For a time, Northern California home prices were experiencing a significant correction.
Year-over-year price declines were in the double digits. Now, though, conditions have changed – home prices seem to have stopped plunging and appear to be inching down.
The median single-family home price in the San Francisco Bay Area fell just 0.3% from July 2022 to July 2023, according to the California Association of Realtors. While the region’s typical sale price remains above $1.25 million. Sales volumes also are declining, dropping 14.2% from February 2022 to February 2023. Even after home prices have declined, Northern California remains the nation’s most expensive housing market. Meanwhile, the sharp rise in mortgage rates in recent months has only exacerbated affordability challenges. Despite its recent struggles, Northern California remains a hub of innovation and tech employment. T. The region is the fulcrum of the global technology industry, and incomes are one the highest in the nation.
For now, though, the housing market in Silicon Valley and San Francisco is reflecting the one-two punch of higher mortgage rates and the pullback in tech employment and stock valuations. What’s more, remote work has allowed tech workers to trade Northern California’s expensive housing market for comparatively affordable homes in Idaho, Utah, Arizona, and Texas.
A recent report by Redfin says the San Francisco area has been hit harder than most U.S. housing markets. As of April 2023, San Francisco’s median home sale price was down a record 13.3% year over year, more than triple the nationwide drop of 4.2%, Redfin reports. As of July, the median price was off just 4.3% year over year to $1.4 million, but that compared with a national gain of 1.6%. The total value of homes in San Francisco has dropped by $60 billion since last summer, a separate Redfin analysis found.
At the risk of throwing out a conflicting tangle of numbers, we’ll also point to the Case-Shiller Home Price Index. It says Northern California was the worst-performing market among the nation’s 20 largest metro areas through June 2023. Home values were off 9.7% year over year in San Francisco, while prices in Seattle fell by 8.8%, Las Vegas was off by 8.2%, and Phoenix was off by 7.5%. Portland values were down 4.2%, according to Case-Shiller.
While home prices have softened in Northern California, that spells an opportunity for investors in the region. The supply of homes will remain constrained for the foreseeable future, and affordability challenges will keep some aspiring homebuyers in rental properties.
To capitalize on the opportunities presented by Northern California’s real estate market, LendSure offers some hot loan products that will help you build your business:
● DSCR Loans: LendSure’s debt-service coverage ratio (DSCR) program is designed to be attractive to property investors in Northern California. In one example of how LendSure offers compelling value to your borrowers, LendSure looks at market rents to qualify the property (instead of considering only currently rented units to support the loan amount), making a smoother path to loan approval. In other words, not all units need to be rented. What’s more, LendSure underwrites the investment property based not just on current but also on future rent. For an explanation of this unique and useful loan program, see our DSCR Guidelines. Meanwhile, LendSure has expanded its DSCR program beyond the typical one to four units – we make DSCR loans on properties with up to eight units.
● Investment Property Loans: Northern California is a prime destination for buyers of investment properties and second homes. LendSure offers a full array of loans for second homes and other investment properties, including full doc and bank statement loans. Mortgages are available for up to $1.5 million, and up to 80% LTV and 50% DTI. See our Investment Property Loans Guidelines.
● Jumbo Loans: Northern California’s home prices are so high that many mortgages fall into jumbo territory. LendSure’s Jumbo program lets you meet that demand – while offering exceptional service levels and expedited funding times. Lend sure’s program offers loan amounts as high as $3 million and LTVs up to 90%.
The LendSure Way
It’s simple. We make loans that make sense. We’re not in-the-box lenders. Of course, there are numbers and ratios, and data to consider, but we know that behind every file, there’s an individual with a unique circumstance seeking a loan. We work hard to offer our common-sense take on lending to borrowers seeking funding for the home of their dreams, another addition to their investment property portfolio, or refinancing of a currently-owned property.
Are you ready to grow your business? Conforming loan approval guidelines can be restrictive, but we want to offer our mortgage broker partners the education, tools, support, and guidance they need in order to say “yes” to more of their clients. This ensures happy borrowers and opportunities for bottom-line growth. What are you waiting for? Let’s get started!