'Crocodile Tears' for the 'Jumbos'!

The NAR and the NAHB have been whining and crying hoarse that the 'jumbo' loan market is just dead and that the rich guys are finding it difficult to get jumbo loans at cheap rates. As a result, the high end borrowers are just not in a position to secure a mortgage to buy their cookie cutter homes!

I sat down to do some simple math to try and understand all of this whining and crying. Let us take a family and a home in San Ramon, CA. 50% of the households in this City have a household income that is greater than 125K. The other 50% of the households have an income that is less than 125K.

So, doing the simple affordability test, the average selling price of a home in San Ramon, CA could be in the range of $400K-450K.

According to the website Trulia.com "The average selling price of detached single family homes for May 2009 in San Ramon California was $676,176".

Without getting into the complicated calculations, it would follow that a vast majority of the population in San Ramon, CA has purchased homes that are actually way beyond their 'affordability' levels using these "Jumbo" mortgages to leverage themselves!

I would think the same logic applies to all these so called "High End neighborhoods". It is all about leverage and leverage and leverage!!