JUMBO magic working well

[bsrsharma]

Comment by Professor Bear

2007-09-03 14:37:16

Evidently the Jumbo lending credit crunch is starting to flatten out SD list prices like a pancake (as I have long anticipated). For instance, on the current MLS, there are 11,179 homes listed for $450K and above, and only 9535 homes listed for $500K and above, which implies 2244 homes are currently listed on a $50K range from $450K to $499K — for an average of 45 homes for each $1000 slice. That is a pretty dense listing density for a dead market.

Translation: You are doing very well by limiting your offers to below $520K for any property.

[want a good deal]

What are those breakdowns normally at. Is this something new or has it been like that for awhile.

[bsrsharma]

I think Professor Bear finds prices trying to get below the $521K mark, post Jumbo crunch. My guess is, by Aug 2008, houses for sale with jumbo price tags would have become rare. A real scientific analysis is difficult since prices are generally coming down. But the near non-availability and high price of jumbo loans will combine to create a highly non-linear “sound barrier” at 521K. If you are a buyer, not much sense making a higher offer and if you are a seller, not much sense keeping a higher price – unless the property is truly exceptional.

[want a good deal]

There must be jumbo loans available or nothing would be selling and as you can see on sdlookup lots of stuff in that range sells every day.

[SD Realtor]

I don’t think a single data sample is worth anything at all. Show me enough data so that a true trend can be identified or a gap movement. This is clearly evident in the short sale monitor where the trend clearly identifies the number of short sales to be growing as a ratio of the total MLS listings in San Diego.

I am not saying that the credit crunch cannot or will not have an effect. Obviously they will.

I could say today was the hottest day ever in San Diego but it would carry more gravity if I had a list of temperatures over recent history.

Also there are currently 1239 properties pending in San Diego County over 520k as a listed price for the minimum list price.

SD Realtor

[want a good deal]

SD

That would be a good data point to see how the credit crunch is affecting the market. How many of those will fall out because of lack of funding. Do people normally get qualified and lock a rate before making the deal or afterwards?

[NotCranky]

SD R I volunteer you to start a “Jumbo” monitor. BTW it was cold, windy and rainy in SD today.

[larrylujack]

agreed. been looking in 92064 in the 1.3 to 1.8 mil range for the past 6+ months, and these properties are selling and continue to go into escrow. NOT a single property I was seriously interested in (a few I have made offers on also) has fallen out of escrow, so clearly there are those that are either paying cash or don’t mind the extra .5% for a jumbo loan. let’s face it, folks in this range don’t seem to be as affected and an extra .5% on a jumbo loan is not a make or break deal. prices have softened a bit and there are a couple high end distressed ones, but for the most part, prices are holding up quite well to my chagrine.

[bsrsharma]

SD – Is it possible to compare that number 1239 with historical trend? Is it possible by those having full access to MLS to make historical queries like “Number of properties for sale on **/01/2007”? Then the query can spew out data for 01/01/2007 .. 09/01/2007. I think Professor Bear’s theory makes a lot of sense. There will be very high pressure to get under the $521K line for anyone in the $522K to, say, $650K range. That should create a compression point at $521K and a vacuum in the $521K+ area, till you reach true estate grade properties at around million $ range. Of course, the crunch is less than a month old. There won’t be enough of data points for at least a couple more months. By 2008, I think this should be obvious.

[bsrsharma]

Larry – I think the properties of interest for this analysis are more in the range of $522K – $800K. Above that, I think, the dynamics are very different. You are going out of the middle class spectrum and looking at buyers for whom price is (almost) of no great concern.

[SD Realtor]

want a good deal – Yes keeping track of the number of pendings that fall out would be a good idea… seems like Rustico already volunteered me for it… Well he owed me one but I will have to decline.

While it is a useful stat I think that tracking the overall sales volumes will be good enough. As long as they continue to show about a 20% yoy decline per month then we are still sailing along through the downtrend.

BSR –

Yes it is possible but again manual. One can go ahead and set an MLS search up with a minimum price value and then an off market date range for previously sold properties. Do this for enough months and you can see a trend if any trend is evident but this will only be for the properties that sold. It would not factor in properties that did not sell.

You can also set up a manual search to find out how many properties were on the market for all solds, expireds, cancelleds, and withdrawns and search for an original list date in any range but again, way manual…

I think that someone could make some good money creating a better GUI for the MLS to allow a more robust search mechanism for compiling data. The one they have now is pitiful…

Larry – Since you want a 1.3-1.8M home you are my new best friend…

Rustico Rustico Rustico… You better be putting me on your payroll soon. Once the recession hits and I loose my engineering job I will hope you will employ me somehow…

******

As I said, there is no doubt the credit crunch will provide a new plateau so to speak but it is way to early IMO to make assessments on the overall effect. I think the past few weeks were a bit of an overreaction. I expect things to loosen up but not alot… then I expect another round of contraction with the next wave of bad news…. this could be a recurring effect over the next few years… Between the crunch, foreclosures, arm resets, psychology, it is hard to tell which factor is most responsible at any given time. That is why I think sales volume will be most reliable. At some point I think sales volume will level off and then median price will come down more appreciably then it has…

Just a guess…

SD Realtor

[NotCranky]

“which implies 2244 homes are currently listed on a $50K range from $450K to $499K — for an average of 45 homes for each $1000 slice. That is a pretty dense listing density for a dead market.”

bsr, This is pretty grey area.The quote you posted doesn’t seem to reflect science but more the are of guestimation and inference. Naturally there is density around the median. I guarantee you there are not 45 houses for each 1000 slice towards the extremes.

Your question about wether or not the “Jumbo” numbers can be monitored is more strait forward but has also many divergent factors. What about general inventory trends for instance? Anyway the problem needs more than just the data on the number of houses in each price range.

I think what you are getting at is this… around the Conforming /jumbo border, with jumbos being as scarce as people to put down a large payment to bring the loan to conforming, the house one can buy(y) is going to go up in quality, size, location, amenities ect. exponentially with the amount (X) in dollars that the price is above conforming. This could become true. It wouldn’t be the first time “high end” got slammed.

I am going to stop this post for now but will continue thinking about the possible implications and watching this thread.

[want a good deal]

I hear a lot about the loans being a problem but does anyone have any real evidence that is true.

[NotCranky]

“Rustico Rustico Rustico… You better be putting me on your payroll soon. Once the recession hits and I loose my engineering job I will hope you will employ me somehow…”

Sorry SD R for better and for worse I have never learned the art of delegation…

[asragov]

Jumbo is dead, long live Jumbo!

There are plenty of credit unions, banks, and other players willing to step in to the jumbo breach left by Countrywide, et al. When BofA says no to a super-jumbo 40% LTV loan (real case), there are those among the other 7,500+ banks in the country that will step in.

The market will not be as deep as it was, and 30-40%++ of the people previously getting jumbo mortgages will no longer be successful (sub-prime does not necessarily mean low price!).

So, clearly the market will be hurt, and prices will come down dramatically.

However, given financing ingenuity like piggyback loans (yes, they’ll still do those, on top of a conforming loan), this market will not die. It will just be much weaker than it used to be.

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