As I have mentioned in the last post, the normal and healthy ripple effect of real estate market is not back here in Silicon Valley yet. There is low demand for lower priced housing, especially condos and townhouses which require monthly fees; in comparison, the higher end segments are selling quite fast. If the sellers of the lower priced houses are not selling, they can not easily move up to buy higher priced houses. But we do have quite a few higher end house buyers, especially some willing to pay cash.
By reading the article by Associated Press, "Bipolar housing market: The haves and have-nots", we get the snapshot of the whole housing market in the U. S. In many senses, the real estate market in Silicon Valley is a synecdoche of the nation.
Owning a home in Silicon Valley is not an easy task. The local market of supply and demand, especially in west side of the Valley, is not in sync with the rest of the country's economical situation. The extreme of low supply and high demand has made purchasing a home in Silicon Valley very competitive and sometimes tricky. In this blog, bits and pieces of market phenomenon are presented for your information.
Wednesday, September 28, 2011
Friday, September 16, 2011
Homeowners' financial hardship
On the left of this blog, I have cited an article from Los Angles Times regarding how high interest rates on some "**under water" home mortgages have drained the financial resources of many homeowners. I do know quite a few of them here in Silicon Valley.
It's quite difficult for these homeowners in this situation. In the case that the homeowners do not intend to walk out of their houses and just want to reduce their mortgage payments by refinancing, they actually are told that they have to bring in cash, sometimes tens of thousands of dollars, to be able to get their refinance completed. This is for those who still have jobs. I understand that some with jobs had elected to opt out of the home-ownership for now and moved on to rent a house. For those who had lost their jobs and income, they would have difficult time reducing the high interest rate.
So I do see a big jump in demand for rentals and the rent, too.
However, there is another phenomenon we are witnessing in Silicon Valley. In certain pockets of the valley where the higher-end homes are, we see slow demand on condos or townhouses but cash buyers are snapping up $1 million to $2 millions homes faster than buyers who have to apply for a loan and have to sell their lower priced houses (with lower demand). I don't know how long this phenomenon will continue. But I think what we see now is definitely the result of the extremity of wealth gap in our society (or our global society).
In the past, the normal ripple effect of real estate market was people buy lower-price house first. Then, years later, they sell their lower-priced home and buy a higher-priced home. The all-cash, first time buyers were only there during the dot-com boom.
Anyway, I do hope we will come back to a more normal housing market. But according this article, it could be a long while...
**under water" mortgage is referring to the mortgage where the house market value is below the amount of loan owed on the house.
It's quite difficult for these homeowners in this situation. In the case that the homeowners do not intend to walk out of their houses and just want to reduce their mortgage payments by refinancing, they actually are told that they have to bring in cash, sometimes tens of thousands of dollars, to be able to get their refinance completed. This is for those who still have jobs. I understand that some with jobs had elected to opt out of the home-ownership for now and moved on to rent a house. For those who had lost their jobs and income, they would have difficult time reducing the high interest rate.
So I do see a big jump in demand for rentals and the rent, too.
However, there is another phenomenon we are witnessing in Silicon Valley. In certain pockets of the valley where the higher-end homes are, we see slow demand on condos or townhouses but cash buyers are snapping up $1 million to $2 millions homes faster than buyers who have to apply for a loan and have to sell their lower priced houses (with lower demand). I don't know how long this phenomenon will continue. But I think what we see now is definitely the result of the extremity of wealth gap in our society (or our global society).
In the past, the normal ripple effect of real estate market was people buy lower-price house first. Then, years later, they sell their lower-priced home and buy a higher-priced home. The all-cash, first time buyers were only there during the dot-com boom.
Anyway, I do hope we will come back to a more normal housing market. But according this article, it could be a long while...
**under water" mortgage is referring to the mortgage where the house market value is below the amount of loan owed on the house.
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