You may have read conflicting articles about the mass “COVID migration,” in which big cities are seeing people flee to more affordable areas in the midst of the pandemic. As far as I can tell, those claims are a little bit exaggerated, even if the Bay Area as a whole is still seeing people leave.
For example, this Bloomberg article tells us that fewer people are leaving big cities overall since the beginning of stay-at-home orders, even if interest in moving is rising again. That said, some big cities (namely New York City and San Francisco) are getting more out-migration than most…and many of those people are migrating towards other large cities like Seattle and Los Angeles!
This does seem to mean that some suburbs and more affordable large cities will likely see home values rise soon. Even if young adults are leaving certain cities, they typically are not doing it because of that city itself, but because they want to try another big city out!
And though it may be true that large corporations, including some based in Silicon Valley, are leaving California for cheaper pastures like Texas, there’s very little indication that it has anything to do with desirability in our state as a whole. While cost is definitely a factor, the rise in remote working during COVID has definitely prompted people to leave the Bay Area at a higher rate.
So what does this all mean for you? If you live in a San Francisco condo, it means prices have dropped about 10% per sq. ft. Rents have also dropped, but the younger folks still gravitate to the city, so if you don’t have to sell right now, maybe wait. If you have been renting at the cities high rent rates and shelter in place means you are about to strangle your family as you need more space, then people are looking to the east bay where prices less that is a relative term – they are less then buying in the city and you get more space. The people who are moving out of the city to Walnut Creek or Sacramento, are driving prices up willing to pay in cash over the appraised value, because it seems relatively cheap or cheaper for them. If you currently have a condo in the east bay, they are sitting much longer. This is because rates are so low, and with no HOAs to pay, people qualify for a house, maybe not in the city they originally wanted i.e. Walnut Creek, but can get on in Concord or Brentwood. This is happening all over the United States. Austin TX, for a second year in a row has the hottest housing market in the country. I have seen friends that are retiring move out of California to TN, ID and Nevada. Having said all that the Bay Area remains a very attractive area to home buyers, and even with a slight uptick in move-out traffic, I don’t expect that to change anytime soon! As a side note, I do think California will need to get friendlier towards attracting and keeping business’s in the bay area and address the rising homeless population especially in San Francisco.
Here’s a fun, light-hearted blog for you today! As many of my clients, readers, and friends know, I’m a dog person. I love all dogs, and especially my Weimaraner, Bodie. He is my loyal companion (even if he thinks he’s the world’s biggest lapdog!). Bodie has traveled far and wide from Reno, Inverness, Monterrey to Tahoe … just an awesome companion!
Better Homes and Gardens shared this list of Top 50 dog names in 2020, and I thought it would be fun to share! I didn’t see Bodie on there, but the freelance writer on my team has two dogs: a boy named Milo and a girl named Penny – both made the lists! Would love to see your dog, so share a picture with their name!
Top 25 Female Dog Names
Top 25 Male Dog Names
Even though Bodie didn’t make it, Finn did! I always said if I got another Weimaraner I’d name it Finnegan and “Finn” for short, whether it was a boy or girl. Did your dog’s name make it?
My friends at JVM Lending put together a list of misleading rate quote tricks that I think you should be aware of. Here, I offer my clarification based on their blog. You can see more from them on their website. Read on…
From JVM: We recently had a borrower come to us with a ridiculously low rate quote for a “no cost” loan from one of America’s largest mortgage banks. The borrower insisted it was legitimate and asked us to match it, so we asked to see the other lender’s Loan Estimate, or “LE.” And, sure enough, there were $9,000 of points buried in the loan.
The loan officer was offering a loan with “no out of pocket” costs, meaning that he had merely increased the borrower’s loan amount by enough to absorb ALL of the points and nonrecurring closing costs. The confused borrower, however, thought she was getting a “no cost” loan.
Yesterday, we had another borrower come to us with a ridiculously low rate quote for a 75% LTV cash out investment property loan; the loan officer had simply misquoted because he missed all of the “hits,” or rate-increases that are associated with such a loan. In any case, the above instances prompted me to write another blog about the tricks and/or mistakes lenders make when quoting rates. Here are a few rate quote tricks and mistakes:
“No Cost” vs. “No Out of Pocket”
This is a classic ploy and it is what happened in the above instance. A true “no cost” loan means that the lender covers or pays all of the nonrecurring closing costs or one-time fees (title, escrow, appraisal, under writing, etc.) on behalf of the borrower. With a “no out of pocket closing cost” loan, the lender still charges the borrower ALL of the standard closing costs (and points in many cases); the lender, however, increased the loan amount by enough to cover all of those costs so the borrower does not have to pay them “out of pocket” at close.
“No Cost” vs. “No Points/No Fees”
Many lenders quote “no points and no fees” loans, when it really only means no lender fees (“big banks” are notorious for this). Borrowers still have to pay for their appraisal fee, escrow fees, title insurance fees, notary fees, etc. These fees can easily add up to several thousand dollars, making “no fees” quotes very misleading.
Quoting Non-Existent Rates
Some lenders quote rates associated with very short-term lock periods (under 7 days for example) that WILL only be available once a loan is fully approved. So, if rates increase between the date the loan is submitted and the date the loan is approved, the borrower is out of luck. Similarly, many lenders also underquote rates during a borrower’s pre-approval stage, knowing they will not be held accountable to that rate because the borrower is usually weeks or even months away from going into contract – when the actual rate lock will be necessary and the loan officer can then say: “oooh – sorry dude, rates have gone way up…”
Quoting Without A Full Scenario (credit score, LTV, property type)
This is a painfully common trick, too. There are as many as 12 factors that affect every borrower’s individual interest rate, as set out in this blog. Some loan officers purposely misquote before knowing all of these factors in an effort to reel in borrowers, knowing that the actual interest will likely be higher once all of the factors are known. The loan officers simply hope they can convince the borrowers that the mistake was innocent and that the borrowers will not want to endure the time or cost (especially if they pay for an appraisal) that going to another lender might entail.
Manipulating Annual Percentage Rates (APRs) and Closing Costs
In this blog called 5 Misleading Closing Cost Tricks Big Banks Play, I illuminate a lot of closing cost tricks lenders play.. These tricks include understating prepaid interest (which makes APRs artificially low), property taxes, and hazard insurance. Lenders also sometimes understate 3rd party fees and eliminate “owner’s title insurance” altogether.
What should borrowers do to avoid these tricks?
They should only use lenders with stellar online reputations and reviews; make sure they are getting quoted rates that can actually be locked, and go over their Loan Estimates with a fine-toothed comb.
From Kristin: Give me a call, and I’ll refer you to a reputable lender…like JVM! It is also hard to compare lenders because of everything noted above. If you have a bad lender the whole transaction can go south, so what I look for in lenders are ones that provide a fully underwritten approval or a DU (desktop underwritten) and ones that I don’t have hiccups with, they consistently perform and finally ones that I know are honest about the rates they are quoting.
2020 was a tough one for many, so here’s to hoping 2021 brings us all a little more joy. Have a wonderful, safe, New Year’s!