We heard so much about subprime loans go under lately. No-named lenders closed doors, foreclosures rates go up. In fact, National Association of Realtors predicts that 13% of the homeowners who purchased houses between 2003-2006, will go into foreclosures.
But wait, this is not true in Bay Area cities: San Francisco, Los Altos, Palo Altos, Cupertino, Sunnyvale and the greater Bay Area.
Be very careful, don’t be fooled by the National figures. Real Estate is a very LOCAL business. Especially in Bay Area, since the beginning of the year, we’ve seen multiple offers and prcing wars. A desirable condo in the mid-500k range will be sold over the weekend when it came to the market, if not sooner. Demands are still surpassing supplies. Particularly in good school districts as Palo Alto, Los Altos and Cupertino.
The only people need to be worried about subprime loans are those who are in less perfect credit histores and using aggressive adjustable mortgage loans such as 100% financing or interest only types. Because once after their “honey moon period” is over, the interest rate will raise a few points, and they will have problems to pay the extra hundreds dollars each month. And that will lead to defaults and foreclosures.