In light of some of the recent trends in rates, I thought it an opportune time to take a look at some markets that will likely benefit from the current economic environment. One market in particular, the ‘jumbo’ market is likely to benefit greatly from recent mortgage loans.
For those who are unfamiliar with the term ‘jumbo’ loan, a jumbo mortgage is any mortgage that exceeds the current conforming loan limit of $417,000 (except in Hawaii and Alaska where the limit is $625,000). Jumbo loans are available for a variety of property types including primary residences, second or vacation homes, as well as investment properties. These loans are typically available in a variety of terms as well as fixed and adjustable rates. It is important to note that while typical ‘jumbo’ borrowers have solid FICO scores, low LTV ratios, and higher assets than most typical borrowers, jumbo loans often have higher interest rates than conforming loans, and sometimes have strict underwriting and larger down payment requirements.
Despite this, because we are seeing lower rates these types of properties and loans are becoming more affordable to more homebuyers. For instance, according to the Census Bureau, since 2013 we have seen an increase of 37% in the year over year percentage of homes purchased for greater than $400,000. In the price range of $500,000 to $749,000 this increase was 47.8% and for purchases above $750,000 there was a 77.7% increase. The result has been that jumbos now make up about 21% of the market share of home sales.
I recently had the opportunity to sit down and discuss these and other characteristics of the jumbo market with Natuzza Dimasi, a William Raveis agent. Natuzza took me through a jumbo listing and described from an agent’s perspective some of the things that go into and set a jumbo listing apart from traditional listings.
Should rates continue to remain relatively low, we will likely continue to see an increasing share of the home purchase market made up by these jumbo purchases. For this week however, with today being Veterans Day, we will likely see a slight increase in rates tomorrow as the markets are closed today, but we should continue to see rates hover around recent levels barring any surprises.
For more information on the featured listing please visit the link below: