Common Building Code Violations: Is Your Home Up to Snuff?

Building codes might seem like a nuisance for homeowners, but they’re there for a reason: safety.

Many homeowners might not be aware of the building codes they need to follow, which not only puts them at risk for paying fines, but also makes them vulnerable to injury and even death.

Here are some of the more common building code violations that homeowners make, and how to avoid them.


Smoke Alarms

Whether they’re not placed in the right spot, have no batteries to keep them functioning, or are missing altogether, smoke alarm issues are one of the most common code violations among households. It’s unfortunate, because these simple and affordable devices save lives every day. Sadly, many lives are lost as a result of faulty, misplaced, or missing smoke alarms. According to the National Fire Protection Association (NFPA), the death rate is more than twice as high in homes with missing or ill-functioning smoke alarms.

Building codes require a smoke alarm to be on every level of a home and outside each bedroom. New homes must have a smoke alarm in every bedroom, which need to be battery-operated, as well as hard-wired and interconnected as a backup. That way all smoke alarms in the home will be activated if one goes off.

The way smoke alarms are installed also matters. Ceiling-mounted alarms need to be installed a minimum of 4 inches away from walls, while wall-mounted alarms must be 4 to 12 inches down from the ceiling.

Check your smoke alarms annually – if not more often – in order to make sure that the batteries aren’t dead and the alarms are still working.

Service Panels

Every time you add more electricity to your home, your electrical panels become increasingly overloaded. If it gets too crowded, an electrical fire is highly possible. All circuits need to be clearly labeled, and the main disconnect must be free and clear at all times. That way the entire electrical system can be shut off right away in case of an emergency.

Some of the more common wiring mistakes include mixing line-and low-voltage wires, and putting too many wires in a switch. Out of all areas in your home, the service panel and the area around it should be the most organized spot in your home.

Inadequate Bathroom Venting

Exhaust fans in the bathroom need to vent to the outdoors and not into the attic. Whether it’s through the side of the house or the roof, all the moist air from the bathroom needs to completely leave the house.

If the fans vent into the attic, a ton of moisture will be released into that space. In hot weather, mold can easily develop; in colder weather, the moisture will condense on the underside of the roof and lead to rot.

Handrails With No Returns

Not only do stairways need handrails, the handrails themselves need to have “returns.” That means the handrails must turn and end at the wall, and need to be positioned between 34 to 38 inches above the stairs.

The reason for these returns is to prevent things from getting caught at the end of the handrails, leading to a fall. Purse straps and sleeves are notorious for getting caught; returns help avoid this potential hazard. 

As a homeowner, it’s your duty to understand building codes, and how they can help make your home a safe one. While the above code violations may be common, they don’t have to be with a little due diligence.

Buyer’s Guide to Jumbo Mortgages

If you’re planning on purchasing a high-priced home and leveraging the majority of the money to pay for it, you’ll likely need a jumbo mortgage.

Almost 90% of mortgages are backed by either one of two major government-sponsored enterprises: Fannie Mae and Freddie Mac. Part of the remaining 10% are considered jumbo mortgages, a home loan option for expensive homes that approach the $1 million mark and beyond.


What is Considered a Jumbo Loan?

It’s helpful to first understand what conforming loans are. Fannie Mae and Freddie Mac guarantee mortgages as a means of freeing up liquidity for banks so these financial institutions can underwrite more loans to the average consumer. The mortgage needs to meet specific securitization guidelines and limits in order to get these government guarantees. Home loans within these limits are classified as “conforming” loans.

One of the most important requirements for a conforming loan is the amount of the mortgage. In most parts of the US, the limit for conforming home loans is $417,000 for a single-unit home. In certain high-priced markets, such as New York City or San Francisco, the limit jumps to $625,500.

Out of the 3,143 counties in the US, this is how the current loan limit is broken down:

  • 2,916 counties have a cap of $417,000;
  • 108 counties have a cap of $625,500;
  • 115 counties have a cap that’s somewhere between $417,000 and $625,500 (these markets have home prices that are higher than average, but not as high as San Francisco, for example);
  • 4 of the 5 counties in Hawaii have caps that fall somewhere between $657,800 and $721,050.

