June San Francisco Real Estate Insider
As we move into summer and are three months into the SIP and COVID crisis, we are starting to have more clarity into the wake of economic destruction as we get closer to exiting the SIP order. First, on national scale, unemployment has pushed many homeowners into mortgage forbearance and or delinquency on a large scale. Overall, 8.16% of all mortgages (about 4.7 million borrowers) were in forbearance as of May 10 (forbearance allows borrowers to either skip or make reduced payments). That was up from 7.91% as of May 3, which is the smallest increase since March.
Statewide, 5.73% of homeowners were delinquent at the end of April, up from 2.16% at the end of March. However, that increase of 3.6% was the ninth highest of any state. The states with the largest increase were Nevada (5.2%) and New Jersey (5.1%).
Locally in the San Francisco Bay Area, delinquent loans were 1.17% at the end of March and rose to 3.59% at the end of April (a 3x increase). In San Jose, delinquent loans jumped from 0.8 at the end of March to 2.8% at the end of April.
As far as a buyer’s ability to borrow money, the Fed is doing its part to create access to cheap money (see chart below). But, mortgage availability has tightened sharply as lenders impose tougher income, credit-score and down-payment conditions. For example, JPMorgan Chase said it will require borrowers to have 20% down payment and a minimum credit score of 700. Also, Wells Fargo stopped allowing cash-out refinance loans.
Looking at local market activity, we are experiencing several trends. First, buyers are seeking space. Well-priced single family homes under $2M are in high demand. This is also true for Southern Marin. The neighborhood condo market has a lot of inventory and those units are taking longer to sell but prices are holding fairly well. The SOMA condo market is seeing a lot of inventory and not enough demand. The SOMA market generally had a large pool of out of area buyers and this has obviously been stifled. If the SOMA trend continues, there will be very good value buy opportunities in the area (and we are already experiencing some now).
Where are the sales occurring in San Francisco? As referenced above, under $2M is the sweet spot.
Are you targeting a specific neighborhood? The chart below will give you a very good indication of what you'll need to spend (and what you will get) to get the average house.
The charts below break out the neighborhoods as well as the price segments for luxury houses ($3M+) and condos ($2M+).
As referenced above, the cost of money is very low. But, lenders have tightened borrowing criteria as they look to hedge risk.
