U.S. home sales completed its recovery from a slow winter this May, posting the highest number of annualized sales since the start of the year.
Falling mortgage rates may have helped to boost home sales nationwide. 30-year mortgage rates dropped the low-4s in May with some banks beginning to quote rates in the 3s. Jumbo mortgage rates were similarly low.
Meanwhile, home values have been climbing less quickly as compared to last year, which has boosted the purchasing power of home buyers nationwide.
The National Association of REALTORS® recently released its May 2014 Existing Home Sales report. The real estate trade group reports 4.89 million homes sold last month on a seasonally-adjusted, annualized basis, a 5 percent improvement over the month prior.
May's sales results are the highest annualized total of 2014.
On an annual basis, however, home resales are off, down five percent from last year. May marks the seventh straight month for which home sales are down as compared to the year prior.
Prior to this 7-month streak, sales had been higher on an annual basis though 29 consecutive months.
Housing market observers were not surprised by the jump in last month's home sales. This is because, in addition to publishing the monthly Existing Home Sales report, the National Association of REALTORS® also publishes a monthly report called the Pending Home Sales Index.
The Pending Home Sales Index measures the number of U.S. homes which are under contract, but not yet closed. History has shown that 80% of homes under contract close within 60 days which results in a very high correlation between the Pending Home Sales Index and the Existing Home Sales report.
The most recent Pending Home Sales Index data projected April's Existing Home Sales between 4.7-4.9 million home sold on an annualized basis. The actual reading landed near the top end of that range.
The May Existing Home Sales Report also revealed other good-for-housing data.
In addition, the national median home sales price is up from last year, climbing 5 percent to $213,400 and buoyed by homes sold for more than $500,000,which now account for 12% of all home sold, up from eight percent two years ago.
Homes sold for more than $500,000 are often financing with "jumbo" loans, with can today be secured with just 10% down.
Jumbo mortgage rates are at a one-year low.
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 58% of loan applications in May, up 3 ticks from the month prior. Furthermore, the average representative FICO score on an approved mortgage is now 727 -- eleven points lower as compare to last year's average.
And, for buyers of luxury homes, the news gets even better -- banks now compete for jumbo mortgage business.
A price war has emerged among the nation's largest lenders, which has pushed jumbo mortgage rates to levels not seen since early-2013.
With jumbo ARMs, rates are even lower. This is because banks are actively seeking their "the ideal customer"; the one with which they can build lasting, deep relationships.
Sometimes, jumbo mortgage rates are lower than comparable conventional ones.
Jumbo mortgage rates can be especially low as compared to conventional or FHA loans when the mortgage is characterized by certain unique traits. This can includes 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.
Jumbo loans are typically for high-dollar amounts. Their size often exceeds the local "loan limit" for a government-backed loan.
Government loan limits vary by loan type.
Conforming mortgage loan limits differ from the limits on an FHA loan, for example. The 2014 mortgage loan limits for a conventional mortgage ranges from $417,000 - $625,500 whereas FHA loan limits range from $271,500 - $625,500.
However, you don't need to have a "big loan" to use jumbo financing. There are instances when loans below jumbo loan limits can go "the jumbo route" -- especially for an adjustable-rate mortgage (ARM).
When jumbo mortgage rates drop, ask your bank if its current jumbo mortgage rates are lower than its conventional ones. With some banks, jumbo rates will be lower. With other banks, they will not be lower.
It's always good to ask.
The 2014 housing market showed strength in May. Its fundamentals appear sound and forward momentum is gaining. Plus, mortgage rates have moved to their lowest point since last year.
Compare today's mortgage rates. Rates are available online at no cost, with no social security number required to get started, and with no obligation to proceed.
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 Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.