Across the metro, even million-dollar homes are having trouble selling
Summit Avenue in St. Paul has long been a showcase for venerable mansions that recall some of the grandest aspects of the city's heritage.
Now, "For Sale" signs along the street are getting old, too.
The market for million-dollar homes on Summit and across the metro area has been hit hard by a combination of factors that have made luxury home shoppers scarce.
The problems range from investment losses and economic insecurity among potential buyers to limited access to the jumbo mortgages often used to purchase upper-bracket properties, those who sell upper-end homes say.
The result: 11 $1 million homes were available for sale on Summit last week, including eight that had been on the market for more than 200 days. The accumulation of high-end homes for sale is not unique to Summit Avenue.
"Higher-priced homes are simply not moving," Matthew Jozoff, an analyst with J.P. Morgan Securities, said in a research note last month to investors in mortgage-backed securities.
He sees home prices hitting bottom in 2011. "However, prices on more expensive homes may not bottom out until 2012," he said, adding that prices could drop more than 60 percent from their peak.
Locally, the Minneapolis Area Association of Realtors agrees that a bottom for the million-dollar home marke
market was hot earlier this decade, borrowers could obtain jumbo mortgages with as little as zero to 5 percent down after clearing relatively lax standards in terms of credit score and documented income, Stenback said.
But that's all changed since the beginning of the credit crunch last year, which caused the secondary market in jumbo mortgages to dry up. Now, Stenback said, the vast majority of jumbo loans are being held in the portfolios of banks, which are requiring higher interest rates and bigger down payments. Lenders also are much more selective about whom they lend to and the collateral property.
"There's a much smaller number of people that can qualify for jumbo financing," he said.
Not only are lending standards tougher, but appraisals also have become more difficult, said Rathmanner, the Keller Williams agent. That's because new rules governing business relationships between lenders and appraisers have made it more likely for appraisals to come in low and potentially scuttle a purchase agreement, Rathmanner said.
The shores of White Bear Lake provide an example of this changing market.
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