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Forget the "weak market" talk. Home resales continue to improve across price points nationwide -- even for luxury homes.
On a seasonally-adjusted, annualized basis, September's Existing Home Sales eased by 150,000 units nationwide, falling to 4.91 million from August, the National Association of REALTORS® reports. In addition, the supply of existing homes rose ticked higher by 3 days to 8.5 months
An "existing home" is a home that's been previously occupied or owned.
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Now, at first glance, September's Existing Home Sales data looks "negative" -- both in terms of units and supply. A closer look, however, reveals just the opposite.
The Existing Home Sales report was actually quite strong.
Home sales aren't down because buyers have "gone away". Home sales are down because (1) There are fewer homes for sale nationwide, and (2) Because purchase contract failure rates are rising.
From the report :
Contract failures are typically the result of a home appraising for less than the purchase price; of a mortgage denial in the underwriting process; or, of an insurmountable home inspection issue.
In other words, Existing Home Sales dropped in September as a natural consequence of falling supply and of homebuyers' inability (or unwillingness) to find mortgage financing.
As compared to September 2010, home sales are surging for homes at every price point -- from $100,000 to $1 million-plus.
Homes under $100,000 made the biggest yearly jump, moving 22% more units as compared to last year, followed by homes under $250,000. These gains are likely tied to investors that are gobbling up homes at a furious pace, and often paying cash.
The National Association of REALTORS® says that investors bought 1 in 5 homes last month, and that 30 percent of all homes were paid for with cash.
The luxury home market showed impressive gains, too :
There are two main drivers for the luxury home market right now. The first is that the economy is improving and that may disproportionately benefit homeowners in the jumbo mortgage market.
Because buyers in this class are typically self-employed, highly bonused, or involved in professional services, incomes tend increase as the economy improves. That's exactly what we're seeing now across the entire United States.
The second reason luxury homes may be outperforming is because of jumbo loan limits in high-cost areas.
September marked the last month of $729,750 loan limits in high-cost areas such as Montgomery County, Maryland; Alexandria, Virginia; and much of California. The surge in home sales may have been attributed to buyers rushing to purchase before loan limits dropped.
A conventional mortgage at $729,750 can be less expensive than a jumbo mortgage for the same amount.
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Although jumbo loan limits for conventional and FHA mortgages have reverted to their pre-stimulus levels, there are still great, low rates for loans of all sizes. Loans over $1 million are finding especially low pricing.
If you're buying a luxury home, or need a jumbo mortgage of any size, adjustable-rate jumbo mortgage hover near 3 percent with limited closing costs. Lenders want to lend to you.
Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan ator click to get a free, no-obligation rate quote.
You can also find Dan on Twitter and Google+.
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