I hope you all had a great holiday season and New Years! Looking back, it seems that 2007 was the year of the mortgage for real estate here in Northern California. A screenshot from the New York Times mortgage rate chart illustrates how buyers (and sellers) were impacted by the dynamics of the mortgage industry this year.
This chart shows the change in jumbo mortgage interest rates during 2007. Put in historical context, the jumbo interest rates over the summer didn't approach the level of rates in, say, 1981, but since 2002, the housing market has benefited from mortgage rates that are historically low.
It wasn't 2005 or 2006, though. In May and July, some buyers discovered the home they were interested in just became about 5% more expensive at the same price because of another interest rate bump. (A $1,000,000 P&I mortgage costs $5,996 per month at 6% and $6,321 at 6.5%.) All the more reason to better understand how rate locks work.
Some homeowners with adjustable rates found themselves in a similar situation and ended up attempting a short sale. Many neighborhoods were unaffected, others were peppered with short sales --- where the available homes may or may not have real estate signs indicating a sale.
But many of the markets around Silicon Valley didn't behave like one would expect from reading the news reports. It's the sales transaction information that tells the best story.
Data Points Across the 44 Cities in the Database for Santa Clara County and San Mateo County
1. Of the 35 cities with a decrease in new listings year-over-year, all of the ones in Silicon Valley --- there were 26, East Palo Alto and Milpitas were the exceptions --- saw their median values increase. (The cities outside Silicon Valley seeing decreases included outlying cities Gilroy, Morgan Hill and Loma Mar.)
2. The were 9 cities that had an increase in new listings year-over-year. Not surprisingly, this acceleration of inventory usually means a decrease in the median. It is notable, though, that Santa Clara and Redwood City showed strength and bucked the trend.
3. There wasn't any real correlation between medians and homes "sitting" on the market. San Mateo saw an 18% increase in CDOM (to 39 days) but had an increase of 8% in the median. San Jose's CDOM skyrocketed 29% (to 58 days) but the city as a whole had a median increase of 3.6%. Mountain View and Palo Alto were on fire the entire year and saw their CDOM numbers decrease 29% and 9% respectively.
Silicon Valley's Gains and Losses
Looking at the table, what stood out to me the most was where Menlo Park turned out. I've written previously about how Menlo Park can be a mixed bag and how low-income housing has affected the median --- and while Menlo Park isn't the only city in Silicon Valley to have overnight parking restrictions, I've talked with a number of people who cite it as a reason why they wouldn't buy a home there.
For the city that's part Atherton, part Redwood City, part Palo Alto and part East Palo Alto, Menlo Park was the only one of these five cities to have both an increase in single-family home listings year-over-year and a drop in their median. (Redwood City withstood its 9% increase in listings and still came away with a 4.12% gain.)
There was core strength in the 101 to 85 corridor of Palo Alto, Mountain View, Sunnyvale and Cupertino. High-paying jobs and the perception of a bottomless market ironically helped fuel growth for 2007.
The 30.6% drop in Palo Alto's new listings cut supply rather dramatically. And while Mountain View's drop of 15.5% seems less dramatic in comparison, the average home sold took 22 days to sell. The only number on my spreadsheet to come close to that speed is neighboring Sunnyvale, where the average is 28 days. Sunnyvale, Palo Alto, and Mountain View all recorded sales prices at above 103% of list.