The availability of mortgage credit is increasing, driven by a rise in the number of jumbo Adjustable Rate Mortgage programs in the market, according to the Mortgage Bankers Association’s latest Mortgage Credit Availability Index.

In addition, minimum credit scores and maximum loan-to-value ratios for FHA and VA loans have been loosened while the availability of high balance loans for the two programs has increased.

According to the Mortgage Bankers’ Index, lending standards are roughly 16 percent looser than two years ago.

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Comments from “Plugged-In” Readers

  1. Posted by SFrentier

    Wonder how long it’ll be until they bring back low doc loans for people with assets?

    • Posted by san FronziScheme (formerly known as lol)

      Low doc loans were a scourge in the last cycle. Yeah your assets were great thanks to the bubble and you could claim everything and anything in your income without providing much proof. A flipper friend played this card, inflating his tax return, paying more in taxes, all for the purpose of declaring twice more income than he was collecting. To the mortgage broker he’d say he had “other sources of income” overseas and couldn’t get all the paperwork and anyway it was in Flemish… I can’t believe with how many 1/2 truths he got away with. I hope they never come back. They’re an invitation to fraud and runaway speculation.

      • Posted by SFrentier

        They’ll be back, and make perfect sense for us serious investors with enough real assets to back the loans up.

        • Posted by san FronziScheme (formerly known as lol)

          My friend also has tons of assets, but he had this “incredible deal” and with the 2003-2006 bull market all of his caution went out the window.

          It’s pretty easy to say we will not fall into the trap of the giddy market that seems to last forever. 2001 looked like the “normal” correction that came roughly a decade after the last downturn. By projection, the next correction was supposed to happen only around 2011 or so. Except that for a number of reasons the 2001 correction was not allowed to run its course and we immediately moved to a crazy debt craze. Almost everyone fell for it and the Great Recession ensued.

          Long story short: I always borrow less and pay back faster. Always in very cautious deals. I am probably missing out, but I get to sleep really well at night.

  2. Posted by SFrentier

    Who’s your friend? That SF Garage dude John pollard?

    • Posted by san FronziScheme (formerly known as lol)

      Nope. There were too many people running over themselves thinking they would be tycoons in one market cycle.
      I was a pretty poor inspiration to a few of my friends. I had caught the cycle at the bottom in the 90s and stopped buying in 2003. It was almost too easy and when you say you have x places people think they can do it too. In 2004-2006 everyone around me was asking for advice and I was telling them I was not buying anything at these prices and that I was considering selling. No one really listened. I sold, made a killing then went back to buying in 2010. Some friends listened this time. Another one, a Google guy, pondered the what ifs for 3 years and totally missed out.

      Today I am not buying anything in the Bay Area. Bad ROI for the quiet landlord.

      • Posted by SFrentier

        So if you’re so smart, and apparently so rich, then why do you have to monkey around with airbnb rentals? It’s like having a freaking job!

        Guess I’m just an over leveraged investor, as I brought in 03 and 05. ‘Xcept that I buy value added development projects. So I still made bank-that is bank in equity as well as cash flow (thanks BOS, for helping to ensure sky high rents :). My LTV is still under 50% too btw. And I still see a few sweet opportunities in SF (a few). Gonna look at one tomorrow, as a matter of fact.

        • Posted by san FronziScheme (formerly known as lol)

          Good for you for finding opportunities in this market. I had to jump back to the other side of the pond to mine for value and ROI. Even with an expensive Euro it’s still worth it and we’re in the trough of the cycle I hope. I do not handle the physical side of my airbnb rentals myself, simply the communication and people shuffling. Plus the average stay is 45 days, which is much less work than 3-5 days. I’d say it amounts to 1 hour a week per unit on average. Not at all like a real job. I still have a day job, or more precisely a PST day job.

          • Posted by SFrentier

            What’s you global LTV? And what do you consider over leveraged?

          • Posted by san FronziScheme (formerly known as lol)

            Current LTV = 17% over all. Planning to knock 3 to 4% every year from rent income and other income savings with the goal of being under 10% in 2016. Then I’ll have reached my goal. 20 years of hard work.

            Overleveraged for me means more than 70% ON THE PURCHASE PRICE. Appreciation comes and goes and I try and never account for it because it makes you overconfident.

          • Posted by SFrentier

            Fonzi- yup you’re very conservative. Like a 70 year old conservative! I think SF RE is a lot more stable than you tend to think, but to each his own.

            I’m more into empire building but will probably slow it down after I maximize my BV project over the next two years. It’s really all we need. I’ve already been living off the RE for over 10 years, but the wife still works. We want to live partially abroad, so that means no 9-5. The BV project is designed to cover her income, and then we will be all set. I may consider another project after that, but it’s not really necessary, so we’ll see.

          • Posted by san FronziScheme (formerly known as lol)

            I’m more into empire building

            It depends on how big you want your empire to be. Something I experienced is that once you reach the original goal you had set there’s always the next thing. You build new income but you get used to it quickly and pursue more growth to build more income. At some point I figured I had to start enjoying what I had built.

