Mortgage terms are easing for luxury homes which will significantly help this market recover.
While the real estate market in Bergen County has been recovering nicely since late last year, the luxury market has not. Sales of high end homes has been one of the less robust parts of the market because of financing. Financing for upper tier homes all but disappeared in 2008. This was a large part of the problem. When banks began to loan on luxury homes the terms were often highly objectionable. As a result, the luxury home market has been having a hard time.
There is a segment of that market which is immune to the economy. Premier luxury homes at the highest level are in a class by themselves. Typically cash purchases, homes at this level are bought and sold by people of such vast wealth that they rise about what’s happening in the world economy. In our area this would be purchases at or above $5 million.
Jumbo loans and super jumbo loans were not only hard to get but their down payment requirements went through the roof. If you wanted to purchase a $2 million house you had to come up with as much as a 50% down payment. Requirements of 40-45% were standard for up to $2 million purchases. As a result it’s easy to see why these terms were objectionable. This has changed because mortgage terms are easing for luxury homes now.
Today I can report to you that only a 20% down payment is required for $1-2 million homes and just a 25% down payment for a $2-3 million purchase. Of course this assumes the buyer is qualified as to credit, assets, etc.
This change bodes well for affluent buyers and the luxury home market. With more liberal jumbo loan financing the market for high end luxury homes is now becoming more active. According to the New Jersey MLS data, we have an 18% increase in the number of homes sold at $2 million or above for the first 4 months of this year. Better mortgage loan terms for luxury home buyers is indeed positive for the Bergen County real estate market.