Silicon Valley Claims the Nation’s Top 5 Neighborhoods for Equity-Rich Homeowners

  • There were 14.5 million equity-rich U.S. homeowners in the third quarter, a new record high.
  • As in previous quarters, the San Jose and San Francisco metropolitan areas had the most equity-rich homeowners.
  • Nearly 90 percent of owners in three Sunnyvale ZIP codes are classified as equity-rich, the most in the country.

The number of U.S. homeowners who are considered equity-rich reached a new high in the third quarter, with Bay Area cities once again leading the pack for that metric.

ATTOM Data Solutions’ latest U.S. Home Equity & Underwater Report says that there were 14.5 million equity-rich properties in the third quarter, defined as those where the owner owes 50 percent or less of a home’s value against the mortgage. That’s a new all-time high since the company began tracking such data and represents 25.7 percent of Americans with a mortgage.

In a statement accompanying the report, ATTOM Data Solutions Senior Vice President Daren Blomquist said that even though price appreciation has recently moderated, more owners are accruing equity because of the length of time that they have lived in their homes. Several weeks ago, the company’s third-quarter report that found owners who sold in the third quarter had been in their homes for an average of 8.23 years, the longest amount of time on record.

As in the second quarter, California boasted the highest share of equity-rich homeowners in the nation, at 42.5 percent. On the flip side on the coin, just 4.1 percent of Golden State properties are categorized as seriously underwater, meaning those where the owner owes 25 percent or more than the home’s estimated market value.

The San Jose metro area continues to lead the country for the number of equity-rich homeowners, at 73.9 percent in the third quarter. San Francisco followed in the No. 2 spot, with 59.8 percent of properties classified as equity-rich, while 47.6 percent of owners in No. 3 Los Angeles have at least 50 percent equity in their homes.

In many Silicon Valley communities, the number of equity-rich homeowners is even higher than in the overall metro area. Sunnyvale claims the nation’s top three ZIP codes with the most equity-rich owners: 94087 (87.1 percent), 94085 (86.7 percent), and 94086 (86.7 percent) Redwood City‘s 94063 ZIP code and San Jose’s 95130 round out the top five, with a respective 85.9 percent and 85.7 percent of properties deemed equity-rich.


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California Housing Affordability Inches Up in the Third Quarter

  • A new report form the California Association of Realtors puts the number of households who can afford a single-family home in the state at 27 percent in the third quarter, a slight increase from the previous quarter.
  • Affordability conditions in the nine-county Bay Area improved from the second quarter, rising to 21 percent, but were down on an annual basis.
  • In Los Angeles County, 22 percent of households can afford to purchase a home, down from the second quarter and identical to one year earlier.

Homes in California and the nine-county Bay Area were slightly more affordable than they were in the second quarter, though less than one-third of households meet the minimum income requirements to qualify for a mortgage. Meanwhile, affordability conditions in Los Angeles County trended in the opposite direction.

The California Association of Realtors’ latest Housing Affordability Index says that 27 percent of state households could afford to purchase the median-priced $588,530 existing single-family home in the third quarter, up from 26 percent in the second quarter but down from 28 percent at the same time last year. California households need to earn a minimum annual income of $125,540 to afford to make the $3,140 monthly housing bill, assuming a 20 percent down payment and a 30-year, fixed rate mortgage at 4.77 percent.

Less than 30 percent of California residents have been able to afford a home for five of the past eight quarters. Affordability peaked in early 2012, when nearly 60 percent of Golden State households met the minimum qualifying income requirements.

In the Bay Area, 21 percent of residents could afford to buy the median priced $950,000 home, up from the second quarter but down from 23 percent in the third quarter of 2017. Bay Area households need minimum qualifying incomes of about $200,000 to make monthly mortgage payments that average $5,070. Across the region, the number of households who can afford a real estate purchase ranges from 14 percent in San Mateo County to 38 percent in Solano County.

As California’s two most expensive counties, with third-quarter median sales prices of $1,600,000, San Mateo and San Francisco homebuyers must make nearly $350,000 per year and can expect to shell out monthly mortgage payments of more than $8,500. Marin and Santa Clara counties followed, with required annual incomes of about $277,000 to make the monthly payments of $6,930 on the median-priced $1,300,000 home.

