Post by jeffolie on Sept 19, 2013 7:38:35 GMT -6
luxury house buyers' spending spree
High inflation ... for Type 1 rich consumers
The favorite purchase inflating the most ... collectable, rare cars
my jeffolie view: The Type 1 rich consumer feels wealthy as the stock indexes make Peak 2 highs ... the wealth effect will persist past the Peak 2 top until denial of the upcoming bear market becomes removed, ending the confidence of Type 1 rich consumers ... denial takes time to squash
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Sept. 19, 2013
High-end home buyers shrug off rate hikes
Mortgage rates have risen. Home prices are up. But high-end home buyers are still on a spending spree.
Purchases of existing homes priced above $1 million are up 25% from a year ago, said Walter Molony, a National Association of Realtors spokesman. Even the bump in interest rates seems to have had little overall effect on the luxury market so far, he added.
Whether they need to move or just want to upgrade, wealthier buyers are less likely to be spooked by rising rates than lower-income home buyers.
The bump in interest rates has had little effect on the luxury real-estate market—so far.
Wealthier Americans also have more in their bank accounts again, and renewed confidence about the job market and the overall economy, said Doug Lebda, chairman and CEO of Lending Tree, an online mortgage marketplace. “At the end of the day, housing moves with income, and if people are secure in their jobs, they are going to buy the house,” Lebda said. “Rates are a factor, but not the driving factor.”
Borrowers needing a jumbo mortgage—defined as loans above $417,000 in most areas and $625,500 in some high-price markets—shouldn’t postpone purchases, especially since rates are likely to rise more next year, said Guy Cecala, CEO and publisher of Inside Mortgage Finance. “The terms and underwriting are getting better, most lenders want to do jumbo loans, and historically it’s very affordable if you want to finance part of a high-end purchase.”
Rates for a 30-year fixed jumbo hit a low of 3.82% on the week of May 3 and climbed almost a percentage point to 4.70% in early August, according to HSH.com, which tracks rates. However, the margin between a 30-year fixed-rate jumbo and a conforming loan has trended tighter than it has been in years, less than 20 basis points. Some banks are offering jumbo rates that are lower than rates for government-backed conforming loans.
Jumbo lending had been frozen during much of the past five years, available only to highly qualified borrowers and from big banks that could afford to keep big loans on their books. However, this year’s thaw has seen lenders of all sizes competing aggressively for jumbo borrowers.
Lender enthusiasm for jumbos has generated a 20% rise in origination volume from the first to second quarter of 2013, and by year’s end, volume is expected to hit $220 billion, according to Inside Mortgage Finance.
To increase their jumbo business, lenders also are becoming more willing to write jumbo loans for vacation and second homes, Cecala said. Vacation home prices are rebounding at a slower pace than the overall market so buyers also are likely to find good deals, he added.
In short, upper-income buyers are in a “sweet spot,” and that extends even to upscale housing markets like San Francisco, where prices are above 2006 peak levels in some neighborhoods and bidding wars are common, said Julian Hebron, vice president of San Francisco-based RPM Mortgage. And the math remains in the favor of jumbo borrowers not just now but into the future, he added.
Even a full 1% increase in interest rates would have little effect on the typical San Francisco jumbo applicant’s ability to qualify for a loan or make monthly mortgage payments, Hebron said.
He explains why: Consider a hypothetical couple earning $225,000 a year with no other debt. This couple, buying a single-family home for $1 million with a 20% down payment, would have a debt-to-income ratio of 27%—well below the 43% DTI cutoff most lenders set.
In this scenario, the resulting loan amount would be $800,000. Using an Aug. 12 jumbo 30-year fixed rate of 4.375%, the payment would be $3,994. A 1 percentage-point rise in interest rates to 5.375% would only increase that debt-to-income ratio to 30%, and the payment would be $4,480, Hebron said.
Those house payments are on par with San Francisco rents, which have risen more than 24% since November 2011, according to RentMetrics, which tracks the city’s residential rental market. Leasing a two-bedroom apartment in the city averages $3,987 per month; renting a three-bedroom unit averages $5,273 a month.