In general, any home loan that surpasses the above-mentioned limits is classified as a jumbo mortgage, and is typically used to buy an expensive home. These types of loans are considered “non-conforming” because they exceed Fannie Mae and Freddie Mac’s caps. These government agencies’ requirements don’t apply to jumbo mortgages, nor can they ever purchase them. Fannie Mae and Freddie Mac only buy loans that meet their guidelines for down payment, credit score, and loan size.

Getting Approved For a Jumbo Loan

Following the housing crisis in 2008, the requirements to get approved for a jumbo mortgage were pretty stringent, but jumbo approvals have become more lax and flexible these days.

For starters, down payments on non-conforming can now be as low as 10% for mortgage amounts of $1 million, as opposed to the minimum 20% that was required years ago. Not only that, jumbo loans don’t necessarily require mortgage insurance, unlike conforming loans.

However, borrowers will typically need to pay a slightly higher interest rate – usually about 0.25% higher – compared to conforming loans, and debt-to-income ratios for such low down payment jumbo loans must be between 30% to 36%.

If, on the other hand, at least 20% is put down, lenders may accept higher debt-to-income ratios. Your total monthly housing payment along with all your other monthly bills will be calculated. If it isn’t more than 43% of your income, you may still be approved.

Your credit score also plays a key role in your eligibility for a jumbo loan, just like it does with conforming loans. If your score is less than 680, you’ll have a tough time getting approved for any type of home loan.

Lenders typically like to see credit scores of at least 720 for borrowers applying for jumbo loans. Some banks want to see scores even higher than that. Of course, the higher your score, the better. If your score is at least 780, you’re almost guaranteed approval and the lowest interest rate.

Your reserves – or the money you’ve got left over after your mortgage closes – will be closely looked at by your lender. The requirements for jumbo loans are more strict compared to conforming loans.

Lenders will usually want to see 12 months of reserves after the mortgage closes – half of the money needs to be liquid, and the other half will be calculated from any of your retirement assets. If you’re putting a high down payment and have a low debt-to-income ratio, you may be exempt from this rule.

The Bottom Line

A jumbo loan just might be the ideal solution for your particular financial situation, especially if you’re looking at buying a pricey residence. It’s worthwhile to shop around for a jumbo mortgage, just like any other type of mortgage, to make sure you get the best rate and terms on your overall home loan package. Get yourself a trusted mortgage specialist who will do all that legwork for you. 

What You Should Know About Having a Co-Signer on Your Mortgage

Bad credit. Insufficient income. Inadequate down payment. These reasons – and many more – can stand in the way of getting approved for a conventional home loan.

Many would-be homeowners often turn to others as co-signers in order to get approved for the mortgage they so desire.

Whether you’re just starting your career and are moving out of your parents’ home for the first time, are self-employed and don’t have tax returns to fully reflect your actual income, or are in some other type of financial predicament that is affecting your ability to get approved for a mortgage on your own, having a willing co-signer may be just what you need to be qualified for a home loan.

But before you add a co-signer to your mortgage, there are a few things that you both should know first before making such a huge commitment.


Two Types of Co-Signers

There are two types of co-signers who can get in on the mortgage:

1. Occupant co-signer – These are co-signers who physically live in the home, such as parents or other extended family members. Lenders will want to closely analyze the location and cost of the current property, and will also make post-closing occupancy checks to make sure they’ve actually moved into the house.

2. Non-occupant co-signer – These are co-signers who do not and will not live in the home, and are more common than occupant co-signers.

Co-Signers Versus Co-Borrowers

It’s common to confuse “co-signer” with “co-borrower,” but in the eyes of the lender, they’re two different things.

Co-signers take on the financial liability of the mortgage if primary borrowers aren’t able to fulfill their obligation. Despite the fact that co-signers might have to pay for the mortgage, they don’t actually have any security interest in the property. Depending on how the contract is worded, co-signers may not be able to take over the home securing the mortgage if they end up having to pay the loan.

