Zero down on a $2mn house is no problem in Silicon Valley

Bloomberg

It turns out that even the well-off need help in a housing market as crazy as the one in the San Francisco Bay area, and lenders are elbowing each other in a rush to provide it.
They’re courting Silicon Valley workers with tailored loans, guaranteed 24-hour approval and financial-planning services. Social Finance Inc. has deals with Google and other top technology companies that allow it to market to new hires. First Republic Bank — which gave Facebook Inc. billionaire Mark Zuckerberg a 1.05 percent interest-rate mortgage — has opened branches in Facebook and Twitter Inc. headquarters. San Francisco Federal Credit Union will finance 100 percent of houses costing up to $2 million.
Michael Tannenbaum, senior vice president of SoFi’s mortgage group, calls it “white-glove service.” Lenders often give special treatment to the wealthy, of course, but the tech industry has created a particularly ripe crop of clients who are rich or on their way. It’s a smart bet to cater to a sector that’s created thousands of millionaires and dozens of billionaires, says Glenn Kelman, chief executive officer of the brokerage Redfin. The downside is that the most expensive U.S. housing region is becoming “a no-fly zone for anyone outside technology,” especially with so many people shut out altogether by tight credit standards imposed after the 2008 real estate crash.
What’s going on “might be good for the borrower and good for the lender,” he says, “but it’s not necessarily good for San Francisco.”

‘SUBSTANTIAL’ INCOMES
The city’s median home value is $1.13 million, up almost 67 percent since 2011, and the numbers are higher in some nearby towns — $6.36 million in Atherton, according to Zillow, and $4.12 million in Hillsborough. Nick Merz knows how tough it can be. He’s a 41-year-old product designer at Apple Inc. whose wife also works there, and says they couldn’t figure out if they could afford to own a place anywhere near the company’s offices in Cupertino, where the median value is $1.8 million.
One reason: Almost half of their compensation packages are in Apple shares. So their lender, Opes Advisors, assigned the couple a financial adviser who used a software program to factor in debts and future income, including the stock, and the costs of education over the years for two young children.

‘SCARY MARKET’
The result? No problem. They could buy in the range they were looking without jeopardizing their finances. “In a weird housing market, in a place where a lot of assets are not liquid, it helps to have their kind of modeling,” Merz says. “They’re catering to people scared by this scary real estate market.”
For many, it’s not home values that keep them in rentals but alarming down payments, which can be more than the cost of the average U.S. house: $187,000.
That’s where San Francisco Federal Credit Union comes in. It started offering zero-down loans in December to people who work in San Francisco or San Mateo County.