Surprisingly enough, what we’ve discovered after a few months of looking backwards, was that buying spiked during the 2nd quarter of 2010 on the low end of the market.
Lo and behold, this buyer credit had much more of an impact than we thought at the time!
A lot of buying got pushed forward to get $8,000 in credits.
However, the lending for these buyers,
for mortgages
below $417,000, is not a problem- but the market has essentially been cornered by Fannie Mae and Freddie Mac.
What does this mean?
Essentially, they are determining rates for these mortgages, and unless you fit into that box, you’re going to have trouble taking out these size mortgages.
So, oddly enough, if you want a mortgage above $417,000, you may see more favorable rates- and more options.
A mortgage broker that I speak to, Frank Cronin, brought up what he calls “The Benefits of being an Affluent Borrower…in Jumbo Lending Programs.”
He writes, “New Programs enter the market directed only toward the affluent client. I see two main reasons for this. First, the valuable asset in Today’s Real Estate lending is now the affluent client.
Second, we may be coming out of the Great Recession but the exit sign out says “Excessive Regulation Recession to Continue”.
Mortgage Programs are opening up past the 417K, the traditional conforming limit. These programs are directed at affluent clients and designed to meet their unique financial profiles. Programs based on assets and alternative documented income… exceptions are granted to this clientele past the 417K partially based on affluence but also regulation.
Strict regulations are in place on mortgages below 417k. State and federal banking regulations do not allow banks to compete with the FNMA and FHA Mortgage product both Quasi Government Products.
The FNMA and FHA Mortgage product have their limitations and as make sense as these products are portrayed to be they only make sense if you fit in the box.
Competition in the mortgage lending market has now entered the only space where competition can exist past the State and Federal Regulations of the 417k benchmark.
Considering my own experience with the rise in mortgage applications past 417K it has led this Mortgage Professional to believe that: The Real Estate Market will rise above 417K but stay flat under the benchmark until lending opens with deregulation under 417K.
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I think this is at least interesting.
What is he arguing, exactly?
My takeaway is that as products cater to a wider variety of buyer in the Jumbo market, he feels that the NYC market for properties, say in the $700k+ area (where one is taking a mortgage of $417k) will be positively impacted- pricing will start to push up.
I can see his logic.
If buyers feel more confident they can get mortgages, and confident at the rates they are seeing, they will get into the market- since so many are on the sidelines right now.
That will in turn push pricing up.
The pendulum has certainly swung to the right, with fewer exotic mortgage options.
I think we’re due to see options expand.
Whether that truly impacts buyer confidence remains to be seen.
My take?
This will impact buyers in the boroughs more than in Manhattan- where buyers are quite qualified already, perhaps even overqualified.
But we’ll see.