While debt markets are facing some turbulence, the secondary market for Conforming Loans (those under $417,000 for single-family dwellings) is still healthy giving providing prospective homebuyers with readily available loans at attractive interest rates. For mortgages above this threshold however, lending rates are not only higher but borrowers also face more stringent requirements.

For many parts of the country, $417,000 is a relatively high threshold relative to residential real estate prices meaning most loans will qualify as a conforming loan. In Silicon Valley however, $417,000 does not go very far. In July, the median sales price for single-family homes in San Jose was $769,000 - a number which pushes most mortgages beyond the Conforming Loan limit into Jumbo Loan (those loans above $417,000) territory.

The higher rates and more stringent lending standards results in a decrease in the number of buyers for these more expensive homes. The result is an increase in demand for rental properties as fewer buyers are able to qualify for the loans they need to purchase making multi-family a segment commercial real estate investors should play close attention to.

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