If you are a homeowner or a would-be homeowner, the current San Ramon Valley real estate market is most likely somewhat perplexing. So this is my attempt to put the various factors into context to help you see where it might be headed.
First, let me dispel any thoughts that we may be in another real estate “bubble” such as we experienced in the run-up to the crash in 2007.
At that time, home prices were rising fast fueled by greed, with buyers being granted loans far too easily. The concept of having to qualify was disregarded. If your salary was insufficient, no problem, you could get a loan based on “Stated Income”. These were the so-called “Liar Loans”. To make matters worse, unscrupulous lenders did not even require a down payment. It should hardly have been a surprise when such buyers immediately defaulted on their loans because they had no ability to repay them!
There is really nothing wrong in Stated Income loans but they were intended to be for self-employed people, not those in salaried employment. Also, there used to a requirement for a 20% or 25% down payment with such loans, thus the likelihood of default was very slim.
The San Ramon Valley Real Estate Market Today
Fast forward to 2016. Home prices are rising again, so why is this happening? The answer is that we have the Perfect Storm. Record low interest rates (at least until recently), massive pent-up buyer demand and historically low levels of inventory in all out desirable areas. No wonder that we see bidding wars and multiple offers. The inevitable outcome is fast rising prices.
But this time, buyers have skin in the game. Around 30% of all home sales in California over the past year have been cash transactions. Very few transactions have less than 20% down payment and Stated Income loans are no longer an option (not even for the self-employed at the moment). Add to that the changes made in regulating the real estate finance business, notably relating to the conditions that a loan has to meet before it can be sold on to Fannie Mae or Freddie Mac. All this means that the likelihood of default in these cases is virtually non-existent.
Now there are some loans available with a down payment of 10% or less but unless you have a decent credit history, the chances of qualifying are zero. It really does seem that the lenders have finally learned some lessons.
Where Is San Ramon Valley Real Estate Headed Now?
All this should reassure those who are concerned about the possibility of a bubble but you still have to wonder when things will slow down. Yes the signs are that it is already happening. Higher interest rates are having some effect and this trend will definitely continue with the result that more first-time buyers are no longer in the market.
Other meaningful indicators are the length of time a home is on the market before a sale is agreed, the prevalence of multiple offers and increasing numbers of price reductions of homes for sale.
Again, some of these are already happening, more in some areas than others. Average days on market is slowly increasing (although still less than 2 weeks in many areas, showing it is still a strong sellers market). We are seeing fewer multiple offer situations and where there are multiple offers, it is generally because a home has been knowingly priced below market to achieve that result. We are even seeing some price reductions and in all price ranges.
Assuming the present trends continue, it seems likely that prices will be much more stable by the end of the year with sustainable increases in value of 3-6% per year from 2017.
If you would like to have an assessment of the market value of your home or if you have any real estate related questions, please do not hesitate to contact me on (925) 997-1585 or email firstname.lastname@example.org. There is never any obligation and I am always happy to hear from you.