Loan payments for Orange County’s record-high median-price house tops $10,000

A single-family home topping $1.4 million carries a significant mortgage payment when financed

By JEFF LAZERSON | jlazerson@mortgagegrader.com | MortgageGrader.com | June 17, 2024

Article originally posted in Orange County Register on June 13, 2024.

Southern California home buyers are reeling, no doubt, from record-high median home prices and high interest rates.

In Orange County, a single-family home in May was selling for a median of $1,410,000, an all-time high, according to Patrick Veling, chief executive and founder of Real Data Strategies. That’s up 12.8% versus May 2023.

The median condo price in May was $760,000, up 8.6% compared with May 2023. Veling, I will note, uses California multiple listing services to compile data on median home prices.

CoreLogic, which is used by my peers at the Southern California News Group, has not released May data yet, but data for April saw a record median selling price of $760,000 for the region comprising Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura counties. Jonathan Lansner also recently told us that the median price for single family homes in April across California crossed the $900,000 threshold.

Regardless of the current high mortgage rate environment (Freddie Mac is 6.95% for a 30-year fixed this week), Southern California home prices keep climbing.

“Home prices will continue to increase,” said Veling. “Not many more listings than now. So goes Orange County, so goes the (Southern California) market.”

As expected, the Federal Reserve held short-term rates steady June 12. The projection is one to two rate reductions for the rest of 2024.

Here is a sprinkling of mortgages available for that $1,410,000 median priced home.

You can get in with as little as 10% down or $141,000. You won’t have to pay for mortgage insurance, but the rate is higher than a kite at 9.875% on a 30-year fixed. Lenders typically require the borrower to pay for mortgage insurance if the borrower is putting less than 20% down or has less than 20% equity in the case of any refinance.

For a loan amount of $1,269,000, your principal and interest payment is $11,019 per month. Taxes at 1% would be $1,167 per month. Add $350 for insurance and your total payment is $12,536. You’d need around $28,000 of monthly income to qualify. This loan costs 2 points.

A Department of Veterans Affairs mortgage or VA gets you in with zero down and a 6.49% rate on a 30-year fixed. Assuming the VA funding is not financed into the mortgage, the principal and interest payments are $8,903 on a $1,410,000 loan. Add the same taxes and insurance from the example above, and you end with a total payment of $10,420. This loan costs 0 points.

VA income qualifying is more liberal. Assume you’ll need an income of $20,000 or more per month.

Fannie Mae will get you in with a cool 20% down payment, or $282,000. A zero-point loan will offer a rate of 7.5%. The payment on a loan amount of $1,128,000 is $7,887. Add those same taxes and insurance. You’ll have to swallow a total payment of $9,404. You’ll need more than $19,000 of monthly income to qualify.

For less qualified borrowers, there are nonqualified loans offered that use bank statement deposits as an income gauge. You’ll need 20% down. You can get a 7.5% rate using 12 months of bank statements. The difference between this and the Fannie Mae loan is this loan costs 2 points. Still, not bad.

Reports on Housing’s cash tracker indicates 24.8% of all April 2024 Orange County sales were cash, according to Steven Thomas, its chief economist.

If possible, one way to compete with other buyers is to raise enough money to offer cash. You can pull up to 75% cash-out after closing through a mortgage program called delayed financing.

Not everybody agrees with Veling as far as home prices continuing to rise.

“In the housing market, high-for-longer interest rates have become more restrictive, causing potential buyers to pull back and resulting in a large increase in housing inventory when compared to a year ago,” said Orphe Divounguy, senior macroeconomist, Zillow Home Loans. “Zillow now forecasts that home values will decline in the next year.”

It’s worth providing some sage advice about sales transactions from Veling, who said that 67% of agents do fewer than three home transactions per year. Whether you are buying or selling, hire an experienced agent.

“You should qualify your agent. Make sure you are working with the right agent. Hold your agent accountable for the level of service you are worthy of,” he said.

Freddie Mac rate news: The 30-year fixed rate averaged 6.95%, 4 basis points lower than last week. The 15-year fixed rate averaged 6.17%, 12 basis points lower than last week.

The Mortgage Bankers Association reported a 15.6% mortgage application increase compared with one week ago.

Bottom line: Assuming a borrower gets the average 30-year fixed-rate on a conforming $766,550 loan, last year’s payment was $133 less than this week’s payment of $5,074.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with 1 point: A 30-year FHA at 5.375%, a 15-year conventional at 5.625%, a 30-year conventional at 6.375%, a 15-year conventional high balance at 6% ($766,551 to $1,149,825 in LA and OC and $766,551 to $1,006,250 in San Diego), a 30-year high-balance conventional at 6.5%, and a jumbo 30-year fixed at 6.875%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $766,550 in LA, San Diego, and Orange counties.

Eye-catcher loan program of the week: A 30-year mortgage requiring 30% down, fixed for five years at 6.25% with 1 point cost.

Jeff Lazerson, president of Mortgage Grader can be reached at 949-322-8640 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.

If you enjoyed this article and want to receive weekly mortgage news for FREE, sign up for the newsletter HERE.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.