  3. Posted by Willow

    I’m really bearish in the medium term. This latest upswing is not going to end well. It’s amazing how short memories people have. $4500 rents for 2 bedroom apartments in the Mission and $1200 per square foot for condos in the Castro. Yikes! Crazy overbuilding everywhere will lead to excess supply.

    • Posted by SFrentier

      “Crazy overbuilding”

      In frisco? Yer kidding me!

      As for sky high rents, they’ll stay that way as long as tech industry is doing well. Hard crash or a moderate tech dip, that is the question.

    • Posted by Anon

      huh. simultaneously bemoaning current high prices, and current building, and postulating that overbuilding will lead to excess supply?

      which is it?

    • Posted by san FronziScheme (formerly known as lol)

      Overbuilding? When I look at the Castro, the only construction happening are around Market Street. All the other blocks still have the same density. If anything, the construction of smaller condos/rentals make traditional units in the Castro appear a better value. If a brand new 800sf condo sells for $1M, a 1200sf “older” condo in a vic selling for the same price looks like incredible value.

      • Posted by two beers

        You seem to be saying that building expensive new condos will enable nearby sellers to raise their price. It seems, then, that adding more supply leads to an overall increase in prices.

        Increased supply (of high-end segment) = increased price (of all segments).

        But then the ironclad hegemony of the supply and demand shibboleth must have a flaw…how can that be?!

        • Posted by san FronziScheme (formerly known as lol)

          Good point but we are not talking about a closed system there. Demand is already there, and indeed there a lot of unsatisfied demand in the Castro. The addition of quality in a neighborhood changes the landscape. Businesses are added to tap the new high earners (like Whole Foods) as well as preceding the change in social landscape. This means the area will go into a virtual circle. This new paradigm will expose some untapped value. The house I was renting 8 years ago in NV for 3K looks incredibly cheap in retrospect. But new people changed the area.

          • Posted by two beers

            I think you mean “virtuous” cycle.

            Of course, the “virtue” is in the eye of the leaseholder: increasing prices are great for investor/speculator/flipper types, but fuel the increasing inequality and displacement you may have heard about.

            You be the only property owner on this board honest enough to admit that increasing supply can actually increase price, contrary to the misunderstood and misapplied theory of supply and demand.

          • Posted by anon

            Increasing the quality of supply can certainly increase price at a localized level. No one disputes that. There’s nothing about that that is in contradiction to supply/demand.

          • Posted by SFrentier

            2B- It’s not that the theory of supply/demand fails, it’s that the supply of market rate housing IS STILL to low. If you add 40,000 new market rate condos this year to DF, trust me, overall prices would go down.

            What you’re talking about is gentrification, where some shiny new homes help increase the value of some nearby older homes. That is also effected by supply, and especially restricted supply (SF built up, no new land, etc.)

            Same thing for rents. It’s not necessarily the lower income folks relying on RC to stay in the city. It’s more the google engineer that has lived in the mission for 3 years, and now is $1000 under market. Many of the same techies you rail against are also quickly benefitting from RC. That dramatically effects supply of rentals, and hence the marginal rent rate of vacat units is through the roof.

            The only way you are going to “force” low cost housing (for sale or rental) is through low income housing units. Government housing. And trying to tie that in to market rate projects, like sup Kim tried, would only make the problem worse.

            Why don’t you guys try to get a few of guilty super rich people to fund privately run low/affordable income housing? Probably the best chance you have of creating a few more lucky, sanctified lower income units, among the multimillion dollar average homes. Hell, maybe when I’m old I’ll do that. Lucky for SF I have no heirs.

  4. Posted by san FronziScheme (formerly known as lol)

    yeah, autocorrect fail…

    Displacement, Schmisplacement. This is a City, not ancestral land. There is no hallowed ground in SF, except maybe for Carlotta’s tomb ;) Looking at the people around I do not see much of the original natives from 3+ centuries ago. I know this sounds a bit harsh, but my family was displaced by wars, crisis, dictature, sometimes to a better situation and sometimes not. Cry me a river if people have to move 5 miles south or east to where they can afford. Try 1000 miles. Living for cheap in SF is THE anomaly, not the norm, especially when it’s done using Other People’s Money/Property.

    One example of the misplaced theory of supply/demand is the phasing out of RC in Cambridge, Massachussetts. In a sealed vacuum rents would have gone back to some sort of average. But people, investors, developers are not passive parameters. They improved housing stock quality and prices followed. The same would happen in SF. I would go back to being a regular landlord instead of an 30+ days airbnb host if that happened.

  5. Posted by san FronziScheme (formerly known as lol)

    Another factor that helps the virtuous circle is your social environment. If lawyers and techies settle in an area more techies and lawyers will consider it. One building where I rent out in the Castro has this very situation. Before 2009 it was all clerks/civil servants. Today this building hosts techies, managers, lawyers, business people. The cheap rent is gone.

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