Mortgage Amounts Rising Faster than Home Prices, MBA Says

Mortgage AmountsIn a peculiar and interesting trend, mortgage amounts are now increasing at a faster pace than home prices. This was revealed in a new report released this week by the Mortgage Bankers Association.

According to the MBA’s report, the average value of purchase loans had actually started appreciating faster than home prices in September 2011. More than three years later, in December 2014, the average amount of purchase loans on the MBA’s records had increased by close to 32 percent. For the week ended March 6, this metric came in at an all-time high $294,900. All told, purchase loans are now valued higher than they were in the run-up to the Great Recession of the late 2000s.

The MBA also cited a separate statistical index from the Federal Housing Finance Agency that shows home purchase prices rising by 18.5 percent over the same period. Explaining the bifurcation, MBA vice president for research and economics Dr. Lynn M. Fisher said that it is possibly due to faster home price increases for larger homes, thereby skewing purchase loan averages higher than they should normally be. She added, however, that most properties that end up sold are at premium price points.

This is congruent with a recent report from Massachusetts-based Mortgage Master that also observed how activity appears to be quite brisk in the premium home market. According to Mortgage Master president Paul Anastos, jumbo mortgages, or home loans valued at more than $417,000 in most markets, take up approximately 25 percent of both Mortgage Master’s and LoanDepot’s businesses; the former company merged with the latter in January, and is now one of the largest nonbank lenders in the United States. Anastos also observed that while mortgage guidelines are not as strict as they used to be in general, the easing “has been a bit more on the jumbo end.”

Another explanation for the bifurcation in terms of mortgage amount and home price increases came from National Association of Realtors chief economist Lawrence Yun. He said that buyers on the low end, or those shopping for homes cheaper than $250,000, “are generally of moderate credit and are having trouble or being intimidated from applying for mortgages.”

As for upper-crust buyers, he believes “they have done well financially” amid a healthy stock market, thus making them more comfortable in buying premium homes.