Million Dollar Homes Sales And Their High Correlation To The S&P500

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Peoples Home Equity comments on a relatively recent release from Corelogic titled "Real Estate's One Percent."

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lenders may be able to forecast demand 2months ahead for million dollar home sales based on the S&P500

Peoples Home Equity was intrigued by a February 20th report from Corelogic titled "Real Estate's One Percent." This report focused on real estates most the expensive housing rather than income inequality.

The report begins with stating “over the last two decades, homes that sold for over 1 million dollars have accounted for 1 percent of all sales.” It continues with “The share of million-dollar home sales was below 1 percent for most of 2003, but steadily increased between 2004 and 2006, reaching as high as 1.8 percent in April 2006, when national home prices peaked in 2006. But even after prices peaked and began to decline, the share of million dollar home sales continued to increase, peaking in June 2007 at 2.2 percent, more than twice the share just five years earlier.” Million dollar home sales are doing great again trending very close to 2% in January 2014 (they were trending above 2% in spring 2013).

Peoples Home Equity thinks one reason why expensive home sales have risen relatively more than lower priced homes is due to Jumbo loan rates. Mortgage rates for 30 year jumbo loan’s were trending at 4.27% on Friday, March 28th, according to This is noteworthy as both 30 and 15 year fixed rate mortgages were trending at 4.49% and 3.51%. The market seems to favor jumbo loan.

Readers should know that home sales for million dollar homes are highly correlated to the health of the S&P500 index. When the index is relatively high, sales are high. In fact, section states “the S&P 500 serves as a very good two-month leading indicator of million-dollar home sales.” Peoples Home Equity founds this very information very interesting as lenders may be able to forecast demand 2months ahead for million dollar home sales based on the S&P500. This can better help lenders understand their high net worth applicants and their potentially ability to get approved for a mortgage. This may be the case as high net worth applicants have more income to prove probable repayment, or that the asset is worth the face value of the loan.

Besides high priced homes, the report highlighted the fact that properties listed between $650,000 and $950,000 experienced the largest year-over-year increase in equity value. Prices increased in this segment by 33%. Home sales in the $350,000 to $650,000 segment rose a respectable 26%. Home sales for the $150,000 to $300,000 range increased 12% which is largely in line with the national average. Meanwhile homes values in the $150,000 are subject to contracting values due to several factors including rapids rises in price after 2012 due all cash bids from investors. Now that the market is changing from investor driven to purchase driven from first-time homebuyers, price increases among all categories should be steadier and less volatile.

Consider visiting to see how much one would needs to earn to afford to afford a million dollar home mortgage.

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Giorgio U Ferrero
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