25Feb2014
Dan Green
Author
Dan Green
Filed Under
Real Estate Sales

Home Buyers Regain Position Of Strength As Spring Market Gets Set For Its Kick-Off

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Existing Home Sales : Relative Home Sales By Price Tier

U.S. home resales dropped to their lowest levels in 18 months as cold weather slowed purchases; and a lack of supply continued to weigh on market.

Among the bright spots in January's Existing Home Sales report were homes sold for less than $100,000 and sales at price points north of $500,000. 

The jumbo housing market continues to perform strongly.

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"High-Priced Homes" Hold Market Share

The National Association of REALTORS® recently released its January 2014 Existing Home Sales report. The real estate trade group reports 4.62 million homes sold last month on a seasonally-adjusted, annualized basis.

The tally accounts for a 5 percent drop from both the month prior and one year ago, and marks the third straight month in which sales of existing homes fell on a year-over-year basis.

Prior to this streak, sales had climbed 29 consecutive months but January's results were not unexpected.

This is because, in addition to publishing the Existing Home Sales report, the National Association of REALTORS® also publishes the Pending Home Sales Index.

The Pending Home Sales Index is a gauge of the number of U.S. homes newly under contract, but not yet closed. 80% of such homes close within 60 days so the Pending Home Sales Index correlates highly with the monthly report of home resales.

Recent Pending Home Sales Index data projected that January's Existing Home Sales report would read somewhere between 4.4-4.8 million home sold on an annualized basis. The actual reading was fell midway through that range.

Despite its downward trend, though, the Existing Home Sales report remains markedly stronger as compared to one year ago.

  • Median Days on Market for homes has dropped four days to 67 days
  • Investors now account for less than 1 in 5 home purchases
  • 31% of homes sold in fewer than 30 days in November 2013

In addition, the national median home sales price is up from last year, climbing 11 percent to $188,900. Homes sold for more than $500,000 have been rising steadily since 2011, and now account for 11% of all home sold.

Just two years ago, homes over $500,000 represented just eight percent of all sales. Homes sold for more than one million dollars account for 2.2% of home sales nationwide.

Thankfully, jumbo mortgages can be secured with just 10% down, and mortgage rates are cheap.

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2014 Jumbo Mortgages Sport Low Rates

Today's home buyers are fortunate. Mortgage rates are low, purchasing power is strong, and banks are making mortgage approvals easier to secure.

According to Ellie Mae, lenders approved 55% of loan applications in January. In 2012, fewer than half of all mortgage applicants were approved. Furthermore, the average FICO score of an approved loan is down to 724.

This is a 25-point drop in 12 months. 

And, for buyers of luxury homes, the news gets even better -- banks now compete for jumbo loans.

A price war has emerged among the nation's largest mortgage lenders. It's led mortgage rates to drop across a broad mix of portfolio loan products which are loans not securitized via the government.

Jumbo loans fall into this mix.

Banks are actively seeking their "the ideal customer"; the one with which they can build lasting, deep relationships. As a result, jumbo mortgage rates are often 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; or, loans for condominiums or condotels; or, loans for 2-unit, 3-unit and 4-unit properties.

To be considered "jumbo", a mortgage loan size should exceed specific 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, for example.

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 $625,500.

The 2014 FHA loan limits range from $271,500 to $625,500 -- again, depending on your location.

Loans exceeding these limits become obvious jumbo mortgage candidates, but there are occasions when loans below jumbo loan limits can go "the jumbo route" -- especially for an adjustable-rate mortgage (ARM).

Banks don't mind taking a different set of risks for certain adjustable-rate loans, which can help home buyers and refinancing households get access to the absolute lowest mortgage rates possible.

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The 2014 Housing Market is underway. Recent reports suggest that overall home resales will slip through the winter months, and maybe into spring. Despite the drop, however, sales at "high" price points are expected to remain strong. There are few homes for sale and demand for such homes is high.

Today's U.S. buyers should approach their home purchase from a position of strength. See how much home you can afford at today's market rates, and whether you'll qualify for today's lowest rates. Rates are available online with no cost, no obligation to proceed, and no social security number required to get started.

Get today's rates now. Click to get started.

About the Author

Dan Green is a mortgage market expert, providing over 10 years of direct-to-consumer advice. NMLS #1019791. You can also connect with Dan on Twitter and on Google+.

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