Analysis Reveals a Different Market Dynamic in Each Real Estate Price Range
It has been obvious to all of us for quite a while now that lower priced homes are selling much faster than higher-priced homes, so I figured it was high time to do some statistical analysis. Here is what I discovered . . .(Click here to read more)
The analysis is interesting, but no surprise for someone in the mortgage business. Your numbers track with what I see.
1. The market today is dominated by people who do not have to sell a home. The move up buyer is largely out of the market because of lack of appreciation in the old home. If the old home is not appreciating, there is no equity to transfer to a new home.
2. Financing is readily available to buy a home with a mortgage up to $417,000 in Jefferson County. If a larger loan is required, they are more expensive, require more down payment, and harder to get. This correlates with your observation that homes below $400,000 are selling well, and as the price goes above $400,000, sales slow dramatically.
3. In the past, upper priced homes were often financed with various Option ARM and Alt-A products. There were many reasons, but today these products are gone from the market. When a borrower with perfect credit, almost $7,000/month in taxable income, and about $1,000,000 in liquid assets is turned down for a $210,000 loan on a $700,000 home as happened to me in June, you will have trouble selling higher priced homes. Credit the government with protecting borrowers from predatory lenders. While the government is protecting the borrowers, you must look for cash buyers.
4. With the elimination of Option ARM products, the higher pricing of Interest Only products, and generally more difficult qualifying requirements for all adjustable rate products, financing houses requires up to double the income compared to what was required for the same loan size a few years ago. This means that people who could buy a few years ago cannot qualify for the same size loan today even though interest rates are lower.
With the above affecting your buyers, it is no surprise that high end homes are selling slowly. FHA and VA financing are readily available for the lower priced homes with low down payments, so they are selling well. It just demonstrates how availability of financing affects sales of homes.
Thank you for the opportunity to be of service. Don’t hesitate to call us if you have additional questions, or if we can be of service in any other way.
Don Opeka – President
Licensed Colorado Mortgage Loan Originator MB100007878
Colorado Certified Mortgage Broker
Orion Mortgage, Inc.
10560 Wadsworth Blvd.
Broomfield, CO 80021
303-469-1254
800-404-0453
www.OrionMortgage.net
Don@OrionMortgageInc.com
Check the license status of any Colorado mortgage loan originator at http://eservices.psiexams.com/crec/search.jsp
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