Home prices aren’t the only thing making a comeback. Take a look at some other trends gaining ground in housing:
In 2007, the median size of a new home built for sale peaked at 2,295 square feet. It then fell to 2,159 square feet two years later, after the crash. As Americans downsized, many experts incorrectly predicted that smaller homes were here to stay. However, as our economy recovers and our collective equity continues to rise (up $1.9 trillion last year), our love affair with over-sized homes has been reignited. According to the National Association of Home Builders, in 2012, new homes grew again, with a median size of 2,384 square feet. Also in 2012, 41 percent of new homes had four or more bedrooms, up from 34 percent three years earlier.
While the lower-end of the market may be stalling as first-time buyers struggle to come up with down payments and meet strict loan qualifications, luxury buyers — with secure jobs, steady income and money to burn — are back, and they’re flocking to real estate. In fact, applications for home loans of $625,000 to $729,000 were up a whopping 57 percent from August 2012 to August 2013; applications for more than $729,000 were up 41 percent.
The reason interest-only loans contributed to the mortgage meltdown and that lenders then stopped offering them was because they were marketed to the masses. What a rude awakening when borrowers couldn’t — or wouldn’t — pay them down over the long-term. Fast forward to today: banks are offering interest-only loans, but only to their well-heeled customers – those with strong income, assets and a history of managing their money effectively. After all, since these loans do not meet the new Qualified Mortgage guidelines, lenders making loans outside these guidelines have less protection against future legal challenges if the borrower fails.
While the 5/5 jumbo has been around for a while, it hasn’t been popular in years. Why is it back on the radar now? This loan – which has a fixed interest rate that only adjusts once every five years – is today being touted as a product that takes the worry out of annual adjustments, saves you money, and provides peace of mind that payments are stable for a much longer period of time.
Vera Gibbons is a financial journalist based in New York City and is a contributor to Zillow Blog. Connect with her at http://veragibbons.com/. Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.