When Kenneth Lowman worked with a buyer on a multimillion dollar home purchase in Las Vegas in December 09, the transaction took an unusual turn: It closed, and quickly.

The buyer was able to get jumbo financing in just 22 days-a far cry from six months earlier, when getting such a big loan, even for a highly creditworthy buyer, would have taken months and still might not have closed.

“The jumbo market is opening up, says NAR Chief Economist Lawrence Yun. Thanks to solid gains in the lower end of the housing market, the first-time home buyer tax credit, and the rebounding stock market, lenders in late 2009 began cautiously lending money beyond the safe Fannie Mae, Freddie Mac, and FHA loans on which they relied for income during the credit crunch. “Lenders can make only so much money holding Treasuries,” says Chris Varvares, president of the national economic forecasting firm Macroeconomic Advisors in St. Louis. “They’ve been holding onto reserves and hoarding capital, in part because of the decline in their share prices and in the price of the assets they hold on their balance sheets. Now that these are turning up, and the risk-adjusted return on making loans is rising, they’re pursuing more aggressive lending.” Only the largest lenders are financing jumbo loans, presently, as they can afford to hold jumbos in their portfolios.

Smaller lenders remain financially incapable to lend on jumbos, at least in significant volume. For investors to start coming in, home prices will need to firm up more. “Price stabilization is happening, says Yun, but I don’t’t expect investors to regain their appetite for non-agency mortgage-backed securities until at least 2011.” Existing-home sales in 2009 rose to an estimated 5 million units for the year, a 2% increase over the 4.9 million sales in 2008. The average price of homes sold was $225,000. For 2010, Yun is forecasting sales of 5.7 million units sold, a 13.6% increase.

The key to recovery in 2009 was the lower end of the existing home market. This fueled by the huge numbers of distressed sales-which drove down prices nationally by an average of 13 % for the year – buyers returned to the market looking for bargains. Also helping were continuing low interest rates (5.2% on average for 2009) and the first time home buyer tax credit, which the IRS says had been tapped by an estimated 1.4 million households halfway through 2009, a figure that includes 350,000 to 400,000 consumers who wouldn’t have bought without it. Close to 2 million buyers used the credit by the end of  November. Estimations are not in for users of the credit for end April 2010.

As economists disagree about how the economy will fare in 2010, they do agree that we are seeing a healthy turnaround in real estate sales across the nation and predict a 3.6% growth in 2010. Improved stock market performance, the need for business to replenish inventories, and the continuing impact of the federal government’s stimulus efforts are all playing a role in boosting the economy. Lingering high unemployment is the major unresolved problem. The unemployment rate is expected to hold at an elevated 10% and won’t likely show notable progress until 2011 because job-cutting in recent years has been so severe.

On the commercial side, the forcast remains cloudy. Commercial mortgage-backed securities continue to be troubled, with few investors prepared to get back in the market. That makes it hard for owners to refinance their existing debt and for others to buy. Some $300 billion in debt comes due in 2010, followed by $500 billion in 2011 and then a whopping $1.8 trillion in 2012.

Multifamily properties are in the best shape – but only marginally. Vacancy rate for multifamily to remain unchanged at 7.3%, with rents moving toward positive territory.

Office slide eases. In the office sector, vacancies will continue to rise (to 18.9% from 16%), but the news won’t be all bad. Absorption is expected to improve, although it will remain in negative territory.

Watch Out for a Spring Spike In Mortgage Rates

All last year, mortgage rates were at historically low levels. This happened because the Federal Reserve, our country’s central bank, launched a huge program to purchase Mortgage

Backed Securities. Buying these mortgage bonds raises their prices, which brings mortgage rates DOWN. Ultimately, the Fed committed to purchasing $1.25 trillion worth of these bonds by the end of 2009.

The good news is, the Fed extended their buying program into 2010. But they also signaled that they intend to wind down the program by the end of the first quarter (March 31st, to us ordinary folks).

REDUCED BUYING POWER

Here’s the important thing to note. If rates were to move up 1%, that means about a 10% loss in purchasing power for a homebuyer. For example, a 30 year $300,000 mortgage at 5.02% has a payment of about $1,614.00 per month. If the rate were to go up to 6%, to keep the monthly payment the same, you would have to lower the mortgage amount to less than $270,000.

This is why people who are thinking of buying a home or refinancing their mortgage should act now. Homebuyers have the added incentive of a tax credit, which the government has extended to April 30th

The industrial picture is mixed. Vacancies will rise (to 15% from 13.3%) and rents will drop slightly but absorption will improve.

Retail decline slows. Vacancies will continue to rise (13% from 11.9%). Rents will decline. Absorption will improve.

Improving  Your Credit Score

In today’s mortgage world, borrowers need to have a FICO credit score above 720 to get the best mortgage rates and to qualify for many programs. So what does a borrower do if their credit is slightly less than perfect?  Standards for FHA loans are less stringent and so they have become increasingly popular, now accounting for about 30% of new home mortgages. That’s a huge increase compared to 2006 when only 3% of new home loans were backed by FHA.   But now the Federal Housing Authority’s finances have deteriorated. There is mounting political pressure to make FHA buyers adhere to higher standards including increased FICO scores.

There are credit repair agencies out there who will charge you quite a bit to help you improve your credit score, but that approach is not always necessary. Contact your lender and ask if they will access your credit and give you solid tips to help you improve your credit score by 20 points or more in 30 to 60 days. This may be enough to help you qualify for the low-rate mortgage you are seeking, and could save you many thousands of dollars in interest over the life of your loan. Many of today’s lenders understand the challenges of our present economy and will work with you over the long-run to help you obtain a good mortgage.