records, in the latest sign of rising anxiety among lenders and investors."Buyers of high-end homes with good credit records"? Gee, that sounds a lot like Marin. So how exposed are we? According to the Mercury News, a lot -- over 78% (hat tip to the comment section of the Sonoma Housing Bubble Blog):
This surge in rates on so-called jumbo loans [marinite: mortgages that exceed the $417,000 limit for loans eligible for purchase and guaranteed by the GSEs Fannie and Freddie] is particularly notable because rates on 10-year Treasury bonds have been falling. Normally, mortgage rates move in tandem with Treasurys, but market jitters have caused investors to ditch mortgage securities.
Percent of Bay Area counties' home purchase loans considered jumbo loans - over $417,000 - from January to June 2007.We're #2!Jumbo Loans by County
Alameda 56.8
Contra Costa 54
Marin 78.4
Napa 51.2
Santa Clara 72.7
San Francisco 77.2
San Mateo 78.8
Solano 29.8
Sonoma 39.3
Bay Area 61.9
But even #4 is starting to feel the love:
Even affluent, good-credit-risk Palo Altans are feeling spinoff effects of the national and international collapse of the subprime mortgage market. Local experts said today that even the financially fortunate are not immune and that the subprime collapse may even affect the venture-capital market and hence start-up businesses.Marinites and wannabe Marinites can still get their jumbo fix at 7.5-8% but not for long. As "tom stone" said over on the Sonoma Blog:
Prime jumbo's are still available at 7.5%-8% with 20% down and good credit,but after August 15th,all bets are off.why 8/15? that is when the next window opens for hedge fund redemptions.one day long.then you wait 45 days to get your $ because they will need to sell some of those lovely rmbs to raise the $ to pay you.However there is NO MARKET for Alt-A right now.NONE.subprime AAA rated tranches will still sell if discounted 30% or so.Fitch reported this week that they were now going to consider debt to income ratios and dig deep down to the state level when measuring the risk of mbs... just think about being the defense lawyer for these guys "our risk model did not have enough fields to include DTI"...the deathblow was delivered by GW when he announced the markets were working and that real estate was assured of a soft landing.When The Powers That Be trot out their sock puppet, the great "decider", George W. Bush, to make his prediction of a "soft landing", you know it's all over (does anyone even use the term "soft landing" anymore? Isn't it a little passé?).
3 comments:
I think we may have our tipping point. If almost 80% of Marin loans are Jumbo, this will effectively shut down most of the first time buyers...how many of them will meet requirements for a hefty downpayment, no other debt, cash reserves, steady & documented income, etc. And without first time buyers, the rest of the market simply freezes up.
Sales will probably go off the cliff in August. But the good news is that no one seems to be denying there was a bubble anymore. Now it's just a question of how big a stink bomb this is going to let loose on the economy.
I'd hate to be a homeowner in Marin right now....talked about being "locked in" for the foreseeable future.
IF you have a traditional fixed, and IF you haven't taken out an adjustable second or maxed your HELOC, and IF your income will be stable and you don't have to sell in the next 10 years, and IF you bought before 1995, it's probably good to be a homeowner in Marin right now.
I'm interested to see how the high end in Marin plays out as the year progresses. The data from the beginning of the year has shown that the >$2 million segment was fairly vibrant. (Remember the IJ trumpeting the rising median prices?) That must be changing as interest rates go up and the availability of willing lenders goes down.
Check out today's (Sunday) SF Chronicle. Almost the entire Business section is a series of articles about the mortgage meltdown. It's a thing of beauty. Short sales. Tighter standards. MBS market disappearing. Jumbo loans tough to get.
This will kill the Marin market. For those who don't visit the housing blogs, the SF Chronicle ripped back the curtain this morning.
And circus act....that's a lot of if's -); I bought in '96 and sold in '04, and am thrilled not to be making mortgage payments/insurance/property taxes/maintenance on a declining asset.
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