Jumbo rates climbed in Orange County this week for the sixth straight week, while conforming rates fell. Jumbo loans are greater than $417,000 in California and most states. The average jumbo rate on a 30-year fixed with a one-point fee hit 7.570 percent, according to Newspaper Chart Services. Meanwhile, the average conforming rate for a 30-year fixed fell to 6.217 percent.
Here’s a table with the rates over the past six weeks:
| Date | Jumbo | Conf. | Gap |
|---|---|---|---|
| 2-Aug-07 | 6.700 | 6.333 | 0.367 |
| 9-Aug-07 | 6.830 | 6.299 | 0.531 |
| 16-Aug-07 | 7.110 | 6.337 | 0.773 |
| 23-Aug-07 | 7.300 | 6.262 | 1.038 |
| 30-Aug-07 | 7.390 | 6.231 | 1.159 |
| 6-Sep-07 | 7.570 | 6.217 | 1.353 |
Given OC home prices, I wonder how many conforming loans get done in these parts. Zilch. Zip. Nada.
Conforming loans are non applicable here in Orange County … at least for time being.
And to think, people actually believe their OC homes are worth 350+ a square foot. LoL
At some point in time, people are going to need to come to the realization (realtors too) that their homes are priced just too high, especially for the Jumbo interest rates of today. Wishing and hoping for a buyer to make an offer near your asking price is just stardust. Most homes on the market today (in OC) need to be reduced approximately 10% if one expects to sell. Realtors need to start earning their commissions by educating their sellers. If a seller wants to list at an unreasonable price, don’t take the listing. Let your competitor sit on it for months on end and spend all that up-front marketing money. Then when the listing expires, as it is sure to do, make another listing approach at a reasonable selling price.
So jumbo loans have almost increased a Full point since the beginning of August. That is nuts, that just means sellers will continue to lower their prices to match demand.
Simple economics, yet many are trying to say otherwise
Is there anyone still left who thinks prices are not heading for a correction?
I think it is a little silly that people think that it is the sellers who are being irrational by not taking these rates into account. The lenders are the ones who are being irrational. The knee-jerk reaction has led to shutting off credit to even the most stalwart borrowers is a classic overreaction. The market will correct this in very short order. There is money to be made lending to creditworthy borrowers, and where there is money to be made…
I think it is a little silly that Mac thinks that lenders are being irrational by not taking the massive losses they are currently experiencing into account. The sellers are the ones who are being irrational. Their wishful thinking has led to a stalemate between buyers and sellers and cause inventories to skyrocket which will lead to a classic overraction. Some sellers will cross the imaginary line of unbelievable prices and sell cheap leading to a mass rush as those who can try to exit the market. There will be very few creditworthy buyers left at the end of this bubble with all the foreclosures going on right now, and therefore sellers able to put money down with good credit will inhabit the OC. They will joyously purchase the McMansions from the banks, and live happily ever after. Sorry about your ARM there MAC, sell short and quick is my advice.
I don’t disagree that there are not sellers out there who are holding out for unrealistic prices. My point is just that I don’t agree that sellers need to adjust to some new paradigm. I have lived through credit crunches before, and this part of the cycle - where credit is unavailable to virtually anyone - is very short-lived. Do you really believe that “there will be very few creditworthy buyers left at the end of this bubble”?
Also, I’ve never insulted anyone personally on this blog and don’t feel like I need to start now. If it makes you feel better to assume that anyone who disagrees is in a financial bind, then fine. I won’t bother to try to convince you otherwise. But if you read through my history of posts you will see for yourself that I am not a “bull” on real estate in the short to medium term (despite the fact that I have been called one on this blog many times). But that’s besides the point. We’ll see where jumbo rates are in a month. I could be wrong.