East Bay Mortgage Rates Are Not The Issue! Credit Is The Issue!
December 9, 2008 by Jim Walberg · 3 Comments
Today’s mortgage issues in the East Bay is actually the availability of credit to home
buyers, and the rising unemployment rates.
The Feds have done a great job in making sure that interest rates are VERY attractive for Buyers. And, because of this fact, the number of mortgage applications last month were up over 50% from October! ( However, we are still have 23% less mortgage applications than this time last year. ) There are two “wild cards” that have shown up that are having more of an impact on mortgages than interest rates – availability of credit, and rising unemployment.
The unavailability of credit has become very complicated. The Feds have poured BILLIONS of dollars into the bailout 
banks the past ten months. The banks are grateful, and you and I are on the hook for all those dollars. The issue that Congress did not foresee is that the banks are now holding onto their new found liquidity. The intent of the bailouts have been to allow the banks to get liquidity back into the housing markets. How the banks are able to horde cash right now is by making the securing of credit very difficult. Several years ago it was not a problem for anyone to get credit. Today the pendulum has swung the complete opposite direction. Very few
people are able to get mortgage credit today. There is an exception – FHA – Fannie Mae and Freddie Mac. These loans are all Federally funded, and these are non-jumbo loans. A jumbo mortgage loan is one where it is above the limits of FHA – Fannie Mae and Freddie Mac – above $630,000.
An even bigger factor may be the rising unemployment numbers. This one is a bit more complicated. It relates to the increase in foreclosures that is coming because of having a rising population of people who don’t have jobs and are not able to pay their bills. This issue may be the BIGGEST issue our economy will have for the next year or so. FEAR is not only paralyzing consumers from taking action to purchase a home, it is impacting business owners who are making decisions regarding cutting payroll costs because of their fear of what economic calamity is coming in 2009.  Take AT&T who is headquartered in San Ramon. Nationally, they will be laying off 12,000 employees! Yikes! Fortunately, very few are exiting out of their Contra Costa facilities. But, this one decision will greatly impact real estate values.Â
THE key to our economy turning around has to do with a healthy residential real estate market. The health of our National real estate economy will not surface until the wave of foreclosures has passed. We are still in for some challenging times, Nationally, regarding a further increase in foreclosures.Â
With all of this sobering information, remember, ALL real estate is local. We are so fortunate that the health of real estate in the East Bay, and the Tri-Valley are in a much more healthy condition than many regions of our country. To show you have local real estate is, Danville has a notice of foreclosure rate of around 8%. If you go just 20 miles east to the Antioch/Brentwood areas it is over 50%. Again, all real estate is local. Leave your thoughts regarding what you are seeing in your markets. Until next time.
Related posts:
- 2010 East Bay Real Estate Update: Mortgage Interest Rates Rising In Q2, Q3, Q4!
- East Bay Real Estate News: Housing Tax Credit To Be Extended?
- September U.S. Home Sales UP 9.4%! An East Bay Real Estate False Indicator?
Filed Under: Blog, News, Real Estate
Tagged: east bay real estate, Jim Walberg, mortgage rates, Unemployment rate
Yet the Congress and Fed are not revisiting the issue of handing out all those Billions and watching their grateful benefactors horde the money.
You are correct, Brett. It is mind boggling to me that Congress and Paulson haven’t gathered the heads of the lending institutions back to the Hill and ask them some tough questions. I even have a hint of a feeling that Paulson just gave all his buddies the key to the Fed’s safe and is making sure they are taken care of before Obama takes office when he may attempt to unwind some of this free money. Also I am amazed that no one else in a position leadership is bringing up this topic. The BIGGEST issue in the world of real estate today is the availability of credit. Thanks for checking in.
Hey Brett,
Congress did call to the Hill several of the key banking players yesterday to ask why they are still hording billions of dollars instead of getting those funds out into the credit market. There were no good answers, and the committee stated they were going to put on a further layer of oversight to make sure it happens. It may be just window dressing, but I am going to follow this one closely. Until next time.