The always insightful National Association of Realtors claimed today that the housing recovery is being stalled thanks to costly and more difficult to obtain jumbo loans.
In their report titled, “Impact of the Jumbo Mortgage Credit Crunch,” they note that the national share of home sales above $750,000 fell to just 2.3 percent this year from 4.4 percent in 2007.
Meanwhile, the months’ supply of inventory of such homes has risen from 18.7 months to a whopping 41.1 months during the same period.
“Lenders are keeping credit standards overly stringent for borrowers at the higher end of the market, and are increasingly reluctant to make jumbo loans,” said NAR Chief Economist Lawrence Yun, in a release.
“The interest rate spread between 10-year treasuries and jumbo loans has also substantially increased, making jumbo loans much more costly than has previously been the case. Many people believe that the jumbo market is for the very rich, but in many areas of the country, middle-class families need these loans to buy a median-priced home.”
Yun also noted that some mortgage lenders are treating jumbo loan borrowers with solid credit scores and substantial down payments as more of a credit risk than conforming loan borrowers with lower credit scores and down payments.
“As a result, more buyers of high-priced homes are resorting to cash purchases, while the bulk of potential buyers remain sidelined and unwilling to take out mortgages that carry interest rates much higher than those on conforming mortgages,” Yun added.
NAR has proposed that Congress make the current rules for determining loan limits permanent, use the Term Asset-Backed Securities Loan Facility (TALF) to buy jumbo loans, and increase lender competition by loosening warehouse line of credit.
Maybe all those sprawling, half-finished, abandoned housing developments are stalling the recovery.