Co-borrowers, on the other hand, have ownership in the property securing a loan. They must sign the mortgage papers and assume liability for repaying the loan if the primary co-borrower doesn’t.

Co-Signers and Title

Generally, co-signers are not on the title of a property, which makes this decision a potentially risky one. Co-signing comes with all of the responsibility of having to pay the loan, but with none of the benefits of ownership.

As stated above, co-borrowing works somewhat differently. If the borrowers take title as joint tenants, both occupant and non-occupant co-borrowers will retain equal ownership to the home. On the other hand, if the borrowers take title as tenants in common, both occupant and non-occupant co-borrowers are free to define their ownership share of the property.

Credit Risks For Co-Signers

It’s no secret that homeowners who are not able to make good on their mortgage payments should expect their credit scores to be hit hard. Even one missed payment can slash huge points off of their scores.

But the credit scores of co-signers who are on title will also be negatively affected, even though they never intended on having to contribute to mortgage payments. Since they are considered co-signers, they are technically responsible for any missed mortgage payments.

The responsibility to make payments on time as per the mortgage contract is still 50/50 between both parties. So if the occupant co-borrower misses a payment, the co-signer can expect a ding to their credit as well.

Co-Signers’ Borrowing Power Can Be Affected

If there are any missed payments on the mortgage, they’ll not only be documented in the occupant co-borrower’s financial history, but also on the co-signer’s. That means the co-signed home loan can count against co-signers when they try to qualify for any type of personal loan in the future.

Ownership Interests of Co-Signers

A mortgage is a legal and binding contract, so any person who enters it – including the co-signer – is personally obligated to honor its terms if the primary borrower misses the monthly payments. Despite this legal obligation, co-signers often have no ownership interests in the property purchased by the primary borrowers. The house basically acts as security for the mortgage, and co-signers remain liable for its payments even if occupant co-borrowers don’t keep up their end of the bargain.    

At the end of the day, co-signers are basically agreeing to make the mortgage payments if the occupant co-borrowers don’t. If you need a co-signer to qualify for a mortgage, make sure that all of the legal responsibilities are fully communicated and understood. 

6 Questions to Ask Your Home Inspector

It’s a no-brainer: there are very few instances where you wouldn’t insert a home inspection clause in a contract to purchase a home. A property may look flawless on the surface, but you just never know what’s lurking in the attic or in the electrical panel. The best way to protect yourself from a potential money pit is to hire a home inspector to take an in-depth look at the property in question before you seal the deal.

But just because you’ve allowed the inspector to take the reigns to investigate any potential issues, that doesn’t mean you won’t have the chance to ask some very important questions.

Here are some things you should be asking your home inspector to make sure you’re in-the-know about what you’re dealing with.


1. May I see your home inspector license?

Professional inspectors have no problem with being asked this question, and should always have their license readily available to show their clients. In fact, they’re required by law to carry their licenses on the job. You want to make sure the person who is conducting the inspection is trained and licensed to do so, or else you’re wasting your money and are possibly leaving potential problems uncovered.

2. What does the inspection cover?

It should be noted that a home inspection is not exactly going to uncover every issue with a property. The only way to know for sure if there are any lingering problems with the property is if you physically rip out drywall and flooring.

Still, inspections can uncover many issues that you would likely not have noticed yourself. After all, you won’t be crawling around in the attic or climbing the roof at a showing. But while the majority of home inspectors follow a standard protocol, you should find out exactly what will be covered during your specific inspection.

It’s important to make sure that the inspection report meets all necessary requirements as set forth by your state, and complies with a recognized code of ethics. The report will be made available to you shortly after the inspection has been completed. If there are any areas of concern that you want to have inspected, ask. If the inspector does not cover these specific issues, ask for referrals to specialists who can conduct further inspections.


