25% Down Payments in Oakland: New home loan changes bring no relief

The San Francisco Chronicle reports on the amazing real estate market:

Bill Boze, a Realtor with Prudential California's Montclair office, said he sees the impact of the mortgage crunch every day.

"Our broker suggested (when we write) offers for clients that the loan contingency not be removed until the loan is funded because we can't trust the lenders anymore," he said.

The lenders in turn appear to feel that they cannot trust the housing market to keep their collateral from depreciating.

For instance, Boze said, he represented a well-qualified couple buying a Montclair home for more than $1 million and making a 20 percent down payment - usually considered the gold standard. At the last minute, the lender said that all of Oakland is now considered a "declining market" where home values are sinking, and required that the couple put down 25 percent. They were able to do it, but it doesn't bode well for future deals.

"This 'declining market' thing of lenders approving you, then requiring an extra 5 percent down is kind of scary," he said. "It's a real trap for people."

Much of California doesn't have 25% down to put on today's California real estate prices.California real estate has no where to go but down.The irony is on the way up 4 years ago,no money down was being promoted by all sorts of financial institutions like Fannie Mae.Now,in a declining market: lenders don't want to take as much of a risk which means the unwinding of leverage.California real estate will correlate with California incomes:one way or another.