The price of Chicago luxury homes along the north shore as well as in downtown Chiacgo are rising briskly, just like they are around the country in luxury markets like San Francisco and the Hamptons. According to the National Association of Realtors, sales of luxury properties priced between $750,000 and $1 million are up 38.7% over a year ago, while luxury homes priced $1 million and over are up 25.7%. Jumbo mortgages are helping to revive the once depressed Chicago luxury real estate market. These loans, which are typically over $417,000, don’t qualify for purchase by federal agencies like Fannie Mae or Freddie Mac. And after they nearly went extinct in the wake of the lending crisis that crippled the industry and caused much of the real estate meltdown, jumbo loans are back.
Guy Cecala, publisher of Inside Mortgage Finance, adds, "The jumbo market may fare better than the overall mortgage market in 2013.”
The credit markets have returned to a comparatively stable point, and lenders who stopped issuing new jumbo loans are giving them out once again. Of course, they’re much more selective about who they lend their money to and will only issue a jumbo loan to the most highly qualified buyers. But what’s interesting is that these jumbo loans are being offered at interest rates that are barely above conventional mortgage rates.
The entire lending landscape has changed tremendously following the mortgage meltdown, and jumbo loans have a favorable price because the selectivity concerning those who can obtain one is so intense. Matt Silver, director of the Chicago Association of Realtors, said, "At one point all you needed was a pulse. Now you have to have all of your ducks in a row."
According to Mortgage Daily, a trade publication that reports on year-over-year increases in jumbo loan activity, new jumbo loan activity was up 60% year-over-year for the four weeks ending February 22nd.
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