According to an article in the First Tuesday newletter, interest rates on jumbo loans over $729,750 have come down from being well above 7% in late 2008, to an average of 5.9% in mid-March, signifying a possible return to lenders comfort level in lending on high end homes.

During the height of the boom years, between 2005 and 2006, jumbo loan interest rates were typically a quarter of a point higher than standard conforming loans. However, after the foreclosure meltdown, the interest rate spread between a standard and a jumbo loan expanded to about 1.7 percentage points in early 2009 as lenders were reluctant to issue high-risk loans. Today, jumbo mortgage rates are back down within 1 percentage point of standard prime loans.

Down payment requirements have also been relaxed. The average down payment requirement for jumbo loans last year was 25%. Many larger lenders are now requiring only 20%. Given the near-50% decline in luxury home values since 2007, the lesser 20% down payment makes expensive homes more attainable by California buyers.