Hurdles shrink for jumbo loan shoppers

You'll pay more for a big home nowadays, but a big mortgage should be less of a reach.

For the first time in over 20 years, rates on jumbo mortgages -- loans of more than $417,000, or $625,500 in pricier areas -- are at or below rates on conventional mortgages. Jumbo rates usually run one-quarter to one-half of a percentage point higher, but lenders eager for wealthier customers are making deals.

In 2013, Wells Fargo and Bank of America cut minimum down payments to 15% from 20%; some competitors did too.

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"It's a good time to be a jumbo borrower," says Guy Cecala, CEO of Inside Mortgage Finance.

Want a large loan?

Big banks have the best rates; you'll need a 740 credit score or higher to snag them, says Keith Gumbinger of mortgage data provider HSH.

Related: Rich people are getting mortgages cheaper than you

Currently, rates for a 30-year fixed jumbo are averaging 4.25%, compared to 4.35% for a conventional 30-year fixed-rate mortgage. For ultralow rates, check out adjustable-rate jumbos: Wells Fargo recently offered a five-year adjustable for 2.375%. Get an ARM, though, only if you expect to move on during the fixed period. 

Tech workers squeezing out renters in San Francisco, Seattle

Low- and middle-income residents of San Francisco, Oakland, Seattle and other metro areas, are getting pushed out of their homes as an influx of deep pocketed tech workers drive up rents.

Rental rates for the 10 metro areas most dominated by tech companies rose by an average of 5.7% year-over-year through January, nearly twice the average 3% increase seen in the nation's 90 other largest cities, according to Trulia. Certain cities have seen far bigger hikes: rents in San Francisco rose by 12.3%, to a median of $3,350 a month in January.

So high are rents in San Francisco and neighboring Oakland, in fact, that protestors have taken to blocking the shuttle buses that transport tech workers to the Silicon Valley offices of companies like Google(GOOG, Fortune 500) and Apple (AAPL, Fortune 500), blaming the companies and their highly paid workers for a spate of evictions.

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"At locations along the Google, Apple or Genentech bus stops, most apartments are going to tech workers," said Craig Berendt, a property manager and apartment broker in the city. An apartment in San Francisco's Pacific Heights neighborhood that rented for $2,100 in 2010, for example, now rents for $3,200 a month, he said.

Many tech workers can afford it. The average paycheck in Silicon Valley has surged past $100,000, while the median wage for private sector workers nationwide is far smaller at $38,600.

Despite the fat paychecks, many young tech workers are choosing to rent over buy, in part because home prices in tech-saturated cities are even more prohibitively expensive than rents.

Cost of living: How far will my salary go in another city?

And prices keep rising. Year-over-year, asking prices in San Francisco and Oakland were up 16.2% and 24.4%, respectively, in January, according to Trulia. That's compared to a national average gain of 11.4%.

Making matters worse in places like San Francisco is that little is being done to meet the increase in demand. The city is hemmed in by the sea so there's very little land to build on and strict regulations have been put in place to preserve the low-rise charm of the city.

Instead, in once working class neighborhoods like San Francisco's Castro, South of Market, and the Mission, affordable multifamily rental housing is being converted into high-priced condos, said Victoria Stewart Davis, an agent with Pacific Union.

The pattern is similar in the Seattle area, home to tech giants like Amazon.com (AMZN,Fortune 500) and Microsoft (MSFT, Fortune 500).

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"There's been a huge influx of people into the city and there's little land left for development," said Jonathan Grant, president of the Tenants Union of Washington State. "Housing in low-income neighborhoods is being converted to high-income rentals."

It wasn't like home prices were cheap in these places to begin with. In most tech hubs, home prices were 52% higher than the national average back in 1990 -- and that was before anyone really knew what the Internet was. Now, prices are 82% above the national average, Trulia reported.

Even some tech workers are getting displaced. David Stoesz, a 46 year-old website content developer for Microsoft, left his old apartment in the Ballard neighborhood of Seattle last October when his new landlord doubled his $1,000 a month rent.

"The apartment was in a complex built in the 1940s and owned by a family," he said. "They sold it to a developer who immediately started to kick out old renters. There's nowhere for them to go. It sends the message that 'This is not your city.'"