Higher house payments may make more sense in the long term, especially since a jumbo borrower’s income is likely to continue to climb. The couple is often willing to absorb the additional costs, Hebron said, “as long as the house is one that will accommodate his long-term family and career plans.”
www.marketwatch.com/story/high-end-home-buyers-shrug-off-rate-hikes-2013-09-19?dist=beforebell
High inflation ... for Type 1 rich consumers
The favorite purchase inflating the most ... collectable, rare cars
my jeffolie view: The Type 1 rich consumer feels wealthy as the stock indexes make Peak 2 highs ... the wealth effect will persist past the Peak 2 top until denial of the upcoming bear market becomes removed, ending the confidence of Type 1 rich consumers ... denial takes time to squash
==================================================
Sept. 19, 2013
High-end home buyers shrug off rate hikes
Mortgage rates have risen. Home prices are up. But high-end home buyers are still on a spending spree.
Purchases of existing homes priced above $1 million are up 25% from a year ago, said Walter Molony, a National Association of Realtors spokesman. Even the bump in interest rates seems to have had little overall effect on the luxury market so far, he added.
Whether they need to move or just want to upgrade, wealthier buyers are less likely to be spooked by rising rates than lower-income home buyers.
The bump in interest rates has had little effect on the luxury real-estate market—so far.
Wealthier Americans also have more in their bank accounts again, and renewed confidence about the job market and the overall economy, said Doug Lebda, chairman and CEO of Lending Tree, an online mortgage marketplace. “At the end of the day, housing moves with income, and if people are secure in their jobs, they are going to buy the house,” Lebda said. “Rates are a factor, but not the driving factor.”
Borrowers needing a jumbo mortgage—defined as loans above $417,000 in most areas and $625,500 in some high-price markets—shouldn’t postpone purchases, especially since rates are likely to rise more next year, said Guy Cecala, CEO and publisher of Inside Mortgage Finance. “The terms and underwriting are getting better, most lenders want to do jumbo loans, and historically it’s very affordable if you want to finance part of a high-end purchase.”
Rates for a 30-year fixed jumbo hit a low of 3.82% on the week of May 3 and climbed almost a percentage point to 4.70% in early August, according to HSH.com, which tracks rates. However, the margin between a 30-year fixed-rate jumbo and a conforming loan has trended tighter than it has been in years, less than 20 basis points. Some banks are offering jumbo rates that are lower than rates for government-backed conforming loans.
Jumbo lending had been frozen during much of the past five years, available only to highly qualified borrowers and from big banks that could afford to keep big loans on their books. However, this year’s thaw has seen lenders of all sizes competing aggressively for jumbo borrowers.
Lender enthusiasm for jumbos has generated a 20% rise in origination volume from the first to second quarter of 2013, and by year’s end, volume is expected to hit $220 billion, according to Inside Mortgage Finance.
To increase their jumbo business, lenders also are becoming more willing to write jumbo loans for vacation and second homes, Cecala said. Vacation home prices are rebounding at a slower pace than the overall market so buyers also are likely to find good deals, he added.
In short, upper-income buyers are in a “sweet spot,” and that extends even to upscale housing markets like San Francisco, where prices are above 2006 peak levels in some neighborhoods and bidding wars are common, said Julian Hebron, vice president of San Francisco-based RPM Mortgage. And the math remains in the favor of jumbo borrowers not just now but into the future, he added.
Even a full 1% increase in interest rates would have little effect on the typical San Francisco jumbo applicant’s ability to qualify for a loan or make monthly mortgage payments, Hebron said.
He explains why: Consider a hypothetical couple earning $225,000 a year with no other debt. This couple, buying a single-family home for $1 million with a 20% down payment, would have a debt-to-income ratio of 27%—well below the 43% DTI cutoff most lenders set.
In this scenario, the resulting loan amount would be $800,000. Using an Aug. 12 jumbo 30-year fixed rate of 4.375%, the payment would be $3,994. A 1 percentage-point rise in interest rates to 5.375% would only increase that debt-to-income ratio to 30%, and the payment would be $4,480, Hebron said.
Those house payments are on par with San Francisco rents, which have risen more than 24% since November 2011, according to RentMetrics, which tracks the city’s residential rental market. Leasing a two-bedroom apartment in the city averages $3,987 per month; renting a three-bedroom unit averages $5,273 a month.
Higher house payments may make more sense in the long term, especially since a jumbo borrower’s income is likely to continue to climb. The couple is often willing to absorb the additional costs, Hebron said, “as long as the house is one that will accommodate his long-term family and career plans.”
www.marketwatch.com/story/high-end-home-buyers-shrug-off-rate-hikes-2013-09-19?dist=beforebell