It appears lenders are facing the increase in jumbo loan rates with new yet, prudent flexibility. Instead of recommending jumbo loans at 8% for clients who qualify, many are turning to loan combinations: Specifically, a buyer looking to purchase a single family home in this area for $750,000 with 20% down ($150,000) might consider a conforming first mortgage for $417,000 and a second mortgage at a reasonable rate for the remainder ($183,000.) In many cases the average interest on the two loans is more favorable then a jumbo loan of equal value. This flexibility is accompanied by more stringent qualifying criteria, as lenders pendulum away from the looser standards which contributed to the sub-prime fallout and resulting nationwide foreclosures.

There are oportunities for Buyers in this market. More stringent requirements have resulting in a smaller pool of buyers, and less competition. There are oportunities, but not a lot of bank owned property available for any reasonable discount. We do not have the frequency of foreclosures that some out-lying areas, such as Sacramento, are experiencing. There are two reasons for this. First with a high median price for Bay Area houses, many buyers enter with strong dual incomes and often bring equity from a previously owned property. This means fewer buyers sought 100% financing. Also, because our market has still had reasonable gains over the last two years, those who found themselves in trouble had more of an opportunity to sell and limit their losses. For Sellers, time on the market has increased and multiple offer winfalls are less likely, but buyers are still out there.