At our Pacific Union Real Estate office meeting this morning in the Oakland Montclair Office we went over some interesting sales statistics. Our office has a large market share in Oakland, Piedmont and Berkeley CA. Our meetings give us a chance to collaborate and interject with one another to get the pulse of the local real estate market.
In the six city marketplace (Oakland, Berkeley, Piedmont, Alameda, Kensignton and Albany) there have only been 20 homes over $500,000 that have closed since Jan 1. In our Pacific Union office in Oakland Montclair every listing that has heard offers since Jan 1 has had multiple offers. Are you seeing a pattern here. If you are a Seller wondering if now is a good time…. What are you waiting for?
Adjustable rate mortgages made 3-5 years ago are coming up on their rate adjustment. To complicate things, many of those mortgages were the optional payment style. Optional payment style mortgages allowed the borrower a choice of payments: Minimum payment, Interest only payment, Principal and interest payment and Additional principal payment. Given how expensive it is to live in the San Francisco Bay Area I think it’s safe to say that most borrowers go with the Minimum Payment option. Example: If I took out a loan that has a principal and interest combined payment of $3500 per month and my lender says that for the first 3 years I can choose to pay a minimum payment of $1500 per month, they will happily add the missing $1000 to my principal balance. Over time my loan balance has gone up while at the same time the value of my home has gone down. Now my three years are up and the loan is going to reset to today’s interest rates. Not only will my payment go up from my comfortable $1500 per month, the new (principal + interest) payment will be at a higher interest rate and calculated on a 27 year timeline instead of a 30 year. Add the dollars added to my principal and a drop in my homes value, it is not a pretty picture. I’m not being dramatic or negative here. This is going to be a market reality for many people in the coming year.
Brian Santilena has been representing home buyers and home sellers in the Oakland Hills, Berkeley Hills and Piedmont California marketplace since 1998. He is a Realtor, Certified Residential Specialist (CRS) and Sr. Sales Associate with Pacific Union Real Estate.