When the pandemic hit the U.S. lenders were afraid the home prices would drastically drop, so they decided to limit large mortgages to avoid a housing crisis like the one in 2008. More strict requirements for borrowers asking for high mortgages caused a drop in the supply of the jumbo loans.
Jumbo loans are a type of mortgage that is used when the property value is too high to apply for a conventional conforming loan. The minimum amount to be able to apply for a jumbo loan in most countries is $510,400.
When the pandemic arrived in the States in mid-March, borrowers and lenders were hesitantly waiting to see what would happen with the stock market, so jumbo loans didn't really show any movement. The credit supply overall dropped 30% since the COVID-19. During March and April, lenders were avoiding large loans, and some of them, like Wells Fargo, even stopped offering jumbo loans at all. Private investors stopped being as generous with private loans, so the banks started to take this type of loans out of their own pockets. However, with a more optimistic perspective now, more investors and lenders are coming back to jumbos' and their supply has dropped by 57% since February.
The housing market has shown to be a stable market, as property prices have remained steady. In some states due to a low inventory that couldn't cover the demand, the housing prices have gone up, which has also promoted jumbo loans.
The historically low mortgage rates have also fueled the jumbos, as last week the average 30-year fixed-rate mortgage set a rate of 2.98% with 0.7 points paid. But due to increased supply, the mortgage rates for jumbo loans have risen to even higher percentages than conventional loans, which wasn't the case before the pandemic.
This increasing interest in jumbo loans has made them harder to get, and even if there is a higher supply now compared to March when the pandemic started, lenders are being more cautious about who they approve for this type of loan. Some extra requirements are now requested such as a 700+ credit score (pre-pandemic the min requirement was 680+), 25%- 30% down payments depending on the mortgage amount (pre-pandemic the average downpayment was 20%), a debt-to-income of as low as 35% (compared to 45% of a conventional loan) and a 2 or 3 month's housing expenses of cash revenues (which is the "emergency cash" you have in case there is a shut-down again).