Tuesday, April 29th, 2008 at 1:11 PM
Million-Dollar Market
I spoke with a local mortgage broker yesterday - here are a couple of his comments:
1. If you need jumbo money, you need to qualify. There are no more EZ-qual jumbo loans, and with many high-end buyers being self-employed, qualifying for a loan could prove to be quite difficult.
He thought that you might be able to get an EZ-qual jumbo neg-am loan through a retail bank like WaMu, Wachovia, or Downey.
2. A year ago his company brokered loans to 71 different mortgage lenders, now only 16 of them are left.
3. The ‘conforming jumbo’ loans are a joke – they are the same as jumbos, just a tick or two less on rate. More government nonsense that won’t change anything.
4. All mortgage lenders left are gearing their operations towards loans they can sell to government entities; Fannie/Freddie, FHA, and VA.
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Where does that leave the million-dollar market?
Currently there are 19,251 active listings of detached and attached homes in San Diego County, and 2,522 of them are listed at $1,000,000 or higher. Their list prices average $619 per square foot.
Comparing the same time frame, Jan. 1st to April 28th:
Total New Listings:
2007 – 2,898
2008 – 2,583
# 0f $1M+ sales closed:
2007 – 847
2008 – 471 (44% decrease)
Average $/sf
2007 – $485/sf
2008 – $520/sf
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Will there be any relief in sight from the B of A/Countrywide merger? The word on the street is that if/when it closes, the end result will be that only the high-producing loan originators will have a job. Bank of America will keep the loan servicing portfolio, and streamline the rest of the operation. Most think the deal has to close, because if it didn’t, it could send the mortgage industry into total collapse.
Here is the summary of the merger from Inman News:
In another move intended to smooth the way for its planned acquisition of Countrywide Financial Corp., Bank of America has announced that the combined company would work to modify $40 billion in troubled mortgages in the next two years — about 265,000 loans.
Bank of America also announced Monday that it’s committed to make $1.5 trillion in community development loans and investments over the next 10 years, double the existing goal of $750 billion.
Bank of America plans to complete its acquisition of Countrywide in the third quarter. Although the Charlotte, N.C.-based bank plans to phase out the Countrywide brand name, it said the companies’ combined national consumer mortgage headquarters will be located in Calabasas, Calif., where Countrywide is based.
Bank of America’s announcement coincided with hearings on the merger convened by the Federal Reserve in Los Angeles, and followed last week’s release of new lending guidelines. The new guidelines would shut down the remnants of Countrywide’s option adjustable-rate mortgage (ARM) loan program and "significantly curtail" other nontraditional mortgages such as low-documentation loans.
Countrywide stopped making most subprime loans last year, after shifting origination to mortgages eligible for purchase or guarantee by government-sponsored entities Fannie Mae and Freddie Mac.
Posted on Tuesday, April 29th, 2008 at 1:11 PM in Thinking of Buying?, Thinking of Selling? | 7 Comments » | 
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Interesting about the conforming jumbos really not making a difference. I expect a fair amount of homes to drop under $1M with the lending constriction. If so, I wonder what the lag time is before we see these results. I feel there’s a few markets hanging on by a thread (CV, Enc. Ranch, and La Costa Oaks for example.) That potential flipper in LCO is a perfect example. Weren’t a lot of people reaching when they bought these?
On the other hand, at what price do you start to see larger down payments and cash buyers? $1.5? $1.3? $1.1??? I’d expect to see this market more stable.
The Blur | April 29th, 2008 at 3:21 pmMortgage broker speak on jumbo loans is a tad tedious. MBs say that having people who borrow $500K or more being required have FICO scores over 700 and two years of tax returns showing $125K in income is onerous. They also state that someone taking on a $4k+/month payment (Principal, interest, taxes, insurance) needing to have a 10% deposit is too difficult a hurdle. Please remind me if they cannot meet those three requirements how will they pay back the loans if home prices do not increase.
In Nevada they have banned no doc loans. The LV paper said this has unfairly disqualified tax cheats. Thats right valets who make $100K a year in tips but only report $40K are now disqualified, remind me to feel sorry for them.
The new criteria are not onerous. They are the basics which will allow a note to paid back without home price appreciation.
LV Renter | April 29th, 2008 at 3:30 pmBlur,
We know that you can still get a conforming loan, plus a second loan that is just a little smaller, both on an EZ-qual basis.
$417,000
$416,900
$833,900 EZ-qual
SP with 20% down = $1,042,375
SP with 30% down = $1,191,285
We have seen healthy down payments become the norm lately, but as you can see above, the number of sales has dropped considerably.
I’d guess the real impact will be on $1,300,000 to $2,000,000 range.
There are currently 910 homes for sale in the county in that range, and only 34 closed last month.
Jim the Realtor | April 29th, 2008 at 4:30 pmJim Ratio of "26.76" for homes in the county in the 1.3-2M range. 2 year + supply. Dwindling demand and ability to finance them. 3 year supply. 2011
doughboy | April 29th, 2008 at 5:14 pmBut I thought everyone that lives in those $1M plus homes make 300K plus a year, right? So there won’t be any problems……
SMC | April 29th, 2008 at 5:17 pmThis describes me to a T in terms of having a very variable income with fat years and lean years, making it hard to get a doc jumbo loan for a ~1.5 million house, even when putting 50% down.
Still, the sellers seem to have more fight in them in this price range…
Also, the range of what people think is worth 1.5 is amazing. I want something unique for that price.
daveg | April 30th, 2008 at 6:04 am1. If you need jumbo money, you need to qualify.
Does anyone else find that unintentionally hilarious? In other words, Hey man, if you want me to loan you a half million dollars, you’d better show me a couple pieces of paper indicating you can pay it back! I mean, how burdensome can you get. No wonder our economy has come to a screeching halt.
Dwip | May 2nd, 2008 at 11:29 pm