Monday, September 23, 2013

A Jumbo Opportunity: Mortgage Interest Rate Inversion Presents Rare Opportunity For Luxury Buyers

If you've been thinking about buying a more expensive home, now is the time to make a move. That's because interest rates on jumbo mortgages, which are loans over $417,000, have fallen below rates on smaller conforming loans.

How often does such an inversion occur? Try never. Yes, economists believe this is the first time jumbo mortgage rates have gone upside down on conforming rates, which means luxury buyers in Harbor Country have a historic opportunity that probably won't be available for very long.

Traditionally, jumbo mortgage rates are at least a quarter of a percentage point higher than conforming rates. When the housing bubble burst and investor appetite for jumbo loans disappeared, the gap widened to nearly two full percentage points. Gradually, as the market recovered, the spread normalized.
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So what caused the recent flip? Sharply rising interest rates on conforming loans coupled with the current inclination of banks to hold jumbo mortgages on their balance sheets. Banks can make these loans at attractive rates and, in the process, establish potentially lucrative relationships with high-net-worth clients.

A few weeks ago, for what is believed to be the first time ever, the average interest rate on a 30-year jumbo mortgage was 2 basis lower than the 30-year conforming rate. It was a similar scenario for jumbo ARMs, which also fell below conforming ARMs.

According to Chicago-based mortgage banker Guaranteed Rate, we can expect parity between jumbo and conforming rates for a few months. But both rates are expected to rise as the economy continues to improve. Interest rates on conforming loans have already increased a full percentage point since May.

So if you're looking to refinance or purchase a more expensive home, you have a once-in-a-lifetime opportunity to actually borrow more money at a lower rate. Contact me for more information and to learn how @properties' industry-leading sales and marketing programs help buyers and sellers achieve better results.

In the news:
The mystery of cheap jumbo mortgages
By Ilyce Glink and Samuel J. Tamkin | September 13, 2013

Something very unusual happened with mortgage interest rates this week. The interest rate on jumbo mortgages actually fell below the interest rate of the conventional 30-year fixed-rate loan. Mortgage experts were quick to point out that this latest quirk of the housing recovery had never happened before.

Sellers Test Housing Market Amid Rising Prices
By Nick Timiraos | September 12, 2013

Housing inventories increased in August and stood just 2.5% below their levels of a year ago, offering the latest sign that more sellers are testing the market after swift home-price gains over the past year. Nationally, there were 1.98 million homes listed for sale in August, according to a report released Thursday by Realtor.com.

Another sign of condo comeback: shorter selling times
By David Lee Matthews | September 03, 2013

Selling a condominium in the city no longer takes as much patience as it used to, especially if you live away from the lakefront. Condos and town homes in West Town, the Near West Side and Logan Square sold in 90 days or less on average in the 12 months through July, faster or the same as in more traditional hot spots, including Lincoln Park and Lakeview, according to a report from local brokerage @properties.

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