Bay Area home sales at virtual standstill

The situation continues to look bleak in the housing industry throughout California, but the Bay Area, with its high home prices faces special challenges. As reported in the San Francisco Chronicle:

Bay Area home sales limped along at a decades-low pace in October, as buyers continued to find few mortgage options. A total of 5,486 new and existing houses and condos changed hands last month, down 35.7 percent from October 2006 and the lowest sales count since at least 1988 Sales of existing, single-family homes in the nine counties that touch the bay slid 41.3 percent, from 5,761 last year to 3,384 in October, the firm reported Thursday. Although it was the 33rd month in a row of year-to-year sales declines, the market has been slammed in recent months by a tightening in the mortgage market, which is making home loans harder to come by and more expensive.

Of particular concern in the high-priced Bay Area housing market is that the number of jumbo loans, or those over $417,000, has slowed to a trickle. This summer, after higher defaults in the subprime sector – where mortgages were given to people with iffy credit – investors stopped buying jumbo mortgages, leading buyers to walk away from deals or avoid the market altogether. “We don’t have liquidity in the marketplace, and that’s creating a drop in market value because people can’t close on a purchase,” said San Francisco mortgage broker Leon Huntting.