In Los Angeles County, 22 percent of residents could afford the median-priced $628,940 single-family home, down from 26 percent in the second quarter and unchanged from one year earlier. Homebuyers in Los Angeles must pull in $134,160 each year to pay monthly mortgage bills of $3,350.

California home shoppers will almost certainly continue to grapple with affordability challenges as mortgage rates increase. The latest numbers from Freddie Mac put 30-year, fixed-rate mortgages at 4.83 percent for the week ended Nov. 1, up from 3.94 percent at the same time last year. A recent CAR forecast projects that mortgage rates will reach 5.2 percent by the end of 2019, which would reduce the number of Golden State households who can afford to buy a home to 25 percent.


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Bay Area Households Are the Nation’s Best at Sticking to a Budget

  • San Jose residents ranks as America’s best for living within their means, thanks to having the country’s lowest debt not related to housing and smallest revolving credit usage.
  • San Francisco places No. 2 for budget consciousness, with annual incomes that are more than $30,000 higher than the national median.
  • Homeowners in all six of the California cities included in the analysis have mortgage-debt-to-income balances higher than 100 percent.

A woman in front of a computer calculating her budgetAlthough San Jose and San Francisco were once again the nation’s two most expensive housing markets in the third quarter, residents of those cities have their borrowing habits very much under control.

A few months ago, a survey from CareerBuilder found that nearly 80 percent of Americans are living paycheck to paycheck to meet their expenses. To find out where consumers are the best (and worst) at living within their financial means, LendingTree examined August 2018 credit data from its user base and compared it with household-income numbers, ranking 50 U.S. cities on a 100-point scale.

San Jose tops the list of places where residents have the best control of their finances, notching a total score of 73.6. The city has the lowest amount of non-housing debt in the country, at 23.5 percent of income, as well as the lowest revolving credit usage of 27.3 percent. Additionally, San Jose millennials owe an average of $18,000 in debt not related to housing — $5,000 less than young people nationwide — and have the country’s lowest student-loan balances.

San Francisco ranks No. 2 for budget-conscious residents, scoring a 70.6. The City by the Bay had the country’s second lowest nonhousing debt and credit-usage numbers behind San Jose, a respective 27.7 percent and 27.4 percent.

Of course, when judged by mortgage debt as a percentage of income, Bay Area residents do not fare as well. San Franciscans’ mortgage balances equal 123.9 percent of their earnings, while San Jose homeowners have a housing debt-to-income ratio of 107.0 percent. In fact, homeowners in all California cities included in the list have mortgage balances that are more than 100 percent of their yearly earning: Los Angeles (121.0 percent), Sacramento (126.5 percent), and San Diego and Riverside (both 131.1 percent).

So why are residents of America’s most-expensive places to call home so good at managing their finances? High incomes are partially responsible; as LendingTree points out, the median annual income in San Francisco is about $88,000, compared with the national median income of $55,300. The fact that Bay Area residents tend to have higher education levels helps them earn such large incomes in a region with plentiful, high-paying technology jobs.

LendingTree offers some common-sense tips for prospective homebuyers who are fretting about their spending and budgeting habits, starting with consolidating debt and regular credit-score monitoring. And besides creating a monthly budget and paying bills on time, consider refinancing student, automobile, or mortgage loans to get a more favorable rate.

(Photo: iStock/mapodile)

Shared with permission from the Pacific Union Blog

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Bay Area Cities Rank Among the Nation’s Best Small and Midsize U.S. Places to Live in 2018

  • Santa Clara and Hayward rank among the top 10 most livable medium-sized American cities this year.
  • Hayward’s median home value has shot up by 95 percent over the past five years.
  • A separate analysis ranks Los Altos as the country’s seventh-best small U.S. city to call home.

Despite the Bay Area’s top-dollar cost of living, the region’s rapid home price appreciation and booming economy have helped land a handful of local cities on lists of the best places to live in America.

