Existing home sales rose in April, showing that first-time buyers continue to be drawn to affordable prices.

Although much has been made of reported declines in the average home price, it is important to look closely at the cause. Of the 75 million owner-occupied homes, only about 5 million will actually be sold, and many are distressed properties.  This skews the average price downward and does not necessarily reflect the value of other homes in a community, or across the nation.

The fact is conditions are optimal for buyers with good jobs who are looking at lower and mid-priced homes and plan to live there for several years.  Mortgage interest rates are low, there is a wide selection of homes and prices are affordable in most areas, and let’s not forget the $8,000 first-time buyer tax credit.

Yet, problems in financing jumbo mortgages are putting a drag on the housing market and the national economy.  For example, many current jumbo mortgage holders, if given the opportunity to refinance, could save $6,000 to $15,000 in annual interest costs – that’s money that could be spent elsewhere.  Sixty percent of recent home purchasers who used jumbo loans put at least 20 percent down on the home – significantly higher than down payments for people using GSE or FHA mortgages.  Again, that money could be spent elsewhere.

NAR has asked the Fed to buy jumbo mortgages as part of the TARP/TALF program, which may help lower the spread between jumbo and conforming rates.  We hope that Washington policymakers will act quickly to correct this discrepancy and take one more step on the road to a meaningful economic recovery.