Are jumbo mortgages holding back the housing market?

Yes ... according to the National Association of Realtors in a new report.

While interest rates have gone lower and lower for prime "conventional" mortgages, guaranteed by the FHA, Fannie Mae or Freddie Mac, there is no federal guarantor for the jumbo mortgage market.

According to the NAR, "the national share of home sales above $750,000 has fallen from 4.4% in 2007 to approximately 2.3% in 2009, and the months' supply of inventory has risen from 18.7 months to 41.1 months during that same period."

In other words, it will take more than three years to sell off all the homes that are priced above $750,000 at the current rate. At the same time, the $8,000 first-time home buyer credit isn't going to do you a lot of good when you have to come up with $100,000+ or more just for the 20% down payment.

States that have the highest percentage of jumbo mortgages include Hawaii (43% of all loans are above $417,000), California (41%), the District of Columbia (30%) and New York (22%).
From personal experience, I can tell you that an $800,000 home in the District of Columbia is not exactly a mansion. It's probably more like a 3 or 4 bedroom house in one of the nicer parts of Northwest D.C., like Georgetown.

See for yourself: D.C. Homes at AOL Real Estate

In places like Manhattan, $750,000 is the low-end of the market, where the median home price is over $1 million. The New York Times documented this a few months ago in a story about buyers who lost their deposits because they couldn't finance the properties. Up in Smoke: The Deposit Vanishes

Along the coast in Southern California and in cities like San Francisco, $750,000 won't get you much, either.

In eight more states, jumbo mortgages comprise 10% or more of all loans in those states (New Jersey, Maryland, Massachusetts, Virginia, Connecticut, Washington, Nevada and Florida).

As recently as 2007, jumbo mortgages comprised 14% of all mortgages for home purchases, and 30% of mortgage originations in dollar volume.

This is most likely part of the reason that we've seen home prices indices like Case-Shiller continue to tank this spring, because only the lower priced homes are being sold and financed, lowering the overall average.

Efforts to make getting jumbo mortgages easier seem to have limited success.

At the same time, as recently as March, Bank of America was talking up its desire to do more jumbos, but the NAR is clearly angling for some kind of federal program to alleviate the situation. The Feds could possibly raise the limit on jumbos to $1 million in some markets, or higher.

Read the National Assocation of Realtor's full report.

Brett Widness is an editor with AOL's real estate channel. Find homes for sale, foreclosures, home values, home finance and apartments at AOL Real Estate.
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