The number of applications to secure a purchase mortgage loan for an existing home in the U.S. ticked down a (1) percent over the past week. And having ticked down two (2) percent on a seasonally adjusted basis, purchase mortgage activity was 32 percent lower than at the same time last year, according to application data from the Mortgage Bankers Association.

At the same time, the spread between jumbo and conforming rate loans, which had been over 60 basis points at the end of last year, has narrowed to 13 basis points, “an indication that there is reduced lender appetite for jumbo loans following the recent turmoil in the banking sector and heightened concerns about liquidity,” with First Republic Bank, one of the largest providers of Bay Area jumbo and interest only loans, having collapsed and mortgage credit availability in the U.S. having dropped to its lowest level in a decade, as we outlined back in March.

8 thoughts on “Homebuying Activity Slips, Jumbo Loan Appetite Has Dropped”
  1. First Republic Bank was the lender that refinanced a $5.95 million mortgage on Mark Zuckerberg’s Palo Alto home with a 30-year ARM starting at 1.05 percent in 2012, when the average 30-year rate was 3.5%. I haven’t read anything about it more recently, but I don’t think it’s a stretch to assume that his “white-glove services” banker there offered to refinance it into a fixed rate loan during the pandemic when mortgage rates were at their trough.

    With this recent banking panic-induced reduction in availability of jumbo loans, we might get a real-world test of the assertion, often made on these comment threads by local flippers, real estate agents and other hangers-on in the S.F. real estate “game” that people buying multi million dollar properties in the Bay Area pay all cash and don’t need financing.

    1. Mortgage rates are irrelevant to all-cash buyers. The value of their investment portfolios is very relevant. Those two things are often inversely correlated, and rising rates usually mean falling long portfolios.

      The NASDAQ is ~flat over the past year, the S&P 500 is down ~5%. That’s likely to slow demand all cash buyers.

      The Doubts live in an all cash Co-op. Mortgage rates are absolutely irrelevant in our building.

    2. First Republic offered sub-market mortgage rates to wealthy individual as loss-leaders to foster wealth management business with the same clients. Wealth Management is the real prize that JP Morgan Chase acquired with the FRC acquisition. Today’s WSJ says more on this topic.

    3. As always who are the hangers ons? If they aren’t the flippers and they aren’t the agents who is in this category? Certainly in this context it’s not the mortgage brokers since they wouldn’t be involved.

    4. One other thing about FRB that’s not being mentioned…they were a large originator of TIC (tenancy in common) loans. I would expect this segment of the SF housing market to get impacted materially

      1. This is a good observation. Sterling Bancorp, and Bank of Marin are also in this basket (regional banks under the microscope, specialty TIC lending businesses).

        I didn’t/don’t know how much First Republic was involved – I thought they stuck more to warm cookies and umbrellas for rich people…

  2. Brahma, some definitely do, and the price ranges vary, and my source is my cousin, who is a contractor. Oh and I personally know someone who has paid cash for a house, more than once. It’s not an “assertion.” Guy made money in the Google IPO. You seem to be looking for evidence to confirm a prior. There will be no definitive real-world test, just a “in some cases” test.

    1. Well, your N=1 is from Google IPO in 2004 at a tech peak. We live in a completely different world today. And given that high end real estate has already corrected the most …

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