Pending home sales post increase of 6.3%
Scarce financing for so-called jumbo loans and plunging property values have frozen the market for million-dollar homes, a real estate research firm reported Tuesday.
Sales of homes priced at $1 million or more were down 43% in California last year, according to MDA DataQuick in San Diego, which attributed the drop to tight credit markets that made it more difficult to finance such large purchases.
The million-dollar market’s sluggishness occurred as home sales overall rose statewide.
Last year, the number of homes sold in California grew 2.5% over the previous year, driven largely by sales of foreclosed, lower-priced homes.
At the high end, however, scarce financing for jumbo mortgages -- those greater than $417,000, which until recently was the limit for conforming loans -- brought the million-dollar market to a standstill.
“A lot of home sales in the upper half of the market have been on hold for months, waiting for financing,” said DataQuick President John Walsh.
The number of home sales financed last year with jumbo loans fell 51% from the previous year, DataQuick reported. But the number of homes purchased with conforming mortgages -- those below $417,000 -- increased 21% from the previous year, the firm said.
For this year, the conforming loan limit in the Los Angeles area has been raised to $625,500, but lenders continue to charge higher rates for loans above $417,000. Lending standards for jumbo mortgages also are more strict.
Jumbo financing may be tight, but “the real issue is, there are so many homes in the $800,000- to $1-million range that used to be over a million, why would you take that leap” to spend more than a million, said Irvine real estate agent Mark Bennett.
Along with the scarcity of willing or qualified buyers, the million-dollar market moves more slowly because sellers often hold out longer to try to get the price they want, real estate brokers say.
Data from online real estate brokerage Redfin show homes now listed at $1 million and above have been on the market an average of 20 days longer than lower-priced homes.
“It really is painful to sellers when they’ve got that seven-digit figure in their heads to switch it to six. It just hurts,” Bennett said.
Distressed sellers, such as homeowners unable to make their mortgage payments or lenders unloading repossessed homes, are eager to sell quickly. Relatively few high-end homes are sold under such circumstances.
Last year, of the 236,000 California homes that went into foreclosure, only 1,612 had previously sold for $1 million or more.
Million-dollar-plus home sales peaked in 2005, when 54,773 such houses changed hands. The total last year of 24,436 was less than half that.
That is partially due to the fact that, with home values plummeting in 2008, fewer homes were priced to sell in that range.
Then, there are some that simply defy market trends still.
The most expensive sale last year was an 11,407-square-foot, six-bedroom, 10-bathroom Bel Air mansion built in 1926. It sold for $38 million in October, according to DataQuick.
The largest home sold in 2008 was a four-bedroom, eight-bath, 20,000-square-foot house in Corona del Mar. The price was unavailable, but the April purchase was financed with a $17.6-million mortgage, DataQuick reported.