Clearwater Beach Condo Update: Shortage of Jumbo Loan Options Hurting Buyers and Sellers

I recently had a conversation with Clearwater Beach Condos professional, Cyndee Haydon, about the problem we’re facing here in Florida with getting upscale condos financed.  Here’s a re-post of what she recently reported on this subject over at her SandbarstoSunsets blog.  I felt the bulk of what she had to say was spot on, so it merits re-posting here.

If you know Jack and Cyndee Haydon, you know them to be two of the most well-respected and hard working Clearwater Florida Realtors out there.  They work extremely hard to find great deals for their Clearwater Beach condo buyers – but like so many Relators working with upscale luxury condo properties, like those in the Clearwater Beach Florida / Sand Key Florida area – they’re running into a roadblock with the allowable Fannie Mae loan limit for conventional loans set at $417,000 – requiring a minimum of 20% down.

Obviously, $417,000 would cover most areas of Clearwater real estate – however, when you consider Clearwater, Florida is home to some of the best beaches in the United States, it’s not nearly enough if you want to buy even a modest, much less a luxury beach condo and are looking for a reasonable loan.

Even if you were planning on buying a condo and putting 20% to 25% down it’s a problem because most Clearwater Beach Florida oceanfront 3 bedroom condominiums are still selling from $800,000 to well over $1 million dollars even in today’s real estate market.

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Clearwater Beach FL Jumbo Borrowers Feeling the Pinch – and So are Sellers

So, how is the challenge in findig Jumbo Mortgages for Clearwater Condos a problem for sellers?

In Cyndee’s experience…

1) Low convention home loan limits for the Clearwater Beach area are causing a lot of mortgage pressure to purchase properties for $520,000 (or less) – which puts downward pressure on sellers who want to sell for top dollar.

2) Clearwater Jumbo Mortgage Rates (and terms) further limits the number of ready and willing buyers in this “jumbo” price point – so with less willing and able buyers, there is again more pressure on sellers to make a deal with the remaining buyers – and we’re seeing cash is king. Cyndee and Jack’s last two beach condo buyers paid cash for their gulf beachfront condos.

Clearwater Condo Buyers – A Mortgage Broker’s Dream! (Rates and Loans – Not so Much!)

What’s hard to believe is that Cyndee and Jack Haydon – as Clearwater Realtors – are working with many buyers who are the best clients a Florida Mortgage broker could want (excellent credit, no debt, no issue with income qualifications, etc.).  The problem is, that they’re not willing to buy a second home / vacation home under the recent terms one National bank / lender gave.

For Jumbo loans on beach condo purchases needing a loan over $417K but under 1 million they didn’t even offer a fixed rate loan. Rather, thaey offered a 5/1 ARM at  5.75% with a 1% point up front!  So basically, when conventional home buyers are getting mortgage rates under 5% – some of the best possible borrowers are being asked to pay a premium of almost 7% and up.  (To quote Wallac Shawn’s Vizzini Character in the Princess Bride… “INCONCEIVABLE!”)

When Cyndee asked “why?”,  the banks told me that it’s because “Jumbo Loans” are currently the highest loans in default – a point I’d made to her not too long ago. Unfortunately, those I see in preforeclosure  and foreclosure on the beaches now are very different than the potential buyers we are seeing. We all know lending had loose guidelines back a few years ago, and many real estate buyers got in way over their heads – these are not the buyers the Haydons are working with today.

77% Pending Sales of Clearwater Beach Condos and Sand Key Condos are NOT Jumbos

There are currently 22 Clearwater condos under contract and pending sale in the Tampa Bay MLS – of that 17 of them has a listed purchase price of under $420,000, 4 are in the $600K’s and one is pending at $849,000 (all of which could be lower on closing – we don’t know the negotiated purchase price at this point). It’s not surprising that it was recently reported that 50% of all real estate sales in Florida this year have been cash transactions.

In our experience, today’s Tampa mortgage rates for Jumbo Loans have caused several of our clients to scale back their Clearwater beach condo purchases, and others have postponed them while they free up additional funds to make up the difference in purchase price and “conforming loans.”  We’ve seen several people who planned on buying beachfront condos for @$800,000 and now have scaled back $200-300K to qualify for the conforming loan rates and terms.

So if you are a seller on Clearwater Beach Florida today (or Sand Key, Island Estates and our Gulf beaches), the best thing that can happen for you right now is that Banks get bank into the Jumbo loan market and begin to offer more attractive Jumbo Loan rates and terms for willing Clearwater Beach buyers.

Clearwater Beach Real Estate gets some good Jumbo Loan news

Cyndee pointed me to an article that stated “that the hard-to-find jumbo loan may be making a comeback.  Bank of America is among the major banks rolling out jumbo mortgage programs and holding the loans in their own portfolios.

It will offer loans from $730,000 to $1.5 million with 30-year fixed rates under 6 percent; but borrowers must make a 20-percent downpayment, have good credit, provide proof of income, and hold six months’ of principal, interest, property tax and insurance payments in reserve.”

The Haydons are constantly working with  local bankers who offer in-house “portfolio loans” – and I sure hope that other banks, both local and national, will follow Bank of America lead in the Jumbo loan market.