3. Who can you refer me to fix certain issues?

An honest home inspector will fill you in on whether someone will need to be hired to fix specific problems, or whether they are minor enough for you to fix them yourself. Many helpful inspectors will tell you where to go to, what to buy, how much the material will cost, and provide you with pointers on what to do. This type if information is really useful, as it will identify all the tasks are potentially DIY-type items.

For more complex repairs, your home inspector should be able to offer you referrals to the reputable electricians, plumbers, roofers, and contractors that you can get in touch with right away and get quotes from during the contingency period. Being armed with the cost of certain repairs that need to be done can help you negotiate with the seller. 

4. What repairs need to be done right away, and which ones can wait?

Many home inspection reports can be quite lengthy, and include what seems like a never-ending list of things that need to be done to bring the home up to par. This list can be overwhelming, but it doesn’t necessarily mean that all the tasks need to be done right away.

Ask your inspector to point out the repairs that need to be done immediately for safety’s sake, and those that are more minor in mature that can wait. That way, you can prioritize the work that you plan on doing, and budget accordingly.


5. How do you work that?

Many home inspectors are happy to show you how to work different systems on the property, including the breaker panel, thermostat, smoke detector, and emergency water shutoffs, just to name a few. For this reason alone, it’s worth it to be present during the home inspection.

6. How long will the major systems and structures last before needing replacement?

Systems like the furnace, hot water heater, roof, and appliances are expensive items. If they are nearing the end of their expected lifespan, you’ll be stuck paying for it.

For instance, a new roof can cost you a pretty penny; replacing the entire roof can cost anywhere between $5 to $8 per square foot, depending on where you live and the type of material being used. So, for 1,000 square feet of roof space, you can be looking at as much as $8,000 to replace the roof. That’s a big expense, and if you’ll have to cover this expense some time soon, you might want to negotiate that fact into the purchase price with the seller.

A big mistake that many buyers make during home inspections is failing to ask important questions. Inspectors expect questions; in fact, they welcome them. No question is too silly; the answers you get might actually come in handy for renegotiating a lower price.

Why Did My Mortgage Payments Increase?

Just because you’ve locked into a fixed-rate mortgage doesn’t mean your mortgage payments won’t change some time in the future.

This can come as an unpleasant surprise, especially when you’re trying to manage a budget. If you’ve allocated a specific chunk of your income to your mortgage, your budget can be thrown for a loop when these payments increase.

As frustrating as it may be to experience a boost in your mortgage payments, it’s still possible to predict if they will increase in the near future. At least you’ll have some time to reshuffle your budget to make sure every debt payment you make will be sufficiently covered each month.

Here are some reasons why your mortgage payments may increase, and signs that a hike is on the horizon.


Your Annual Property Taxes Are Being Reassessed

Every year, homeowners receive a property tax assessment. If the housing market has been a strong one – which it has been lately – you can bet that your property taxes will increase.

Every homeowner wants the value of their property to increase, thereby boosting home equity. But property taxes tend to follow close behind. In order to anticipate a tax increase approaching, try to keep tabs on what other homes in your neighborhood are selling for. Your real estate agent can help gather that info for you. If you notice that other homes have been selling for a lot more than what you bought your home for, and aren’t lasting long on the market, that’s a pretty good sign that your property taxes might increase

Your Homeowner’s Insurance is Up For Renewal

Before getting approved for a mortgage, your lender will want to make sure that your home is insurable, and that you’ve taken out home insurance. Just like other types of insurance, property insurance premiums are likely to increase every year. Reputable insurance providers will send out notices well in advance of any changes to premiums, which will give you a head’s up that an increase in your mortgage payments is about to take place.   

You do, however, have some control over how much you pay for your homeowner’s insurance. It’s in your best interests not to overvalue your home when you’re trying to determine how much insurance to take out for it. You only need what’s required to fix or rebuild your house if was destroyed by a natural disaster, vandalism, or other incident.

