After getting tired of sharing space with other people, the Hodgsons thought it was time to buy their own home despite the still weak housing market. Cari and her husband sold their condo to purchase the 5-bedroom Chicago home for $1.2 million. The deal was sealed with a big down payment that blazes U.S. property market’s high-end. The couple did not disclose the amount of their own money which was added to fund the home purchase. The mortgage though was smaller than the jumbo loan bigger than general mortgages that at present begin at $730,000. The couple put down almost 40% of the house value, an amount most Americans can hardly afford.
U.S. housing has improved 4 years after its collapse that ignited a global financial crisis but this is at the market’s top and bottom level, the middle remains unrecovered. Wealthy Americans gain their confidence back at the receding recession impact and better gains at the stock market. Homes worth above $1 million gained in sales, representing 1.5% of total U.S. sales. Bidding on expensive homes has been reported by realtors and brokers.
Pamela Liebman, chief executive of the Corcoran Group said there is a surge of confidence among high-end buyers and unfortunately there’s inventory shortage. The firm’s sale of $10 million worth of luxury co-ops have doubled in 2011’s first quarter. Homes at the bottom level are also doing well with investors paying for foreclosed properties and renting them out.
The middle market though is different as $100,000-$500,000 property March sales are down. This category is 60% of U.S. housing. Foreclosures and short sales still happen as homeowners struggle to sell homes less than what they owe in agreement with their lenders. Credit is still hard as access to it remains a problem.
Middle income earners are not ready to buy just yet. This is what realtor Ted DeVore saw as he waited for possible buyers in Leawood, Kansas for a ranch home priced at $344,900. Homes that sell in the state are those 20-30% less than listed price. DeVore said many people ask themselves if they’ll have a job in 6 months. The indicators are very mixed for the whole economy and the real estate market very closely follows the overall economy, making it hard to be positive, he added.
Joblessness may have gone from 10% to 8.8% in March but Americans still worry. RealtyTrac said foreclosure filings dipped 27% but 1 in 200 U.S. homes is still affected. The National Association of Realtors (NAR) reported a March 3.7% rise in existing home sales. National median home price went 5.9% down from March 2010. The worst since the Great Depression is not fully over even with the government’s support and very low mortgage interest rates. Homeowners that stay in their homes invest in home improvements instead while not moving out. Maintenance and repair supplies demand have increased.
Realtor Mario Greco said buyers still think properties are too expensive and want bigger discounts. Sellers are still not ready to take their lumps yet and recognize what their property is worth in today’s market, Greco added. Lenders were easy on borrowers during the boom where no income proof was asked for. But today, credit access and big down payments have become an issue even to buyers with good credit which slowed the market.
Quicken Loans chief economist Bob Walters said it’s getting more difficult as all the moves whether it be regulatory, underwriting, pricing are pointing toward making it more challenging to get a loan. This may be because after increased bad loans, Fannie Mae and Freddie Mac, major financing rescued by the government, have made stricter standards in 2007-2008. Since then, new requirements kept coming up that lending became more constrained.
Mortgage loan consultant Keith Klein said tougher underwriting standards made it impossible for prospective buyers to get a mortgage if they cannot put down 20%. There is no available credit for first-time buyers either thus affecting the rest of the property ladder, complained realtors. While the rest of the market is weak, high end is gaining. Jameson Sotheby’s International Realty’s Mike Sato said deals for $4.5 million homes not even constructed yet is a big change and a deal he has not seen since 2008. Saunders & Associates Realty’s senior VP Diane Saatchi said more $10 million-home buyers are seen and that there’s a pent-up demand on the buy side because people have been waiting for a couple years.
Getting credit is easier for high-end borrowers although it is still not guaranteed such as what happened to the client of Urban Real Estate’s Matt Farrell. He said his client was with good credit and tried a $2 million home loan. The mortgage was not secured on time hence the buyer wired cash to pay for it with no loan. Farrell said after the banking sector was infused with all that government cash to go out and lend more money, more activity out there is thought to be seen. But when someone who can pay $2 million in cash can’t get a loan, then there is a real problem, he added.