Existing Home Sales : Jumbo Housing Market Booms Into 2013
The luxury housing market continues to expand.
Fueled by move-up buyers and cheap jumbo mortgages, the market for homes over $500,000 is growing rapidly. Furthermore, a subset of that market -- homes selling for $1 million or more -- are driving growth.
2013 and 2014 may be big years for big homes.
Homes Inventory Fell 25% In 12 Months
Earlier this week, the National Association of REALTORS® published its January 2013 Existing Home Sales report.
The Existing Home Sales report is a monthly report which includes such data as total homes sold during the month prior on a seasonally-adjusted, annualized basis; and, the total number of homes available for sale nationwide.
The Existing Home Sales report also features buyer-related data including the percentage of home buyers buying homes with case; and, the percentage of buyers buying homes in short sale or foreclosure.
According to NAR, 4.92 million homes were sold in January on a seasonally-adjusted, annualized basis -- a 0.4 percent increase from the month prior and a 9 percent improvement from one year ago.
More importantly, though, January's tally marked the 20th straight month of annual home resale growth, a figure which suggests that the housing market is well into its recovery.
The 20-month win streak is even more impressive once we account for a dearth of homes for sale.
As compared to January 2012, the number of home resales for purchase is down 25%. There are now just 1.74 million homes for sale across the country. This is the sparsest home inventory in more than 14 years.
At the current pace of sales, those 1.74 million homes would "sell out" in 4.2 months, marking the fastest pace since April 2005 -- nearly 8 years ago.
"Jumbo" Housing Market Booming Into 2013
Looking back, it's clear that the housing market bottomed in October 2011. Since that month, home sales and home values have made slow, steady gains. Demand has climbed, supplies have dropped, and prices have moved higher in many U.S. markets.
This is especially true for price points considered to be in the "luxury" housing market.
For example, sales of $1-million homes are up more than 25 percent from one year ago, a function of existing home sellers selling homes at lower price points and (finally) getting the ability to become move-up buyers.
There is a chain reaction in today's housing market and it's trickling up to jumbos.
- Sales under $100,000 : -5.8% from one year ago
- Sales between $100-250,000 : +14.5% from one year ago
- Sales between $250-500,000 : +27.2% from one year ago
- Sales between $500-750,000 : +30.4% from one year ago
- Sales between $750,000-$1,000,000 : +38.7% from one year ago
- Sales over $1,000,000 : +25.7% from one year ago
One main reason why the jumbo housing market is roaring back is because the jumbo mortgage market now supports it.
Jumbo Mortgage Loans For Home Buyers
Jumbo mortgages are returning and buyers have choices. For example, in certain high-cost areas including Potomac and Bethesda, Maryland; Alexandria and Fairfax, Virginia; and most of California, Fannie Mae and Freddie Mac will allow loan sizes of up to $625,500.
Fannie Mae and Freddie Mac require downpayments of 10% to use their respective "jumbo-conforming" mortgages -- mortgages with loan sizes of more than $417,000 but less than the local jumbo loan limit.
The FHA and VA will lend to even higher loan sizes. The FHA lends up to $729,750 and the VA goes higher, depending on your county. Downpayment requirements are less, too. The FHA requires just 3.5% downpayment. The VA allows for 100% financing.
And, lastly, private jumbo lending exists, too, with loan sizes up to $4,000,000. Downpayment requirements vary by credit score and loan-to-value (LTV), but can be as low as 10 percent.