If you have a magnifying glass you might find some signs of a housing recovery here or there, sometime in the near future.
Defying all the green shoots, however, is the upper end, jumbo market, which continues to be absolutely miserable. Yesterday, Bloomberg ran this chart, showing that inventory at the high end dwarfs more “affordable” homes.
“Tighter lending standards and the lack of cheap financing for these borrowers continue to be key issues,” the New York- based analysts wrote, referring to “jumbo” mortgages. That’s after so-called interest-only and option adjustable-rate loans were a “major driver” of soaring values, they said.
“Currently, we have national home prices bottoming in 2011,” they said. “However, prices for more expensive homes may not bottom out until 2012, and ultimately result in peak-to- trough declines in excess of 60 per cent (compared to 40 per cent nationally).”
This weakness in the jumbo market has alarmed the National Association of Realtors (NAR), which recently came out with a report demanding that the government “fix” this market.
They point to this chart, which shows that the government hasn’t brought down the cost of a jumbo, non-conforming mortgage the way it has with other loans.
(The green line is the 30-year jumbo, the blue is conforming)
But here’s the problem, NAR and anyone else participating in this space. The jumbo market is the only real market there is. Fannie and Freddie don’t play in that space, so what you’re looking at is the real state of things, sans-massive intervention. The NAR wants the Fed to use TALF to goose this space. It may happen, though given the lack of investor interest in TALF we’ll be sceptical that it makes a difference. But while folks like Cramer and others talk about a rebound in housing, remember this slice of the market to get a sense for how things look without Uncle Sam’s fingerprints.