November home resales dropped to their lowest levels in more than one year as bulk investors pulled back on purchases; and supply constraints continued to weigh on market.
Sales of newly-built homes took a unexpected chunk from the resale market, too, as the Census Bureau reported November's Housing Starts at its highest point in close to 6 years.
Among existing homes, "jumbo" sales are strong and represent a growing share of the overall market.
The National Association of REALTORS® released its November 2013 Existing Home Sales report in which it reported 4.90 million homes sold on a seasonally-adjusted, annualized basis -- a 1.2 percent drop from November of last year and marking the first time in 29 months that home resales fell on a year-over-year basis.
However, the findings weren't unexpected.
The real estate trade group also publishes the Pending Home Sales Index which tallies the number of homes in contract, but not yet closed, nationwide. The index correlates to the monthly Existing Home Sales report because 80% of homes under contract close within 60 days.
Recent Pending Home Sales Index data projected that November's Existing Home Sales report would read 4.89 million home sold on an annualized basis. The actual reading was just ten thousand units more.
Despite its downward trend, the Existing Home Sales report remains markedly stronger as compared to one year ago.
In addition, the national median home sales price is up, climbing 9 percent to $196,300, as the mix of home sales has moved away from "entry-level" price ranges toward luxury ones. This shift suggests a stronger U.S. economy, and pent-up buyer demand in release.
The $1-million-plus sub-category is faring well, too. As compared to two year ago, the share of homes sold for one million dollars or more has nearly doubled to 2.2% of all home resales.
Thankfully, jumbo mortgage rates are cheap.
Today's home buyers are fortunate. Historically low rates and as-yet-recovering home prices have combined to move home affordability near all-time highs. Purchasing power is strong, and mortgage approvals are plentiful.
According to Ellie Mae, lenders have approved 53% of loan applications this year from home buyers and refinancing households. Last year, fewer than half were approved.
For buyers of luxury homes, the news gets even better -- banks are competing for jumbo loans.
Similar to last decade, a price war has emerged among the nation's largest mortgage lenders and it's helping mortgage rates to drop across a broad mix of portfolio loan products (i.e. loans not securitized via the U.S. government).
This time, though, different from last decade, banks aren't clamoring to give high-risk loans to high-risk borrowers. Rather, they're competing for "the ideal customer"; one with which the bank can build a lasting, deep relationship.
Jumbo mortgage rates can be lower than comparable conventional ones. This is especially true for loans with unique characteristics such as loans for homeowners with more than 4 properties financed; loans for condominiums or condotels; and, loans on 2-unit, 3-unit and 4-unit properties.
To be considered "jumbo", mortgages must typically trip loan limits set forth by the government. Loan limits vary by loan type. Conforming mortgages have different loan limits from FHA loans, for example, and loan limits are different for VA and USDA loans, too.
2014 mortgage loan limits for a conventional mortgage ranges from $417,000 - $625,500, depending on the home's location. Most loans are capped at $417,000 but, for homes in "high-cost" areas such as Montgomery County, Maryland; San Francisco, California; and New York City, loan limits can range up to $625,00.
For FHA loans in 2014, the lowest loan limit is $271,500. The highest is $625,500.
Loans for more than these amounts are obvious choices for jumbo financing, but loans below that amount may be eligible as well -- especially for adjustable-rate mortgages (ARMs). Banks can take different risks on adjustable-rate loans as compared to fixed-rate ones, and consumers can get lower rates.
The 2014 Housing Market is beginning. The Pending Home Sales Index suggests overall home resales will slip through the winter months. However, strength at luxury price points is expected to persist. Home supply is down and demand for such homes is up.
With competition high, buyers should approach their home purchase from a position of strength. Know how much home you can afford at today's market rates; and approach your home seller with a pre-approval letter in-hand.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2015 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)