SILICON VALLEY Real Estate UPDATE

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The real estate crisis has gutted house prices, tipped millions into foreclosure, and rattled the global economy to its core. But for many would-be home buyers, the historic boom and bust have been a blessing in disguise. During the first half of the previous decade, easy credit and speculative excitement worked to make houses increasingly expensive. By the fourth quarter of 2005, median home prices had reached 2.77 times median household incomes. That is sharply higher than the 1.92 average of the 15 years ending in 2003 and too expensive for many families. But the subsequent crash in home prices–values have fallen roughly 30 percent at the national level from their 2006 peaks–has helped restore affordability to this once inflated market. By the third quarter of 2009, the price-to-income ratio–a key measure of housing affordability–had fallen below its 15-year average, to 1.84 for the nation as a whole.

Beginning Jan 2010 Silicon Valley Counties (North Santa Clara and Southern Alameda) sales prices have stabilized and some areas are now seeing small increases.

Apart from this being a normal process indicating the last stages of any financial cycle, it has been significantly driven by 5 major sources:

  1. 1st Time Buyer Tax Credits which ended mid 2010.
  2. Extension of FHA and V/A maximum loan limits for High Priced Zip codes.
  3. Historically low interest rates.
  4. Huge increases in the number of 1st Time Buyer programs from Federal, State, County, City, and Employment specific sources. These continue to increase and improve.
  5. Major reductions in Bank Owned (REO), and Short Sale properties coming to market as Banks have beefed up programs designed to keep people in their homes where possible. This has allowed more normal conditions to have control of sales prices.

NOTE: I’m only describing my local Market here in Silicon Valley. I know conditions in other areas have been, and continue to be hit worse than us.  

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