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| Name: |
Kizma Anuice
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| Subject: |
article on highend housing
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Date:
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2/3/2009 11:57:43 AM
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High-End Housing Market Ravaged by Stock Selloff
Tuesday February 3, 2009, 10:15 am EST
Yahoo! Buzz Print For wealthier Americans, the free-fall in stocks is not only ravaging their portfolios-it's taking a huge bite out of the value of their homes.
"The high-end market relies on equities," says Walter Molony, spokesman for the National Association of Realtors. "If stocks are doing well, so too does high-end housing."
Though only 2 percent of the overall housing market, high-end home sales have seen a dramatic drop, according to Molony. Homes valued at $750,000 or more plunged a whopping 47 percent in the year ended in November. By comparison, homes valued at $400,000 or less fell by only 3 percent during the same period.
A look at the markets during the same time period shows the Dow Jones fell 33.1 percent, while the S&P shows a 37.5 percent drop in value.
Real estate professionals agree that sliding markets and a ravaged economy are hurting prospective high-end buyers and sellers. And that means prices will likely decline even more before there is any recovery.
"Unless they are forced to move, they are staying put," says Mary Cassidy, a licensed real estate broker in Bronxville, New York, a wealthy suburb of New York City that is home to many Wall Streeters. "People are not buying and people are not selling. When everyone's uncertain as to whether they have a job, why go out and buy something?"
Jumbo Loans
While equities and the economy are reasons for slower sales, the rise in jumbo loan rates is another, says Greg McBride, Senior Financial Analyst at Bankrate.com. "More money down is the big reason people aren't taking them out," McBride says. "It takes good credit but you need 30 percent down or more and even those people are paying an interest rate of more than 7 percent."
_____________________________________
Calculators and Advice from Bankrate.com:
Compare Mortgage Rates Nationwide
Struggling to Save Your Home? Get Help Here
Bob Walters, Chief Economist at Quicken Loans also sees fewer jumbo loans being made. "Down payments have to be higher, credit scores have to be higher," says Walters. People are getting hit hard from all sides and there's less demand for more expensive homes."
By nature, jumbo loans, or non-conforming loans are used for financing high end homes. They are a mortgage with a loan amount above the industry-standard definition of conventional conforming loan. A loan in excess of $417,000 to $625,000 is currently considered a jumbo in most states. And jumbos have interest rates a little higher than a conforming loan.
But those interest rates have gotten even higher over the past few months, which is a direct result from the lack of a secondary market to purchase jumbo loans says Gary Meglino, a corporate executive at Residential Home Funding in White Plains, New York.
"The secondary market lost interest in acquiring the loans about May or June of 2008," says Meglino. "The only institutions that are offering jumbo loans have to service them, and that has made them very expensive."
Bigger Problem Behind Jumbo Loans
In February of 2008, then-President Bush signed an economic stimulus package that increased the conforming loan limit to $729,750. But that only lasted until the end of 2008 and caused a bigger problem for jumbo loan applicants says Bankrate's McBride.
"Conforming loan limits declined beginning in 2009," McBride says. "What that means is that in high cost housing markets, you have a lot more borrowers that are considered jumbo and can't get rates for a lower loan. The conforming loan limit should go back to the 2008 level, when it was higher. In New York it was the $729 thousand figure. It's now at the high end of $625,500. That could increase foreclosures."
Foreclosures For High End Homes?
In the past, foreclosure rates have been much lower on jumbo loans in comparison to conforming loans. But jumbo's are a higher risk for lenders, because if the jumbo loan defaults, it's harder to sell a home, especially a luxury home. for its full price. And that could be a problem if there are more foreclosures ahead.
"I think the best thing is to re-invigorate the banking system, and let it work itself on its own," says Quicken's Walters. "It's not a good policy for the government to buy million dollar homes," when asked about what's the best solution if jumbo loan foreclosures mount in the wake of higher unemployment.
Future Of High End Market
As the markets continue to decline and home values erode at record lows, the future for high end sales looks fairly bleak at least for now, says Bronxville, NY's Cassidy.
"Lower prices are not moving people to buy," Cassidy says. People say, 'I have what I need, why do I need more.' We're not seeing may sales with jumbo loans. People are scared about the economy. The high end here is more than $2 million. There's no market for them. It's a lot of hand holding for sellers. Our work is even tougher."
