Realty One Group
The lenders did not waste any time. Before the announcement of interest hike by 85 points all interest rates have moved up and they change more often today than before November 2016. I just checked many lenders are now charging 4.375% for 30 year conforming loan or 4.125%-4.25% for jumbo 30 year fixed mortgage over $471,000 popular here in Silicon Valley. The no point no cost mortgage is not readily available in some banks.
In Silicon Valley a $1.3 million dollar home often is a remodeled 3-4 br, 2 bath, 50+ year old tract 1,300-1,999 sf home on a 5000+ sf lot. Many buyers often put a larger down payment in order to keep their mortgage payment manageable.
For a $1,000,000 mortgage for a 30 year fixed rate jumbo mortgage, the monthly mortgage (PITI) and minimum required annual income needed is:
- 4.65% $6,781 $201K 2017
- 5.15% $7,085 $209K 2017
- 5.65 % $7,400 $217K 2018?
For each 1% in interest rate increase it translates into ~10% increase in monthly mortgage payment. To keep same mortgage payment the housing price needs to be 10% lower during each rate change.
It is likely our mortgage interest may increase up 2% in the foreseen future. Home prices then needs to be lower by 20%. Local wage increases is probably about 3.5% annually while local housing can absorb a 6.5% price decrease. With traffic back to back on the freeways with too many cars (job) most do not mind live close work. A few years back the high tech workers preferred a good school neighborhood like Sunnyvale or Cupertino. These days school rating can take a back seat since get to work on time being close to work matters.
Mountain View, CA had many non-professional residents and school quality was just average before. Since Google IPO in 2004 it took about 10 years to improve school quality after home prices climbed ~3X from the bottom of the Great Recession.
In 2017 one expects only a modest may be 3-4% increase in some desirable neighborhoods often close to high technology centers. Some higher priced estates may even continue to see a price decrease too cool of the speculations. Uber may be going ipo but not everyone will become instant multi-millionaires ready to purchase homes. Apple may even expect cut back in spending and staff as their CEO Tim Cook took a pay cut! He just received -15% less than previous year! In 2017 Apple already reduced the iPhone 7 production by 10% during Q1 2017 because there are a more unsold iPhone 7.
Historical home listings in Santa Clara County (2003- )
Regardless of affordability of housing, escalating cost, the inventory is still very limited. The data above for single family in Santa Clara County seems to support that housing will still be competitive. We expect another great 2017 year in residential real estate.
Snopsis on Mortgage Interest Rate vs Affordability (Silicon Valley affordability)
How is my Silicon Valley home worth? (Silicon Valley Home Values)
Sam Shueh Realtor
I've called San Francisco South Bay home for over 30 years. We love this area and all it has to offer, and I enjoy sharing what I know about homes. I documented in several books about Silicon Valley history. I have much expertise in real estate...please give me a call.