Since January 1, 2009 (the last 47 days) in the prime Foothills zip codes of 85718 and 85750 only 2 homes have sold (meaning closed escrow) between $500,000 – $600,000; 3 homes have sold between $600,000 – $700,000 and no homes have sold between $700,000 – $800,000; 2 have sold between $800,000 and $900,000 and 5 have sold for 1 million to 1.4 million. It should be noted that many more homes are under contract now, but we are experiencing a large number of fall -throughs, so it is best not to study those figures too closely now, except to say that there are no homes under contract between $796,000 and $994,000 .
The main reason for this rapid slow down is it is a very challenging time to obtain jumbo loans (over 417K). Interest rates are quite a bit higher than rates are for conforming loans; just a few years ago one could obtain a jumbo loan for the same or almost the same interest rate as one could obtain on a mortgage of 417K or less. Many lenders are looking for 30% down or more, very high credit scores and very good work histories. The lenders are taking no risks. So the pendulum swings! Lenders were much too lenient for years and now they are only accepting the “creme-de-la-creme”.
Obviously this is killing the move-up Foothills market. It is easier to sell a home priced a little over a million than one that is priced between $700,000 and 1 million! This is amazing and has never happened before! Of course, this is because those buying a home for over a million will either pay cash or put enough cash down to obtain a low mortgage.
Could this last? Unless Jumbo financing loosens up we will see a big glut of homes priced between $700,000 and 1 million. And it is no picnic for Sellers with homes priced from $500,000 to $700,000, either. Great opportunities will be knocking for those move-up buyers or second-home buyers who can come up with a big downpayment, especially if they can get the mortgage amount down to $417,000.