The Balance in Your Escrow Account is Low

Your mortgage payments will include property taxes and homeowner’s insurance if you choose not to handle these fees separately. In this case, an escrow account will be opened. Every year, your lender will go through your escrow account to make sure there is enough money in there to cover your property taxes and insurance. If not, you can expect your mortgage payments to increase as a result. You can choose whether to pay this amount in a lump sum, or in monthly installments along with your home loan payments.

Your Interest-Only Period Ends

If you’ve got an interest-only mortgage, you’ll likely see an increase in your mortgage payments when this period ends. The average interest-only mortgage has an amortization period of 10 years. But after this time has passed, you won’t be able to make interest-only payments any longer. At this point, it’s necessary to pay both principal and interest, which will increase your payment amounts.

The fully amortized payments will be a lot higher compared to the interest-only payments, considering the fact that your principal payments have been deferred for 10 years. Since the principal portion of the mortgage remained untouched for all that time, you’ll have to start pitching in for it, which means more money out of your pocket.

When you take out a mortgage, make sure your lender fills you in on all the ins and outs about your payments, including the likelihood of your payments increasing at some point in the future. That way you’ll be better prepared once that happens, and will be able to budget accordingly.

Why Aren’t Enough Homes in California Being Built to Meet Demand?

The housing market in California has been characterized by sky-high prices, fierce competition, and affordability issues. While there are a few factors that have contributed to these scenarios, tight inventory is one of the biggest.

There simply aren’t enough homes in the state to accommodate for all the would-be buyers out there, which has forced many to continue to remain renters for longer than they would have liked. 


With low supply and high demand, it’s not hard to understand why prices are so high in many centers, and continue to rise. In fact, California is home to the country’s most expensive housing markets, keeping low- and moderate-income families out of the world of homeownership.

Median home prices in the San Francisco area currently sit at $1.225 million, and a whopping $2,537,126 in Newport Beach, to name a few.

Overall, the median home value in California is $463,600, an increase of 6.2% over the past year. That’s twice the national average of $232,500. While price hikes have slowed somewhat, they are still expected to continue to increase by another 2.1% within the next year.

To put affordability issues at bay and meet the high demand, more houses need to be built. In fact, in LA alone, a million more homes need to be built just to keep up with demand.

So why aren’t they? 

Builders are forced to contend with incredibly stringent regulations in the state, including building codes, land use regula­tions, environmental laws, impact fees, and administrative fees to enforce these reg­ulations.

This, in turn, generates exorbitant costs to build, which can significantly delay and even halt altogether any plans of future development that’s in dire need right now. And along with such regulations comes major expenses. It’s simply too costly for builders to have to go through all the red tape associated with getting the permission to build on land across the state.

Regulations come in many different forms, and can be enforced by various levels of government. County, state, and federal fees can add tens of thousands of dollars to a new home’s price tag. According to a report from the National Association of Home Builders, regulations imposed by the government add a sizeable $84,671 to the final price of a new single-family home.

Considering how expensive it is to contend with these regulations, developers just don’t have the motivation to build. If they did, they would inevitably have to price their homes higher in order to cover their costs and make a decent profit, which would severely limit the pool of buyers who can actually afford the homes.

So far, the powers-that-be in California have only come up with temporary fixes to deal with housing affordability issues, including subsidizing a handful of low-income housing programs. But these programs are marginally effective; they merely put a cap on housing choices at the expense of the hard-working taxpayer.

The obvious solution is to revisit restrictions and regulations, and identify areas that can be eased up on in terms of limitations and expenses. Building more homes can safely help to alleviate housing affordability and the squeeze on supply, but builders need a break on the cost associated to acquire land and build. 

California Suburbs Expanding, But Supply is Still Tight

Population growth continues to swell in many centers across the state of California, and while the big cities have typically been the focus of major population growth, this trend is now expanding to surrounding suburbs.

Thanks largely in part to a shortage of inventory, buyers are looking to places where they can snag a home at a decent price, and the suburbs are a viable option – sometimes an only option for many.


The population in California grew just under 1% since the same time last year, and now sits at 39.3 million residents. But despite the typical appeal of big city life, more affordable suburb living is apparently attracting more and more residents.

