High Priced Home Sales Fuel Jumbo Loan Market
By: Rosemary Rugnetta | January 4th, 2013
In 2012, the high end property market made a comeback as consumer confidence grew and jumbo mortgage rates declined. Home prices in this market were also attractive enough to draw in home buyers. According to DataQuick, a real estate data firm, sales of homes priced at $1 million and over increased by 9% during the first nine months of 2012 as compared to 2011. This increase was the highest level in four years. In California, that increase was at 14.8% and at the highest level since 2007 during these first three quarters of 2012.
The most sales in the high end market occurred for homes between $1 million to $2 million price range. The supply for homes in this market also fell giving home buyers less inventory to choose from. According to the National Association of Realtors, it would take nearly twelve months to sell the current supply of high priced properties for sale in October of 2012 which is a sharp decline from a year ago when the inventory was at 21 months. In the West, the supply was down to only six months in October.
In some cases, low supply for higher priced homes has caused bidding wars amongst home buyers. As this continues to happen, home prices will continue to increase in this market. Although values and sales are not back to where they were during the peak of the housing boom, this sector of the industry has definitely seen improvement over the past year.
As jumbo mortgage lenders continue to be strict, a 20% down payment is generally required along with excellent credit scores and history. Lenders are looking closely at the income of the home buyer and may require extensive documentation for proof which includes two years of full income tax returns. In some cases, more than one appraisal of the property is required in order to prove the value of the home. Since jumbo loans are usually held by the lender as private loans, lenders will take extra steps in order to reduce their risk.
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