A new SmartAsset study ranks the top 25 medium-sized U.S. cities — defined here as those with populations higher than 100,000 but excluding the 100 largest — on a 100-point scale based on median home value change, monthly housing costs, unemployment and poverty rates, and median annual household income. By those criteria, Santa Clara is the country’s third most livable U.S. city, notching a near perfect score of 99.46. Santa Clara gets a boost from its five-year median home value change of 66 percent but is hurt by its $2,316 monthly housing expenses, the second highest of any city included on the list.

The Alameda County city of Hayward comes in at No. 10 on the list, with an 89.34. Over the past five years, home values in Hayward have skyrocketed by 95 percent, the highest rate of appreciation recorded in any of the 25 cities included in SmartAsset’s analysis.

Two other Bay Area cities rank among the best midsize communities in the nation: No. 12 Sunnyvale (88.12) and No. 20 Concord (80.30). Sunnyvale households pull in the highest annual incomes on the list — $134,234 — but also are burdened with the largest monthly housing costs of $2,329.

A separate analysis by WalletHub ranks America’s best small cities, also on a 100-point scale and using similar metrics as Smart Asset. Of the more than 1,200 communities include in the report with populations between 25,000 and 100,000, Los Altos comes in at No. 7, with a score of 69.06. While the wealthy Silicon Valley city ranks in the top 10 in the country for overall economic well-being, it is predictably much lower for housing affordability.

WalletHub gives Los Altos a special mention for being among the nation’s top five places where the highest percentage of the population holds at least a high-school degree. And while San Mateo County’s Burlingame does not appear in the upper part of the best-small-cities rankings, it ties five other U.S. cities for the most income growth.


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How Long Will a Home Purchase Impact Californians’ Credit Scores?

  • The average American can expect their credit score to decline by 15 points after buying a home, with the total recovery time taking about 10 months.
  • San Jose and San Francisco homebuyers have exceptionally high credit scores but will need to wait roughly a year before their ratings return to normal.
  • Making on-time mortgage payments will help boost new homebuyers’ credit ratings, as will the diversification of their accounts by owning real estate.

San Francisco homebuyers have some of the best credit scores in the country, but they also face one of the longest roads to recovery after completing their real estate purchase.

A new analysis by LendingTree Chief Economist Tendayi Kapfidze examines how much buying a home affects credit scores in 50 major American metropolitan areas and the length of time that it takes ratings to return to their prepurchase averages. U.S. buyers can expect their credit scores to decline by an average of 15 points after they buy a home over a period of nearly five months. After that, the recovery begins and takes another five months for credit scores to return to the baseline.

Of the six California housing markets included in the report, San Jose fares the best when it comes to credit recovery. Before buying a home, San Jose residents boast credit scores of 725, the highest of any of the cities included in the study. Post-purchase, Silicon Valley credit scores fall to 711 for an average of 149 days before taking 173 days to recover, ranking it solidly in the middle of the country.

San Francisco homebuyers have almost as good of credit as their counterparts to the south, at 724, and they can also expect their scores to dip to 711 over a period of almost exactly six months. Once the 196-day recovery time is factored in, San Franciscans will need to wait one year and 10 days for their ratings to normalize, ranking it near the bottom of the list at No. 47.

The other Golden State cities included in LendingTree’s analysis also appear in the lower half of the rankings when it comes to total credit-recovery time: No. 39 Los Angeles (347 days), No. 40 San Diego (348 days), No. 44 Sacramento (357 days), and No. 48 Riverside (375 days).

As Kapfidze explains, the reason that Americans’ credit scores fall when they purchase a home is fairly logical: As the biggest purchase that most people will ever make, a real estate transaction adds a large amount of debt to one’s balance sheet. Once new homeowners have proven that they can swing the monthly house payments in a timely manner, their credit ratings gradually improve, boosted by the fact that having a mortgage helps diversify a credit portfolio.

Of course, having a good credit score is key to getting a home loan in the first place, and younger homebuyers could stand to improve their ratings to maximize their chances. Another recent LendingTree study reports that millennials have average credit scores of 634, the lowest of all generations. And earlier this year, Experian published an analysis finding that more than 60 percent of millennials lack a prime homebuying credit score.

