It’s no secret around here that our local housing market is H-O-T.
Even though it might seem crazy to us, Denver’s fast-paced market isn’t completely unique — both Portland and Detroit are experiencing similar real estate trends. This phenomenon has caught the eye of the nation’s most influential financial media outlet, The Wall Street Journal.
Our own Dave Ness is quoted in this week’s article on jumbo mortgages. We’re excited to have Thrive’s local expertise in the WSJ! Kick back and give the article below a good read. (Or if you want the Spark Notes version, just scroll down to the paragraphs in bold!)
The New Markets for Jumbo Loans
Buyers in Denver, Portland, Ore., and even Detroit are increasingly getting jumbo mortgages.
By ANYA MARTIN
More home buyers in the U.S. are going for jumbo loans—and not just in hot luxury markets like Manhattan and San Francisco. Buyers in Denver, Portland, Ore., and even Detroit are increasingly getting jumbos as well.
The number of homes that would require borrowers to get a jumbo mortgage with a 25% down payment has increased 13% in 25 top metro areas since 2012, according to Zillow.com, a real-estate information website.
Prices have been steadily rising since January 2012, when home values hit bottom in many markets, says Svenja Gudell, senior director of economic research at Zillow. As a result, more buyers seeking financing need jumbo loans—mortgages that in most parts of the country exceed the $417,000 limit on government-backed loans ($625,500 in high-cost areas).
Here’s a closer look at three local markets seeing a bump in prices.
The number of homes here that would require a jumbo mortgage for financing almost doubled (89% increase) from 4.2% in 2012 to 8% today, according to Zillow. In Portland, the conforming-loan limit is $417,000.
The Portland market has revved up in the past two years but especially in the last six months, says Shannon Baird, a real-estate broker with Portland-based Meadows Group Realtors. Many buyers hail from out of state, attracted by the temperate climate, cultural activities, restaurant scene and outdoor activities, she says.
Aaron and Arlene Unverzagt, both age 43, saw Portland as a great place to raise their two children, Jack, age 6, and Zoe, age 3. “Portland is family friendly, the size is manageable, and we can travel easily to Mount Hood, central Oregon and the coast all within an hour,” says Mr. Unverzagt, a stay-at-home dad whose wife is a marketing executive.
To score their 3,300-square-foot, Midcentury-Modern home in the Wilcox Estates neighborhood in May, Mr. Unverzagt says he made a rapid offer right at the $825,000 asking price, waived appraisal and home-inspection contingencies and even wrote a personal letter to the sellers. They made a 20% down payment and financed the purchase with a jumbo mortgage.
Because of fierce competition, jumbo borrowers have to state upfront that they are willing to make larger down payments if appraisals can’t keep up with rapid home appreciation, says Steph Noble, a mortgage consultant for Guild Mortgage in Portland, who handled the Unverzagts’ jumbo loan.
Chinese cash buyers looking for investment properties are a significant part of the current Portland market, Ms. Baird says. Homes priced $700,000 to $1 million often attract as many as 10 offers—some up to $100,000 above the asking price, she adds.
The median home value in Portland was $286,200 in May 2015, only 2.1% lower than its peak of $292,300 in April 2007, according to Zillow.
Here, 11.2% of homes listed would require a jumbo mortgage for financing, an 82.3% jump since 2012, according to Zillow. Home-price appreciation has been so rapid that Denver is one of only a few places nationwide where government loan limits were raised from $417,000 to $424,350 in 2015. The median home price climbed to $297,700 in May 2015, according to Zillow.
In some neighborhoods, it’s not uncommon for buyers to make higher down payments to make up for gaps between appraisal values and approved loan amounts, says Chris Magnotta, a Denver-based Guild Mortgage mortgage consultant. “A year ago, when an appraisal came in low, it was on the seller to bring the price down, but now it’s flip-flopped,” he adds.
In Colorado’s capital, a booming economy and job growth are the main drivers attracting today’s transplants, says David Ness, managing broker for Denver-based Thrive Real Estate Group. Of 46 deals that he brokered from January through May, 43 sold for above list price, he adds.
A virtual standstill in new-home construction over the past decade is driving prices even higher, Mr. Ness says. In 2006, there were 35,000 home listings. Now there are just 6,909, he says.
Only 1.9% of homes listed in the Motor City would require a jumbo loan, but that’s 108% higher than in 2012, according to Zillow. In Detroit, conforming loan limits are $417,000.
Last month, Mike Blake, a real-estate agent with Detroit’s Century 21 AAA North office, sold a 5,600-square-foot home in the suburb of Oxford for $1.8 million. “I have never seen so many $1 million houses up and selling, and there are a lot of new builders moving in, too,” Mr. Blake says. “Detroit follows the auto industry, and the auto industry is excelling.”
Current Detroit buyers tend to be small-business owners or auto-industry executives buying up. And some of them have a recession-era bankruptcy or foreclosure on their credit reports, he adds. If those borrowers with one-time credit strikes now have sufficient income, some community banks are willing to lend, Mr. Blake says. “I know of two people who filed for bankruptcy in 2012 and got jumbo loans this year,” he notes.
Median home prices in Detroit were $115,300 in May, still 26.9% lower than their June 2005 peak, according to Zillow.
So, this market… is it exciting? Cut-throat? Downright crazy? That’s for you to decide. Around here, we’re we’re having fun, letting our adrenaline pump as we roll with the punches.