There is concern that the decrease in conventional loan limits at the end of last year will hurt home sales and trade-up activity in higher price ranges across the country, according to the National Association of Realtors^®.

The most current home sales data shows nationally that transactions under $400,000 are 3 percent below a year ago whiles sales of homes priced at $750,000 or more have declined by 47 percent!

Outside of FHA and other government backed mortgages, there is a certain segment of the lending arena that is still experiencing the credit crunch. Buyers looking a acquiring a jumbo (non-conventional) mortgage will see interest rates that are more than 2 percentage higher than conventional financing.  The result of this drastic difference in price is that the high-end or “high cost” market is not moving.

Lawrence Yun, NAR chief economist, said  “Buyers in higher price ranges are at a severe disadvantage because they have to pay higher interest rates,” he said. “Lower loan limits are having a pronounced impact on trade-up activity at the upper end of the market, which depends more on large downpayments to keep mortgage amounts below the maximums for conventional financing.”

“However, the lower mortgage limits for conventional loans mean upper middle-class home buyers in much of the country, including many areas in the Midwest and South, also have to pay higher interest rates,” Yun said. “As a result, we are seeing a universal stalling of sales in higher price ranges across the country.”

NAR President Charles McMillan commented that “all consumers should have access to today’s historically low mortgage interest rates. It’s only fair that all hard-working, tax-paying, successful people who want to purchase a home have equal access to low interest rates regardless of where they live or where they want to buy,” he said.