Jumbo Loans - Lowest Rates in 5 Years, Lending Requirements Loosened; National New Home Sales Fall to Record Lows
News about the housing market is erratic. First there is favorable news (Los Angeles rated #7 housing market in nation in 2009 -- prices flat!) and then some dispatches of not so good news. But first, a little more good news.
Last week, jumbo loans rates were around 5.79% -- down from above 7% in 2008 -- the lowest rates in 5 years. (In Los Angeles County, jumbo loans are above $729,750.) Some lenders have also reduced downpayment requirements for jumbo loans from 25% to 20%. "Stated income" loans are also reappearing on the market after being almost absent from two years.
How will this affect the Los Angeles market? In a big way. One reason for the decline in home prices in the $1 million + range is the lack of financing available to qualified buyers. Stories abound about high-earning individuals with substantial assets and excellent credit being denied loans which they could easily afford. As panic has subsided, lenders are tiptoeing into the jumbo loan market which should provide much-needed support to the upper housing tier.
Before we start kvelling about a housing recovery, we must also consider what's happening on a national level. New home sales in January 2010 fell to a record low of 309,000 homes annually -- the lowest number since records have been kept (starting in 1963!) Mortgage applications in January 2010 also fell to the lowest level in 13 years.
In spite of continued government stimulus, the housing market is afflicted by consumers' woes: high unemployment, high debt loads and plenty of uncertainty. Although it is our belief that each month the housing market moves towards recovery -- it is still ill, weak and at best going from the ICU to bed rest.