But Residential Home's Meglino does see some hope for home buyers with enough cash. "Jumbo's are harder and more expensive," he says, "but for people who need a mortgage, there's always someone there with a price."
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Interesting article.
I guess it would be time to hold the 2nd mortgage and allow the price to fall under a "non Jumbo" loan then if you wish to have an appealing sell. This would sure make you more money than the banks are offering on CD's or savings accounts. If some has good credit and the income is there, this is a no brainer. You would not have the money all at one time which would help with the impose tax hikes that will come if things do turn around.
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| Name: |
lucky67
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| Subject: |
article on highend housing
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Date:
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2/3/2009 8:56:54 PM
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well, not everyone knows the market-- 30 yr jumbos [loans over $417,000] can be had for 6.375%--call Capital Lending Inc in Montgomery--the owner is a resident at the lake & really knows his stuff; if people cant qualify at these rates, we're all in trouble; remember the Carter days at 17.50 % ??????????? that was a recession too
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I feel good for getting 5.25 then. Union State Bk.
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| Name: |
Ulysses E. McGill
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| Subject: |
article on highend housing
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Date:
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2/4/2009 9:05:32 AM
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I've been shopping rates and jumbos have been available in the 5 to 5.5% range for those who qualify....if you're looking, shop around!
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| Name: |
lucky67
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| Subject: |
article on highend housing
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Date:
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2/4/2009 12:44:11 PM
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well, you better check your mortgage--they just quoted me 6.50%--bet you got an ARM or your papa is chairman of the board !!!
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| Name: |
lucky67
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| Subject: |
article on highend housing
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Date:
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2/4/2009 12:44:47 PM
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you better ask "how many points do I have to pay to get that rate "
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| Name: |
BiggerDog
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| Subject: |
article on highend housing
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Date:
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2/4/2009 3:38:37 PM
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These generalizations are national - they have very little accuracy when you start looking on the local level. If anyone believes high end homes on lake martin have taken a 40%+ hit, then they are insane.
The market in the US though is the blind leading the blind. I think the national IQ now is down to about 55. That is what we should be worried about.
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| Name: |
Ulysses E. McGill
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| Subject: |
article on highend housing
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Date:
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2/4/2009 5:50:02 PM
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You are correct that points on an advertised rate can be a leader that some companies use as bait and one should be cautious in the details. My wife's an accountant and researches this type of thing for clients to help them get the best deal, and there are many other questions to ask about fees (beyond points) involved. That being said, 5.5 with no points has been available within the last few weeks. 15 and 30 year conventional loans have been as low as 4.25 with no points (this is an unusual parity in these terms due to government earmarks). Rates are slightly higher now, but indications are that they will fluctuate lower again (more earmarks to come). One should also check with out of state companies licensed for business in Alabama as some companies are hungrier for business than others. A top credit rating is also a must.
...although I assume you know all of this, it's good info for those who don't. cheers.
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| Name: |
lucky67
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| Subject: |
article on highend housing
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Date:
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2/4/2009 11:27:33 PM
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the state banking regulators will tell you the biggest fraud in mortgage lending is from 'out of state lenders' who offer teaser rates--when you get to closing & there are lots of hidden fees--but the moving van is at both houses--most borrowers are sucked into signing the paperwork, even though most times its not what they were quoted; ask any reputable realtor at the lake--they despise out of state lenders; do business with people you know or have good references on; you will not find "jumbo" rates at the levels you saw in some of these comments--jumbos are loans greater than $417,000
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| Name: |
Ulysses E. McGill
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| Subject: |
article on highend housing
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Date:
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2/5/2009 11:06:27 AM
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I'm quite familiar with what constitutes a jumbo rate and there are many lenders from out of state that are very reputable (as well as in-state); my wife has clients that do business with both on a regular basis. Do as you please and believe what you wish, but for those that want to pay the least in fees and rates, it pays to shop around. FYI, some of the biggest offenders we have seen on overcharging have been local mortgage vendors that work in unison with Realtors.
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| Name: |
Kizma Anuice
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| Subject: |
article on highend housing
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Date:
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2/5/2009 7:37:00 PM
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WOULDN'T THAT BE THE DUMB LEADING THE DUMB?
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| Name: |
Ulysses E. McGill
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| Subject: |
article on highend housing
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Date:
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2/5/2009 8:40:00 PM
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BTW, I'm not arguing the fact that rates are higher today than they were a few weeks ago, but I do believe they will come down again as solutions to the banking problems are put in place.
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