(Photo: iStock/tolgart)


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Bay Area Housing Markets Got Spooked in September

Executive Summary:

  • Bay Area home sales declined by 20 percent year over year in September, with all counties posting drops, led by Sonoma and Contra Costa. In 2018, the region’s housing market activity is trending 4 percent lower year to date.
  • Santa Clara County posted sales declines across all price ranges.
  • Bay Area inventory increased by 14 percent year over year in September — about 2,000 more homes — with Santa Clara County contributing more than 50 percent to the total increase.
  • While appreciation has slowed from its spring peaks, Bay Area home prices are still up by 10 percent on an annual basis. San Mateo County maintained the strongest price growth at 19 percent.
  • Home price reductions were up by 7 percentage points, from 16 percent last year to 23 percent this September. Sonoma and Santa Clara counties posted the largest increases in price reductions.
  • The rebalancing between buyers and sellers is driven by affordability constrains and buyer fatigue, with the biggest change seen in relatively affordable and previously fiercely competitive markets.

September Bay Area home sales slowed markedly from one year earlier, with an overall decline of 20 percent, ranging from a 9 percent decrease in San Francisco to a 27 percent drop in Sonoma County. With September’s decline, year-to-date sales are now 4 percent below 2017.

Figure 1 summarizes changes in sales by Bay Area county from last September and overall year-to-date changes compared with last year. San Francisco is the only region where overall 2018 sales are still above last year despite September’s decline.  By contrast, Santa Clara County posted the region’s largest year-to-date drop of 8 percent. Note that for the purposes of this analysis, all property types have been included.

Figure 1:Year-over-year and year-to-date change in home sales by Bay Area county

Source: Source: Terradatum, Inc. from data provided by local MLSes, Oct. 7, 2018

Figure 2 illustrates September home sales activity for the last four years. While activity between September 2015 and 2017 trends relatively in line, this year’s drop appears most obvious in all counties. As noted in Figure 1, Sonoma County posted the relatively largest decrease, followed by Contra Costa County.

Figure 2: September home sales activity by Bay Area county, 2015-2018

Source: Source: Terradatum, Inc. from data provided by local MLSes, Oct. 7, 2018

Figure 3 illustrates September’s change in home sales by price range compared with last September. Three counties posted noticeably lower sales: Santa Clara, Contra Costa, and Alameda. In Santa Clara County, all price ranges saw annual sales declines in September. In the East Bay, the decline was dominated by homes priced below $1 million, some of which are now priced above $1 million compared with what they would have been priced last September. Taken together, Santa Clara County and the lowest price range drove most of the decrease.

Figure 3: Annual home sales changes by Bay Area county and price range

Source: Terradatum, Inc. from data provided by local MLSes, Oct. 7, 2018

Declining sales appear to reflect two underlying conditions that are shifting Bay Area housing markets: affordability constraints and buyer fatigue. While affordability has long been a serious concern in the Bay Area, recent median home price hikes coupled with rising mortgage rates have put a 20 percent to 25 percent dent in buyers’ purchasing power. The impact of these forces is causing fewer sales in relatively more affordable parts of the region, such as Sonoma, Contra Costa, and Alameda counties. In Sonoma County, aggressive pricing amid low post-wildfire inventory had a particularly discouraging effect on buyers of homes priced below $1 million.

On the other hand, fierce buyer competition on the Peninsula, which drove home prices up by almost 30 percent year over year in the first half of the 2018, led buyers to step back and put home purchases on hold. Also, a sentiment that the housing market has reached the top has impacted sales activity, with buyers not wanting to purchase at the top of the market and more sellers listing properties in September.

Consequently, inventory increased by 14 percent year over year in September, with Santa Clara County contributing more than 50 percent to the total gain, adding more than 1,000 homes to the market compared with last year. Alameda and Sonoma counties followed in housing-supply gains. Sonoma County’s changing conditions largely reflect post-wildfire activity.

Figure 4: Annual inventory changes by Bay Area county and price range

Source: Source: Terradatum, Inc. from data provided by local MLSes, Oct. 7, 2018

Median home prices, however, maintained healthy momentum, with most regions continuing to grow at rates seen earlier this year. Figure 5 summarizes median year-over-year home price changes in September. The last column shows median price growth in March 2018, when year-over-year changes peaked. Overall price growth slowed from 19 percent in March to 10 percent in September, and most regions saw some cooling except for Napa County, where gains have picked up in the latter part of this year. Santa Clara County saw the largest decline in appreciation, from 34 percent in March to 11 percent in September.

