Looking beyond the mortgage mess - a cement foundation

Buyers have bought homes this year (2008) for 17.8% lower than they did in 2007. More importantly, only 9.3% of them got a 2nd mortgage compared to 43.4% in 2006. ARM's and hybrid loans are down to 7.5% of all loan from 20.2% in 2007.

Finally, 35.9% of all buyers in 2008 were first time home buyers.

So what does all of the above mean? The cement is being poured into the foundation of the future housing market. A strong base is being built, and so unlike the house of cards from the 2004 to 2007 markets, the future housing market is likely to be quite strong and stable.
Interesting report from the California Association of Realtors (found here).

The naysayers, the doom and gloomers, all point to continuing mortgage problems like Option ARM recasts starting in 2009 through 2011. But the government has clearly demonstrated their commitment to supporting the housing market and saving as many homeowners as possible. Meanwhile sales are up 12% over last year... builders have stopped building new homes... and the U.S. still has population growth... so we'll have a housing shortage sooner rather than later.

Meanwhile, lending is still incredibly tight where the majority of buyers have to have 20% down, and often 30%.... and that can only ease over time... it won't get tighter. That will invite more and more first time home buyers, using record low interest rates, who will buy homes that are 30%, 40% and even 50% below their highs.

In the end, we will have a strong foundation upon which the new housing market is now being built... and those who purchase in 2009, 2010 and 2011 will look like real estate geniuses 5 years later.

Finally - since this is a City of San Francisco real estate blog... as the suffering California market stabilizes for all of the above reasons, and the stock market shows that it too has firm legs, the well off San Francisco buyers who are absolutely refusing to buy anything, at any price, will be back. And the drop of 10% in places like Noe Valley and Cow Hollow will be a 2008 blip. Anyone who believes San Francisco is in for a 30% or 40% drop simply because California or nearby Bay Area towns have had drops of that size, will soon find out that San Francisco is different.