Market Update – July 2007

There have been significant recent financial shifts that are affecting borrowers' ability to obtain credit. In a recent article on www.Bloomberg.com, banks such as IndyMac and National City have made "very major changes" to the loan qualifying criteria, and in the rates customers are paying. National City Corp. said it will stop accepting home equity line applications. In the past 2 weeks, Jumbo Loan rates have jumped more than 2 points. Much of the recent instability in the interest rates has to to do with the under performance of mortgage backed securities. This has led to a number of lenders being in financial crisis or, worse yet, closing their doors. There are still programs available for buyers, but the days of loose credit restrictions, stated income/stated asset loans, and 100% financing may be more difficult to find in the near to medium term.The inventory of homes active on the market topped, continues to remain above 6,000 listings in July. For single family homes, the hottest markets in July include Campbell (75 active/283 closed), Cupertino (64 active/434 closed), Los Altos (28 active/33 closed), Mountain View (20 active/26 closed), and Palo Alto (39 active/41 closed). On the other hand, San Jose (2,736 active/411 sold), Morgan Hill (285 active/30 closed), and Gilroy (405 active/40 closed) continue to show selling trends favoring buyers. In San Jose, properties in communities such as Almaden Valley, Cambrian, and Willow Glen show stronger sales, whereas homes in Alum Rock and South San Jose are selling much more slowly