Figure 5: Median home price changes by Bay Area County from September 2017 and March 2018 peak

Source: Source: Terradatum, Inc. from data provided by local MLSes, Oct. 7, 2018

Still, it’s important to note that even with slowing price growth, which was inevitable given the unsustainable rates seen in first half of 2018, the longer-term appreciation trend for the Bay Area (Figure 6) shows gains returning to the trend line of around 8 percent to 10 percent.

Figure 6: Year-over-year change in median home price in the Bay Area, single-family homes

Source: California Association of Realtors

Lastly, shifting market conditions are also reflected in the share of homes that required price reductions. Figure 7 illustrates the change in the share of homes that saw price reductions, with green shades indicating increases in price reductions compared with last September and red shades suggesting fewer reductions. Overall reductions increased by 7 percentage points, from 16 percent last September to 23 percent now. Again, Sonoma and Santa Clara counties posted the largest increases in price reductions, up by 13 percent and 15 percent respectively. Forty-one percent of Sonoma County homes required price reductions in September, followed by Santa Clara County at 24 percent.

Figure 7: Changes in price reductions by Bay Area county and price range

Source: Source: Terradatum, Inc. from data provided by local MLSes, Oct. 7, 2018

All told, September market activity shows a changing dynamic between buyers and sellers. As noted above, both sides may believe that housing price growth has reached its peak and are acting accordingly, with buyers pulling back and sellers rushing to list their homes before the slow winter season kicks in. To some extent, volatility in financial markets and geopolitical developments may be exaggerating consumer fears. However, the underlying macroeconomic environment and California’s continued growth confirms that housing markets may be returning to a more normal balance between buyers and sellers rather than preparing to topple.

Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.


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California Housing Inventory Near a 3-Year High in September

  • California had a 4.2-month supply of inventory in September, the highest level recorded in 31 months.
  • Statewide, home sales declined by 12.4 percent from September 2017 while dropping by 16.4 percent in the nine-county Bay Area.
  • The Bay Area’s median sales price was $930,000 in September, an annual gain of 9.8 percent after 14 straight months of double-digit-percent annual appreciation.

Although the Golden State’s tight housing supply situation improved again in September, rising mortgage rates and buyer sentiment that the market may be topping out conspired to hold back home sales.

That’s according to the latest home sales and price report from the California Association of Realtors, which puts the state’s months’ supply of inventory at 4.2 as of September, the highest level in 31 months. Active listings increased for the sixth consecutive month and were up by 20.4 percent from September 2017.

The nine-county Bay Area saw the number of homes for sale improve on both a monthly and annual basis, as the month’s supply of inventory rose to 3.2. All counties posted year-over-year gains, with the monthly supply of inventory ranging from 2.7 in Alameda County to 5.6 in Napa County.

An increased number of homes on the market did not translate to higher sales, which declined by 12.4 percent year over year statewide, the largest such drop in more than four years. All major regions of the state saw double-digit-percent annual sales declines, with Bay Area activity down by 16.4 percent, the biggest decrease in nearly eight years.

California home appreciation continued to moderate in September, with the $578,850 median sales price up by 4.3 percent on an annual basis. In a statement accompanying the report, CAR Senior Vice President and Chief Economist Leslie Appleton-Young said that she expects appreciation to further decelerate in the coming months, driven by homebuyer reluctance to enter the market given current prices.

The median sales price for a single-family home in the Bay Area ended September at $930,000, a year-over-year gain of 9.8 percent. For the previous 14 months, the region had posted double-digit-percent annual home prices gains.

All nine counties recorded home price growth from September 2017, ranging from 14.2 percent in San Mateo County to 5.5 percent in Alameda County. San Mateo County overtook San Francisco as the state’s most expensive county, with a median sales price of $1,600,000, followed by San Francisco ($1,507,500), Marin ($1,395,000), and Santa Clara ($1,250,000) counties.


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