1.
Real Estate Real Estate M Maarrkkeett U Uppddaattee – – Q Q44 2 2001144

2.
Overview Overview f oforr S Siliilcicoonn V Vaallleleyy
The Silicon Valley Real Estate Market continues to be driven by high demand
due to continued job growth and population growth.
As affordability decreases, prices are beginning to flatten out. Multiple offers
are still being seen in communities with <30 minute commute to tech jobs and
neighborhoods with high scoring schools.
Lenders are beginning to loosen borrower requirements via the acceptance of
lower credit scores. However, underwriting of loans continue to demand tons
of documentation from borrowers about debt, credit history, and reserves.
Low interest rates continues to drive consumers to keep looking and
predictions of higher interest rates in 2015 will continue to drive consumer
demand to buy now instead of later.
Sellers with equity are recognizing 2015 as the year to sell and either upgrade
their home/neighborhood or move out of the area.

3.
(Number of consumers viewing homes for sale.)
Some seasonal stats but
mostly interest rate driven.

4.
Banks make money when they lend money.
Look for increased availability of loans to continue into 2015.

5.
Scores are just one component.
Lenders evaluate total risk. As the
economy improves, lenders relax
requirements.
EllieMae

6.
FHA and Fannie Mae loans require
as low as 3-5% down payment.
For buyers with good monthly
income, low debt, but do not have
20% down, these loans are key to
buying a home.
EllieMae

7.
30 Year Fixed Rate Mortgages
Fed stopped buying bonds and we expected rates to
go up. However, EBOLA, and the European markets
actually pushed rates down to 3.98% in early
November.
Freddie Mac
Actual Rates
January 2013 – October 2014
Freddie Mac 10/2014

8.
Mortgage Rate Projections
Everyone continues to watch employment numbers,
Europe, consumer confidence, and inflation.
Analyst Projected Rate
2015 4Q
Fannie Mae 4.7%
Freddie Mac 5.1%
Mortgage Bankers Assoc 5.1%
National Assoc of Realtors 5.4%

9.
30 Year Fixed Rate Mortgages
Affordability for SV will be impacted more by projected rate increase
than actual price increase for 2015.
1/2013 10/2014
Freddie Mac
Projected Rates
June 2014 – 2015 4Q
Freddie Mac 10/2014
Freddie Mac Rates
January 2013 – October 2014

10.
Date Mortgage Interest Rate* P&I**
Today $500,000 3.98% $2,381.31
2015 4Q $520,000 5.1% $2,714.75
Difference in Monthly Payment $333.44
*Average Commitment Rate per Freddie Mac **Principal and Interest Payment
Monthly Annually Over 30 Years
$333.44 $4,001.28 $120,038.40

11.
Date Mortgage Interest Rate* P&I**
Today $1,000,000 3.98% $4,762.63
2015 4Q $1,040,000 5.1% $5,429.50
Difference in Monthly Payment $666.87
*Average Commitment Rate per Freddie Mac **Principal and Interest Payment
Monthly Annually Over 30 Years
$666.87 $8,002.44 $240,073.20

12.
Buyer’s Purchasing Power
5.25 $ 2,761 $ 2,692 $ 2,623 $ 2,554 $ 2,485
5.00 $ 2,684 $ 2,617 $ 2,550 $ 2,483 $ 2,415
4.75 $ 2,608 $ 2,543 $ 2,478 $ 2,412 $ 2,347
4.50 $ 2,533 $ 2,470 $ 2,407 $ 2,343 $ 2,280
4.25 $ 2,460 $ 2,398 $ 2,337 $ 2,275 $ 2,214
4.00 $ 2,387 $ 2,327 $ 2,268 $ 2,208 $ 2,148
3.75 $ 2,316 $ 2,258 $ 2,200 $ 2,142 $ 2,084
$ 500,000 $ 487,500 $ 475,000 $ 462,500 $ 450,000
-2.5% -5% -7.5% -10%
RATE
Principal and Interest Payments
rounded to the nearest dollar amount.

13.
Buyer’s Purchasing Power
5.25 $ 5,522 $ 5,384 $ 5,246 $ 5,108 $ 4,970
5.00 $ 5,368 $ 5,234 $ 5,100 $ 4,966 $ 4,831
4.75 $ 5,216 $ 5,086 $ 4,956 $ 4,825 $ 4,695
4.50 $ 5,067 $ 4,940 $ 4,814 $ 4,687 $ 4,560
4.25 $ 4,919 $ 4,796 $ 4,673 $ 4,550 $ 4,427
4.00 $ 4,774 $ 4,654 $ 4,535 $ 4,416 $ 4,297
3.75 $ 4,631 $ 4,515 $ 4,400 $ 4,284 $ 4,168
$1,000,000 $ 975,000 $ 950,000 $ 925,000 $ 900,000
-2.5% -5% -7.5% -10%
RATE
Principal and Interest Payments
rounded to the nearest dollar amount.
Multiple offers not nearly as scary as higher interest rates!

14.
Decade Average Rate
1970s 8.86%
1980s 12.7%
1990s 8.12%
2000s 6.29%
Freddie Mac
Historic Mortgage Rates by Decade
My first home in California 1992 – 8.25%!!

