It’s June 26th, which means we’re just four days away from what Jim Cramer has predicted would be the very day the housing market bottoms. Exciting.
Do you have plans for that day? Are you attending any open houses this weekend in preparation?
Well, before you do, maybe hold off. The thing is, the housing market still sucks, especially at the high end. We noted earlier how the Jumbo, non-conforming market, where inventory is piling up like crazy, was the real housing market, because there was little government intervention and mortgage rates remained high. There’s also not much of an after-market for the mortgages, and it’s why the NAR is desperate for a government “fix.” Specifically, it’d like to see jumbo loans be included in the TALF, though since the TALF is kind of a flop we’re not sure what good that would do.
And it’s not just mortgage rates.
Jonathan Miller over at HuffPo talks more about the problems at the high end:
Mortgage lenders aren’t crazy about lending in a weak economic environment and are being more draconian than ever with much stricter mortgage underwriting requirements (standards more similar to those that existed before the credit boom).
As a result, most buyers have to put 20% down to qualify for a conforming mortgage, $417,000 or less, in a large portion of the country and $729,750 in “high-cost” housing markets like New York.
A mortgage higher than those limits is considered “jumbo.” Because secondary market investors in jumbo products have largely disappeared, mortgage lenders for higher priced houses have to hold the mortgages in their own portfolios and can’t offload the risk to secondary market investors.
As a result, banks often require 40% to 50% down payments for purchases using jumbo mortgages versus 20% for conforming mortgages. This situation is not improving. That knocks a lot of potential buyers out of the high end housing market, many who would have qualified before the September tipping point.
So it’s hard to imagine anyone calling a bottom of the housing market with much conviction considering a significant portion of the mortgage market is not functioning very well, unemployment is expected to rise through the end of 2010 and mortgage rates are rising as the Fed seems to be losing its ability to reign in rates as the US Treasury continues to print money to cover record government spending to stimulate the economy.
Read the whole thing; apparently talking about Cramer’s bottom is the new joke these days in real estate circles.