š” Insider Report - Wed, Jan 5
š” Insider Report - Wed, Jan 5
Conforming loan limits soar for 2022. Plus, a collection of homes with libraries.
TRENDS
Market Movement
Amidst the start of the new year, and new Covid variants which have the country setting records, the number of new homes on the market dropped to just 10 in the past day. Home prices for most counties are down, with the exception of San Mateo, San Francisco, and Sonoma counties. If you missed our 2022 housing market forecast and review of 2021 predictions, you can read the complete analysis here.
MARKET UPDATES
Quick Clicks
Price dropsĀ (409 today in the Bay):
50 price drops inĀ Contra Costa County, 105Ā inĀ San Francisco,Ā 79Ā inĀ Alameda County, andĀ others.
Last week in theĀ Bay Area:
Most expensive home listed:Ā 26700 Shady Oaks Court, Los Altos Hills for $10,000,000
Cheapest home listed:Ā 92 Ottawa St., Oakley for $50,000
Oldest home listed:Ā 2931 Chestnut St, Oakland built in 1905
Home with the most beds: 2874 Stallion Way, San Jose with 8 bedrooms
Home with the most baths:Ā 115 Humboldt Road, Burlingame with 5 bathrooms
FEATURED HOMES FOR YOU
š Homes with libraries
There is nothing more comforting than sitting by the fireplace with a cup of coffee, cozy reading socks, and your favorite well-read book. If this sounds like your dream, these homes with libraries might just be for you. Check them out!
GET SMARTER
Fee simple (n)
The highest form of property ownership, fee simple basically means having full and irrevocable ownership of the land and any property/buildings on it. Fee simple is the most dominant form of ownership in the U.S. and is only restricted by any zoning laws, deeds, or subdivision restrictions. Most single-family homes are covered by a fee simple ownership. The duration of fee simple ownership is not limited, and the property owner is free to sell, rent, lease, or transfer it to their heirs.
A fee simple ownership is different from a leasehold, wherein the use of the property is dictated by certain restrictions or laws. For instance, when somebody buys a condo, they own the unit but not the land on which the condo is built. This is a form of leasehold ownership. However, when they buy a single-family detached home, most often it is a fee simple ownership.
MARKET WATCH
Hottest market of the week - Morgan Hill, CA
Our hottest market this week is Morgan Hill, with sales volume up by 67% this week! Average days on market were 121 days this month, up from 79 days last month and 59 days last year. The median sale price this week of $1.48 is close to the top of the range since mid-October, and higher than the last monthly high of $1.26m in April 2021; at $521, the price per square foot is lower than the last monthly high of $575 in August. The number of new homes coming on the market each month inĀ Morgan Hill increased byĀ 57.14%, while the number of homes sold each month decreasedĀ byĀ 40.85% over the past 12 months. Popular home searches include a swimming pool, an open floor plan, and a big yard.
HOME ADDICTION
Conforming Loan Limits Soar for 2022
The FHFA announced the new Conforming Loan Limits for Fannie Mae and Freddie Mac. After determining that home prices are up by more than 18% on average across the nation, they raised conforming loan limits by the same percentage ā a dollar increase of almost $100,000 for the standard one-unit home. Multi-unit properties got a similar increase.
Most counties in the Bay Area are deemed high-cost areas and granted the maximum 1-unit loan limit, which is $970,800, up from $822,375 in 2021. The lower limit was increased to $647,200 from $548,250. FHA loan limits rose similarly, with the same ceiling at $970,800, but a lower floor at $420,680.
Conforming Loan Limits for 2022 by County
The below map shows the limits by county; you can interact with this map on the FHFAās website here.
Intended and Unintended Consequences of Higher Loan Limits
Imagine if these loan limits had not been increased; it would have prevented access to affordable mortgages for millions of homebuyers just trying to buy an average home in their neighborhood.Ā On the other hand, jumbo mortgages, those above conforming loan limits, are currently priced about 50bps lower than conforming mortgages for high-quality borrowers (think 700ās FICO and low debt to income); so for example, the high-quality borrower going for a $900,000 mortgage in 2022 could end up paying 50bps more than in 2021; they are better off trying to stretch to a $971,000 mortgage, putting them into jumbo territory where the rates could be 50bps lower.
Some people worry that increasing limits in this manner perpetuates a cycle of home price increases that make homes unaffordable for future generations.Ā However, a recent analysis by Black Knight suggests that average monthly mortgage payments are quite affordable relative to history.Ā The monthly out-of-pocket mortgage payment required to buy an average-priced home was $1,346 in October 2021, assuming a 20 percent down, 30-year fixed-rate mortgage. This is an increase of nearly 24% ($260) since the start of the year but is still below the 2006 peak of $1,372 when mortgage rates were much higher.
It now takes 22.4% of the median household income to make the monthly mortgage payment on a median-priced home, up from 18.1% at the beginning of the year. This is the largest share since late 2018 when 30-year interest rates were near 5.0% but is still far lower than the 34% payment-to-income ratio in 2006.Ā This increase to 22.4% from 18.1% would typically help cool home price gains, but with continued low inventory levels, this relationship may not hold as well as when supplies were higher and buyers had more bargaining power.
INSIDER INSIGHT
š Checking in on San Francisco neighborhoods
It's time for our first month of the year look at how certain neighborhoods are doing in San Francisco when considering the median number of days on market (DOM) - the time before homes sold - over the past 3 months:
Here's how things look: South Of Market saw some growth in the median price per square foot and median sale price for the first week of December before falling off in the last week of the year, unsurprisingly. This was driven by a sharp drop in inventory, as new listings fell sharply in both November and December while the number of homes sold increased slightly. DOM for homes still on the market has continued to grow, but with the expected influx of new homes that will come on the market in the new year, we expect it to flatten and even fall.
This 1 Bed 1 Bath Condo is one of the newest homes on the market in the neighborhood and had new lighting installed in 2018.
North Beachās median DOM grew for three weeks straight after falling in the first week of December but remains well below the cityās median DOM. The fact that homes in the last two weeks of 2021 sold above listing price indicates that there is still good demand for the neighborhood, and we expect as more inventory comes on the market, it will remain strong relative to the rest of the city.
This 2 Bed 2 Bath condo is the newest listing in the neighborhood, which has 141 EV charging points nearby.
GET IN TOUCH
Have a Great Day
Want to talk to someone about data on homes or have suggestions for this email? Great, our data science team is starved for human contact. Ping us atĀ data-team@zerodown.com.