15.
Case Shiller
Year-Over-Year PRICE
CHANGES
Prices will flatten over the remaining of
2014 and into early 2015. Now is the
time for buyers to seriously consider
making an offer on a home.
S&P Case Shiller 10/2014

16.
S&P Case-Shiller Home Price Indices
Not a bubble.
Not speculative.
Not yet meeting demand of a growing population.
S&P Case Shiller 10/2014

17.
% Change in Sales from last year
For Silicon Valley about 10%
by Price Range
NAR 10/2014

18.
Renting will not improve your financial wealth.

19.
Year-over-Year
Inventory Levels
As homeowners regain equity, more and more homes will come onto the market
in 2015. More inventory will help control prices but buyers must be aware of
rising interest rates on loans.
NAR 10/2014

20.
As the 5th most populated county in California, Santa Clara County is projected to increase
population at a rate of 1.2% or about 25,000 people each year over the next 20 years. For more
demographic information visit this link.

21.
2015
PREDICTIONS
2015
PREDICTIONS
1. Housing prices will continue to increase but at a slower rate than 2014. Projection: 5%-8%
for 2014 in Santa Clara County.
2. Rents will continue to increase 5-10% in Santa Clara County with higher rents driven by
city, schools, and commute.
3. Morgan Hill, Gilroy, and North San Jose will heat up as new construction is greatest in
these localities. Expect jumps in rents for North San Jose (commute) and price increases
for Morgan Hill/Gilroy as they close the gap back to 2007 peak.
4. Expect Willow Glen and Campbell to flatten out as availability of homes and schools will
keep average sales price gain =/<5% for 2015. Look for builders to continue to grab
older/rehab homes with all cash.
5. Watch Saratoga/Cupertino/Mountain View/Los Altos, and Palo Alto to continue push
average sale price up with a projected gain of 10% in 2015.
6. Expect commute time to increase for South Bay residents as mass transit is far behind job
growth.
7. Expect 2% increase on updated assessed value for property taxes.
8. Ability to obtain a loan become easier due to improved economy and lower volume of
applications.
9. Expect interest rates to increase to 4.75% by summer 2015.
10. Expect El Dorado County to become one of the fastest growing counties in California due to
Prop 60/90 property tax transfer. (Silicon Valley retirees can buy a larger home and still be
close to family and all the Bay Area/Tahoe offers.)

22.
InIn S Suummmmaarryy
Silicon Valley continues to be a unique real estate market, unlike any other in
the country. Our market is driven by job generation, climate, and cultural
diversity.
2015 is projected to see continued growth for jobs, rents, home prices,
population, and an overall better economy.
We all need a home and at Veridian Realty Group, we have the professionals
to help you not only determine how to afford buying a home in Silicon Valley,
but also the neighborhood knowledge and negotiation skills to work on your
behalf in a high integrity manner.
Call us today to set up time to discuss your goals. 888.858.2386
Or visit us on the web at VeridianRealtyGroup.com

23.
Resources
http://www.freddiemac.com/finance/pdf/October_2014_public_outlook.pdf
http://www.fanniemae.com/resources/file/research/emma/pdf/Economic_Forecast_102314.pdf
http://www.mortgagebankers.org/files/Bulletin/InternalResource/89713_.pdf
http://www.realtor.org/sites/default/files/reports/2014/embargoes/phs-09-29/forecast-10-2014-us-economic-outlook-09-29-2014.16-17 Edelman Berland Survey http://finance.yahoo.com/news/prudential-real-estate-q3-consumer-164800563.html
KEEPINGCURRENTMATTERS.COM
Slide Slide Title Link
5, 6, 8 Existing Home Sales, Pending
Home Sales, http://www.realtor.org
7, 9 Foot Traffic https://magic.piktochart.com/output/3039836-foot-traffic-september-2014?sf5159951=1
10 Mortgage Credit Availability http://www.mba.org/ResearchandForecasts/MCAI.htm
11, 12 Average FICO Score Conv,
Average FICO Score FHA https://www.elliemae.com/resources/origination-insight-reports
13 Mel Watt Quote http://www.fhfa.gov/Media/PublicAffairs/Pages/Prepared-Remarks-of-Melvin-L-Watt,-Director,-Federal-Housing-Finance-Agency-14 30 Year Fixed Rate http://www.freddiemac.com/pmms
15 Mortgage Rate Projections
18 30 Year Fixed Rate Projection http://www.freddiemac.com/finance/ehforecast.html
19-22 Cost of Waiting Slides http://www.freddiemac.com/finance/ehforecast.html
23-32 Buyer’s Purchasing Power http://www.keepingcurrentmatters.com/infographics/purchasingpower
33 Historic Mortgage Rates http://www.freddiemac.com/blog/research_and_analysis/20140324_dirt_cheap_to_cheap.html

24.
Resources
KEEPINGCURRENTMATTERS.COM
Slide Slide Title Link
35, 36 Existing Home Sales, Pending
Home Sales, http://www.realtor.org
37-39 Case Shiller http://us.spindices.com/index-family/real-estate/sp-case-shiller
40, 41-43 % Change in Sales by Price
Range, Months Inventory, http://www.realtor.org
44 Year-over-Year Inventory http://www.realtor.org
45 %of Distressed Property Sales http://www.realtor.org
49 Joe Pulizzi Quote http://contentmarketinginstitute.com/author/joepulizzi/