Relative unavailability of mortgage loans seen as a key reason

 

By Sam Richards

Staff writer

 

Monday, March 3 (10:00 a.m.): Rossmoor’s familiar master insurance policy situation – that it can obtain only about 45% of the insurance needed to fully cover all $2.77 billion of the valley’s physical assets – has placed this community at the top of a certain specialized list.

According to data collected by real estate firm Redfin Corp., and recently reported in the San Francisco Chronicle, the 94595 ZIP code had the highest proportion of all-cash home sales recorded in the Bay Area, constituting 67% of transactions during that period. That figure was higher than the 59% recorded in the ZIP code 94027, in the decidedly upscale community of Atherton, in San Mateo County. The third-highest proportion of cash sales, in a Palo Alto ZIP code, was 51.8%

The 94595 ZIP code includes not only Rossmoor but also the unincorporated Saranap community and Walnut Creek neighborhoods west of Interstate 680. But it’s clear Rossmoor had great bearing on 94595’s all-cash transaction totals.

Drew Plaisted, an agent/broker at Rossmoor Realty, said there were 434 total home sales last year in Rossmoor, and about 90% of them were all-cash.

Rossmoor has been unable to insure its complete valuation for several reasons, most notably because the worldwide insurance industry has been stretched to the breaking point in recent years by having to pay out on increasing numbers of wildfires, floods, earthquakes and other disasters. Without complete insurance coverage, the Federal Housing Finance Agency and the Fannie Mae and Freddie Mac entities it oversees won’t guarantee mortgage loans in Rossmoor or other common interest developments.

This situation has affected Rossmoor’s co-op buyers and sellers more than those buying or selling a condo, Plaisted said, as a greater percentage of co-op buyers need loans than do condo buyers. With Fannie Mae and Freddie Mac not backing conventional loans, non-conventional loans – generally at higher interest rates – are the alternative for buyers unable or unwilling to pay all cash, Plaisted said.

Because co-op properties are owned as a share of stock rather than a deed, it was harder to find co-op-approved lenders even before the current insurance crisis landed, Plaisted said.

“Co-op buyers can now get a better purchase price, but if they need a loan to purchase, they have to pay a higher rate than a buyer who is purchasing a condo or co-op outside of Rossmoor that has Fannie Mae backing,” Plaisted said.

“The condos have always been primarily cash,” Plaisted said in an email. “(Rossmoor Realty’s) condo sales haven’t been affected nearly as much as the co-ops.”

Meanwhile, Rossmoor leaders continue to monitor the overall situation. One reason for such interest is that most home sales in Rossmoor include a “membership transfer fee” paid by the buyer.

Currently $13,500, that fee feeds GRF’s Trust Estate Fund, from which money for major Rossmoor capital projects comes. GRF leaders are now weighing whether to raise that fee more than, or sooner than, it would automatically increase by $500.

Adrian Byram, a member of the GRF Finance Committee, pays close attention. He was quick to say that, while demand for homes in Rossmoor has remained “constant and reasonably strong,” there are usually few homes for sale, generally 60 to 80 at any given time.

Plaisted said Rossmoor owners seem to be holding on to their manors longer these days, sometimes renting them out, perhaps awaiting a return to Fannie Mae/Freddie Mac loan backing, or lower interest rates that often enable a higher home price.

Byram said other theories include people simply living longer, or perhaps passing the manors down to adult children who may be 55 or older and wanting to live in them.

“At the moment, we have no data to support any of these hypotheses,” Byram said.