The National Association of Realtors has revealed that properties in the $750,000 to $1 million price bracket have seen a sales increase of 38.7% from last year, and $1 million-plus sales have increased by 25.7%.
The growth in the luxury real estate market is thought to have been encouraged by the revival of jumbo mortgages, which are loans that are typically too large to be granted by federal agencies.
After the 2008 credit crisis saw significant depletion of jumbo loans, they appear to be making a comeback. In the four weeks ending 22nd February, jumbo loan activity had increased by 60% in comparison to the same period in 2012, according to Mortgage Daily.
Despite the growth remaining some way off its peak, when jumbo loans totaled $348 billion, jumbo mortgages of around $200 billion were made last year and predictions indicate that a further rise to $220 billion could be seen by the end of 2013.
The difference in interest rates for jumbo loans and conforming loans has been getting smaller. In mid-February the average rate for a 30-year fixed-rate jumbo loan was 3.98%, compared to the average rate for a 30-year conventional loan of 3.75%. This represents a difference of just 0.23%. The pre-crisis figure was typically 0.25%, although it hit 1.8% at the height of the crisis.
Amy Slotnick, vice-president of Fairway Independent Mortgage Corp in Needham, Massachusetts claimed: "I just locked in a $900,000 loan at 3.5%. I can't even get a conforming loan at that rate."
Unlike pre-crisis, when interest-only mortgages made up 10% of the jumbos loans market, interest rates are now competitively priced because lending standards have intensified.
"At one point all you needed was a pulse" says the director of the Chicago Association of Realtors, Matt Silver. "Now you have to have all of your ducks in a row".