In particular, suburbs outside of the San Francisco and Los Angeles areas grew especially quickly in 2015. The fastest population growth went to suburban areas in San Joaquin County, west of the San Francisco Bay area, which grew by 1.3% to 733,000 residents. More and more people are flocking to this area to get away from the exploding housing prices that San Francisco has been experiencing over the recent past, while still taking advantage of a reasonable commute into the city.

Following closely behind San Joaquin County are Yolo, Riverside and Santa Clara counties. As far as suburban cities over 30,000 people are concerned, Porterville, Eastvale, Lake Forest, Beaumont, Santa Clarita and Lake Elsinore grew the fastest, which are located in this Inland Empire and Orange County area.

In fact, the majority of the 482 cities across the Golden State experienced population growth in 2015, helping California obtain the title of 8th-fastest growing state in the country.

With 450,000 new jobs added last year in both city and suburban centers, California’s economy is a robust one, helping to contribute to migration within the state. But finding an affordable place to buy in big cities is a challenging feat, leading to migration to surrounding suburban areas.


Affordable housing inventory in the state is simply not keeping pace with its population growth. With stringent regulations and sky-high expenses that new home builders are faced with, new housing development continues to be an issue.

But such new developments is exactly what’s needed to deal with the current inventory and affordability issues that are plaguing the state. And while residents are looking to set up shop in suburban areas where housing is more affordable, inventory is still tight.   

Roughly 13% of the US population lives in California, yet the state only accounts for 8% of all national building permits. California’s housing stock would have to expand between 6% and 7.5% – or 800,000 to 1 million additional residential homes. In Los Angeles County, another 180,000 to 210,000 units, would have to be built, and in the San Francisco Bay Area, an additional 170,000 units would need to be constructed.

It’s a vicious cycle: it’s expensive for developers to build, increasing the final sale price of new residential units. Meanwhile, such shortage of new home builds is contributing to inventory shortage, further contributing to sky-high prices and a dire housing affordability issue in the state.

Residents are taking to suburban areas, where housing availability and affordability are better, but not necessarily where it should be.

Can the Presidential Election Affect the Housing Market?

The current presidential election is definitely an interesting one, capturing the attention of not just Americans, but people across the globe. We’re still quite a ways away from November when the 58th Presidential Election Day takes place on the 8th, which means things are only going to get even more heated.

But as fascinating as it is, what’s also intriguing is how such an election can affect other facets in the country, including the housing market.

So how and why would the election have such an impact?


Presidential Elections and the Economy

Presidential elections tend to reflect the underlying mood of the economy, and essentially consumer confidence. History has shown that voters tend to be much more confident and optimistic in a robust economy, which drives consumer spending along with restored enthusiasm for housing. Homeowners and homeowner-hopefuls zealously enter the market with the notion that the American Dream is alive and kicking, which helps spike property values as returning politicians head back to office.

The opposite is also true. When the economy is struggling, consumer confidence nosedives. This, in turn, puts pressure on consumer spending, sending housing prices right down with it.

It’s happened throughout history, and it’s well-documented. Studies have even been conducted on the effect that presidential elections have on the economy and the housing market. The British Journal of Political Science published a paper in 2014 which details the observation of home sale and price trends during elections. The study involved analysis of data from 1999 to 2006 during 73 of those elections. What they discovered was that the price of homes dropped two- to three-tenths of a percentage point.

Other studies discovered similar findings. In 2012, showed that the housing market was affected by presidential elections using data from the California Realtors Association (CAR). They found that housing prices increased 1.5% less than in the year right before the elections, and 0.8% less than in the year right after the election. This might not seem like a lot, but little differences like these can really add up with time. The year of a presidential election could realistically cause property values to decline.

Elections Effect Consumer Confidence

Two different studies, same conclusion. Consumers look as if their confidence lacks when they’re in the midst doubt during these elections. Basically, consumers aren’t comfortable enough with the economy’s strength to make such a huge purchase. It’s not hard to accept the fact that when the economy is somewhat weak, as it is now, it directly mirrors consumer confidence.

