Ask my high-end buyers -- those who plan to spend more than $1.2M on their home purchase -- and they will undoubtedly comment about two problems, both of which have gotten only worse as the year has progressed.
1. Limited inventory. Berkeley's residential inventory has been roughly half of what existed in 2008. In properties listed at $1.2M and above, inventory during the past 12 months is down 12% from the previous 12 months. Interestingly though, median price has changed very little. Median price for the $1.2M and above sector in Berkeley in June 2007 was $1.389M. In June 2008 median price for this sector was $1.35M, with 75 sales in that range during the past 12 months. Median price this June was actually up slightly to $1.4075M, but with only 45 sales in that range during the past year.
Just looking at the numbers however does not fully capture the sense of the market. As a Past President of my Association of Realtors, and an active member of several committees, I have the opportunity to speak with numerous agents each week from different brokerages. Repeatedly I hear agents mention the "really good properties." Those are the ones priced appropriately, marketed actively and presented attractively. If they're also well-located they have the golden combination of factors that is very likely to result in multiple offers. Even now, even with the difficulties we are all facing in this tough economy, the "really good" properties may close significantly over list price.
A listing I had a few months ago received four offers and closed $150K over list. That was lovely for my sellers, but it was not really newsworthy in Berkeley. Yesterday another listing closed just a bit above list, having received two offers. Again, no big deal here, except that it was an all-cash sale. At a selling price of $1.425M, that's a great deal of cash! Which leads to the second problem we're experiencing at the high end. . .
2. Difficulties in securing true jumbo loans. There's no question that qualifying for a loan over $729,750 is more difficult than it was a year ago. Rates on jumbo mortgages historically have been higher than rates on conforming loans. While jumbo loans still are available, they often come with stricker, if not absurd, underwriting requirements. Prior to the credit freeze, borrowers of jumbo mortgages could qualify for loans with a 5 percent down payment, credit scores of 620 and enough money in the bank to cover two months of payments. Now, borrowers typically must have six months' reserves, a 700+ credit score, and a down payment of at least 20 percent. More and more we hear of lenders requiring 25% or even 30%. Any irregularities in a borrower's credit or employment history can lead to delays, and sometimes denial of a loan. And communication with lenders has become frustrating in the extreme as banks become increasingly skittish about their own futures. The situation is a bit better now than it was a few months ago, when it seemed no one wanted to lend the money at all. Now they will, but the hurdles are higher.
Given the difficulties of not just getting loan approval in the jumbo range, but actually funding those loans, an unprecedented number of buyers have chosen to avoid the loan process all together and pay cash.
But there's money out there to be lent. So sellers, if you have one of those "really good" houses, this is actually a great time to sell in Berkeley. There is little competition. I myself have three sets of buyers just waiting for the gracious, spacious homes that would accommodate a family, and perhaps a visiting grand parent. Four bedroom, three bath homes are especially in demand. If any sellers are listening, I'd love to speak with you! Your home will be given a very welcome reception in this market!
