Lack of jumbo mortgages could be hurting Buckhead.

I read an interesting article in the Wall Street Journal this morning regarding the difficulty of securing loans over $417,000. Since the average selling price for a residential home in Buckhead is around $650,000 that really places us in a bind. As a matter of fact, there are few Buckhead properties selling for less than $500,000; Buckhead Forest, Peachtree Hills and Peachtree Park are the main neighborhoods that come to my mind. The current “stimulus” bill will not help the Buckhead market. Hopefully, liquidity will be increased for all types of mortgages, not exclusively starter-homes for first-time home buyers.

Many homeowners in high-priced markets are experiencing similar difficulties, and are left with few options other than to raid their savings or retirement accounts and use the cash to “buy down” their mortgages. In some cases, home buyers need to put up a large down payment, often 25% or more, to qualify for a jumbo mortgage. Others are bypassing jumbos altogether and putting up enough cash to become eligible for a lower-rate conforming loan.

“Every single day I’m talking to people who have a jumbo loan, and I can’t do anything for them,” says Jeff Lazerson, a mortgage broker in Laguna Nigel, Calif.

While total mortgage originations fell by 17% in the fourth quarter from the previous quarter, jumbo originations fell by 42% to $11 billion, according to Inside Mortgage Finance. That’s the lowest volume ever tracked by the trade publication, which has figures dating to 1990.

This was also mentioned in the article:

Jumbo borrowers have always paid slightly higher rates than conforming-loan borrowers, in part because luxury homes can be harder to sell quickly for their full price if a homeowner defaults. But the gap between jumbo and conforming loans, historically around 0.3 percentage point, is now about 1.55 points, with jumbo rates averaging about 6.77%.

Some banks, though, are quoting much-higher jumbo rates. Mortgage brokers say that indicates that lenders are reluctant to make jumbo loans and are setting their prices high to deter new deals. For example, Taylor, Bean & Whitaker Mortgage Corp. in Ocala, Fla., recently listed a 7% rate on a 30-year fixed-rate jumbo loan, but charges up-front origination fees equal to 5% of the loan.

Related posts:

1. Short Sales
2. Georgia Home Buyer’s Closing Cost Calculator
3. 5 key features of Obama’s loan modification plan
4. Mortgage Rates Continue to Fall
5. New Administration trying to stifle the Buckhead housing market.