Mortgage industry officials say the Bay Area's economy is growing in leaps and bounds. They expect the growth to continue for at least two to three years.
"I think we're in for an amazing year, so hold on to your hats," Opes Advisors CEO and president Susan McHan told members of the Silicon Valley Association of REALTORS® (SILVAR).
At a recent presentation to REALTORS®, McHan and chief investment officer and principal Mark Duvall painted a positive outlook of the economy. They noted consumers are in the best financial position in years. There are more jobs, disposable income is up, and retail sales are robust. Corporate profits are up and inflation remains largely in check.
The Opes Advisors officials said Silicon Valley's economy is booming. The San Francisco Metropolitan Area's unemployment rate is down to 5.4 percent, and San Jose's is down to 5.6 percent. Venture capitalists will continue to invest in Silicon Valley because every type of industry from auto manufacturing, consumer electronics, tech to social media is in the region, said McHan.
McHan, who is an affiliate member of SILVAR, said housing starts are projected to increase next year, and then level off. Though rising home prices have hurt affordability, they are not affecting demand for homes, which is being fueled by job growth. She predicts the millennials, the largest segment of homebuyers since the baby boomers, will be more active in the market in the next five years.
Duvall indicated the S&P 500 Index is 22.7 percent higher than last year. He explained stock indices and real estate prices have a strong correlation. The Bay Area median home price has increased 54.3 percent from October 2011, while the S&P returns have grown 230 percent since their low in March 2009.
According to the Opes Advisors officials, the typical monthly mortgage payment that Bay Area buyers paid in August was $2,352. Adjusted for inflation, the August payment was 19 percent below the typical payment in the spring of 1989, which was the peak of the prior real estate cycle, and 40 percent below the current cycle's peak in July 2007.
Good news for high-cost areas is the jumbo market accounted for 58 percent of loans in August. In 2009, the jumbo market share was down to a low of 17 percent.
The mortgage experts believe interest rates will rise, but they expect rates to remain in a low band and not rise above 5 percent next year. They also see more money going into the creation of different, "out of the box" mortgage products.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.