From the NY Times:
Mortgage amounts are rising more quickly than home prices, an unusual phenomenon that seems to confirm continued weakness at the lower end of the housing market, according to the Mortgage Bankers Association.
The trade association reports that the average size of purchase loans began to outpace the recovery in home prices in September 2011. By December 2014, according to the group’s weekly mortgage application survey, the average purchase loan amount had risen by nearly 32 percent. The average for the week ending March 6 was $294,900, a record high. In other words, the average purchase loan now exceeds levels reached before the recession when home prices soared to unsustainable heights.
By comparison, the association noted, a Federal Housing Finance Agency index that measures home purchase prices shows a considerably more gradual rise of 18.5 percent since 2011. Why this unusual parting of the two trend lines? Lynn M. Fisher, the association’s vice president for research and economics, said one possible explanation is that home prices are rising more quickly for larger homes, skewing the loan average upward. But more likely, she said, is that the bulk of the properties being sold are at the high end of the price range. “The mix of people buying is changing,” Dr. Fisher said. “More of the bigger stuff is transacting.”
That opinion jibes with the business trend at Mortgage Master of Walpole, Mass., which merged with loanDepot in January to become one of the country’s largest nonbank lenders, funding $2.1 billion in February.
“What our mortgage applications reflect is that we see a lot more activity at the higher end in general,” said Paul Anastos, the president of Mortgage Master. He noted that jumbo loans (which exceed conventional conforming loan limits) account for about 25 percent of the combined companies’ business. The brisker activity among jumbo borrowers — those who take out loans greater than $417,000 — is partly because, while there has lately been some loosening of credit for borrowers at the lower end, “for the most part, the easing of guidelines has been a bit more on the jumbo end,” Mr. Anastos said.
Buyers on the lower end — looking for homes priced at $250,000 and below — “are generally of moderate credit and are having trouble or being intimidated from applying for mortgages,” said Lawrence Yun, the chief economist and senior vice president for research at the National Association of Realtors. “While on the upper end,” he continued, “given the stock market bull run of the past six years, they have done very well financially. The stock market expansion has given a comfort level at the top tier of families to go ahead and apply.”