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Ballard was a blue-collar neighborhood of Norwegian fishermen and other working-class people -- the cast members of "Deadliest Catch," drink at a bar there, said Stoesz. Many of his old neighbors, which included a retired librarian and a grocer, were forced to move outside of town.

Stoesz was able to stay, but he is now paying $1,800 for a two-bedroom townhouse, which he shares with his daughter. "Now, everyone around me is the same, same age, same demographic, many are tech workers," said Stoesz. "It just sucks. The city is losing its character." 

Not all housing bubbles crash equally

Four reasons why a collapse in China's home prices won't spell global disaster.

By Shang-Jin Wei

FORTUNE -- As China's home prices soar to record highs and well beyond the reach of ordinary citizens, the world watches closely as many wonder if the housing market might eventually crash. The global economy is still recovering from the financial crisis triggered largely by the collapse of America's housing market, and it's easy to see why investors and economists would worry that a similar boom-and-bust scenario in China could deepen the lingering slump.

Such concerns, though, are premature at best. Is there a bubble in China's housing market? It's possible, especially in major cities, such as Shanghai, Beijing, Shenzhen, and several provincial capitals. But China's economy is far different from America's; should a real estate bubble in China suddenly burst, the following differences could temper the risks of another global disaster:

China's saving propensity might save the day

Declining home prices erode what's called the "wealth effect." If home prices drop, theoretically homeowners feel less wealthy so they consume less, which in turn, leads to an economic slowdown. The U.S housing crash in 2007 damaged the wealth of countless Americans, but such spillovers likely won't be as deep in China because the country saves far more than most other countries.

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Most Chinese don't enjoy the kind of retirement plans and other social safety nets that most Americans do. So they tend to rely on savings and their children for financial security. In addition, they also save to help their children in their competition for marriage partners. As the ratio of males and females in the youth cohort rises due to gender-selective abortions, the competition for brides is getting fiercer for families with a son, and the competitive savings have risen in importance relative to the precautionary savings. Because of these factors, Chinese households save a greater fraction of their incremental wealth than most other countries.

As home prices rise, incremental consumption as a share of incremental wealth in China is smaller than in the U.S. For the same reasons, if home prices were to fall, the decline in consumption as a share of a decline in housing wealth may also be smaller than in the U.S.

 An affordable housing program can partially offset a slump

A housing bust could also disrupt input-output linkages -- when home prices collapse, the ramifications could ripple across the construction industry, leading to reduced demand for steel, cement, and appliances. China isn't immune, but the government's ambitious affordable housing program could cushion the blow to the wider construction industry. This program is meant to help address income inequality. To build these houses, you need cement, steel, and eventually furniture. To the extent that a price correction occurs in the normal housing market, the construction of low-income housing will at least partially offset any potential negative effect.

China's banks can manage bad home loans

As we saw in the U.S., a collapse in home prices nearly destroyed the nation's financial system as loans to real estate developers and homeowners turned sour.

In China, loans to real estate developers and mortgage loans to homeowners altogether account for about 20% of all bank loans. Suppose 20% of these loans go bad, which is an aggressive assumption given that subprime loans in the U.S. accounted for less than 20% of all banks' loans during the subprime crisis of 2007-2008 (and not all subprime loans went bad); this will produce 4% of bad loans.

While this is not negligible, China's banking sector should be able to work itself out, perhaps with the government's help. The fact that China's government debt burden is much lower than the U.S., Europe, or Japan is important here. After all, the Chinese banking sector got itself out of a far more serious bad loan problem a decade ago.

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Policymakers don't sit idle

Chinese government policies are not fixed either. In the last few months, the country's central bank has tightened its expansionary monetary policies used to counter the global economic slowdown. It did so because it made a judgment that risk in the housing market was not very big. If it sees signs of a housing price correction and a potential negative effect on the overall economy, it can reverse course.

Bubbles are an inevitable byproduct of a market economy, especially when the underlying asset is hard to sell short (such as housing in China). However, even if a housing price correction comes, it won't have the same impact on the overall economy that we experienced when the U.S. and European markets collapsed.

Shang-Jin Wei is the director of Columbia Business School's Jerome A. Chazen Institute of International Business and the NT Wang Professor of Chinese Business and Economy.