Elections place a lot of weight on the shoulders of consumers who may have been in the market to buy a home. Every president that steps into office might have very different policies on housing and mortgages that could potentially impact buyers. Consumers are concerned about such effects, and many would simply rather wait it out and buy only when they feel certain that politics have stabilized.

Until then, and until the economy shows major signs of strength and stability, consumers just aren’t as apt to making a massive financial decision such as a home purchase. They’d much rather wait until all the uncertainties blow over, including who is elected to head the country. And the fact that the race is such a tight one so far this year means the uncertainty is even more prominent.

How Does This Affect Buyers and Sellers?

Experts anticipate housing prices to increase by about 3% this year, which is lower compared to recent years past. It’s highly possible that such speculation is related to the fact that a presidential election is looming. Some say that anyone willing to accept added risk might be able to snag a good deal on a home purchase. Others say it could take longer for sellers to find the right buyer, and recommend that sellers either sell the year before or after the election to take advantage of slightly higher property values.

Either way, it’s important to pay close attention to the market, regardless of whether there’s an election or not, before buying or selling. Everyone’s specific financial situation is different, and by working with a real estate agent and mortgage broker, you’ll be in a much better position to make a sound buying or selling decision.

Silicon Valley Housing Market Finally Cools Off After Extended Price Climbs

Are we finally seeing a slowdown in the Silicon Valley housing market?

Data seems to suggest so.

After record-breaking price climbs in the luxury housing market over the past few years, it looks like the tech-rich strip in the Golden State is finally entering a cooling off period. Homes over the $5 million mark took an average of 16 days to sell in April, compared to 11 and 10 days during the same months in 2015 and 2014, respectively.

After four years of bidding wars and skyrocketing prices entering multi-million dollar figures, the real estate market in the most expensive housing market in the US is finally experiencing a small pullback by some of the state’s wealthiest buyers.


So, what’s lead to the slowdown?

Chinese Investments Slowing Down

Financial markets in China, Greece, and other nations across the pond have been hurting over the past few months, and the economy on local soil has also seen better days. According to a report from PricewaterhouseCoopers, international investments in Silicon Valley dropped nearly 20% over the first quarter this year, compared to the same time in 2015.

Chinese buyers, who have been instrumental in driving housing prices up in the state, have scaled back their investments in California real estate. The Chinese government is cracking down on investment capital being sent outside Chinese borders.

Until very recently, Chinese investors had been purchasing around 5% to 7% of residential properties just in the San Francisco area alone. Net Chinese foreign exchange sales dipped to $23.7 billion in April from $36.4 billion the month before, and from $54.4 billion in January.

Tech Niche Cooling Off

Concerns over a slowdown in the technology industry may also be contributing to the dampened demand for homes in the higher price bracket, though interest in the more moderately-priced housing market continues to be rather strong.

Silicon Valley realized an unbelievable boom in the high-tech industry over the past few years, helping to contribute to the extremely high home prices we’ve been used to seeing in the area. But experts agree that such a boom is unsustainable, as is the job growth associated with the industry. At some point, a correction is likely inevitable. Right now, the decline is marginal, but some worry whether a decline will become more significant at some point in the near future.

Uncertain Economy

The global economy as a whole is on weak ground, and the economy on home soil is also experiencing a degree of difficulty. Buyers are more concerned about making a large purchase during times like these, and are more cautious about how they spend their hard-earned capital.

While mortgage interest rates are still very low, there’s concern over how soon and by how much they will increase following the Federal Reserve’s decision to increase rates this past December. And the fact that we’re in a presidential election year isn’t making matters any better. History suggests that consumer spending confidence tends to lag when a new person is slated to take over the country. 

With uncertainty of the US economy plaguing the housing market, buyers are more apt to take more time before deciding to make offers.

Whatever the reason for the current cooldown in Silicon Valley, perhaps it was time for the local market to finally take a breather.