Analysts indicate that much of the impact from the subprime crisis will be felt when rate adjustments roll through the system in 2008 (See Wall Street Journal Article 11/24/07: Rising Rates to Worsen Subprime Mess). However, a good deal of the negative impact from the subprime borrowers comes when they are forced to sell or refinance in a market where they have suffered value declines in their collateral and have little or no equity. That just isn’t the case for the SF Mid Peninsula. As of October, the 16 SF Mid Peninsula Cities showed consistent year over year gains. Demand seems to have softened compared to spring, but our reality is that there is still strong demand for houses in this area. See the table below for specific city performance:
SF Mid Peninsula City Year over Year Price Increases (Median Price)
| City | % Gain over Oct, 2006 | Median Price Index (Jan, 2000=100) |
| Atherton | 6 | 155 |
| Belmont | 14 | 177 |
| Burlingame | 15 | 211 |
| Foster City | 8 | 180 |
| Hillsborough | 17 | 161 |
| Los Altos | 4 | 170 |
| Los Altos Hills | 11 | 126 |
| Menlo Park | (2) | 188 |
| Mountain View | 18 | 189 |
| Palo Alto | 28 | 193 |
| Portola Valley | 9 | 159 |
| Redwood City | 13 | 188 |
| Redwood Shores | 7 | 166 |
| San Carlos | 14 | 182 |
| San Mateo | 17 | 204 |
| Woodside | 7 | 135 |
As a mortgage broker, I can say that nationally and in many metropolitan areas (except for S.F.), the worst is yet to come as many of the two year and three year ARMs that were predominantly sold to subprime borrowers have yet to be re-set by the lenders. Will the Feds attempt to have lenders freeze rates have any real effect? Only if values return before loans are re-set. Does any of this have an effect on Mid-Peninsula real estate? Only when more land is created and the supply is more than demand. This will happen when pigs fly.
By: Steve Cohn on December 5, 2007
at 6:24 pm