February 21, 2008
The beauty of up-to-the-minute data is that we know which direction we are headed REGARDLESS of the countless television stories and news articles. This report is a snapshot of the market today. In comparing it to prior snapshots, we can pinpoint trends that won’t reach the pages of a newspaper or the teleprompter of a newscast for weeks, if not months, down the road. The data often confirms the buzz among the agents working in the trenches of the real estate market. Here’s the buzz: increased open house activity; many buyers climbing in cars who are extremely cognizant of value; plenty of short sales; more realistic sellers on the market; and, homeowners opting to NOT market their homes as they are acutely aware of the current market conditions. Let’s see if the “buzz” correlates with the data. Demand, the number of homes placed into escrow within the prior month, increased by 49% over the past month from 1,219 to 1,820 escrows. We have not seen demand at this level in six months, since just before the beginning of the credit crunch in mid-August. The current active inventory climbed by only 147 homes in the past month to 15,392 homes, only a 1% increase. With the active inventory virtually unchanged, coupled with a sharp increase in demand, the expected market time has dropped substantially over the course of the past month from 12.51 to 8.46 months today. We started off the year with a 15.60 month inventory, almost double today’s snapshot. By no means am I insinuating that sellers should be jumping for joy with the return of a seller’s market, since for most economists, anything over a six month inventory is dubbed a “buyer’s market.” “Equilibrium” is a market between five and six months. A “seller’s market” doesn’t even register until the market time drops below five months. But, there are a few cities below the six month mark: Aliso Viejo, Anaheim Hills, Brea, Foothill Ranch, Fountain Valley, Huntington Beach and Mission Viejo. To be fair, there are a few areas that are still in a deep buyer’s market with over a year in inventory: Coto de Caza, Laguna Beach, La Habra, Newport Beach, Newport Coast, Portola Hills, San Juan, Santa Ana and Villa Park. Most of these cities will improve as the credit crunch begins to release its stronghold in the coming weeks and months. Last year at this time there were 12,194 homes on the market, demand was at 2,654 escrows and the market time was at 4.59 months. Two years ago, there were 9,038 homes on the market, demand was at 2,892 escrows and the market time was at 3.13 months.
What’s the difference between the condominium market and the detached home market? The detached home market is faring a little bit better with an 8.22 month inventory. For condominiums, there is an 8.85 month inventory. 27% of the detached home inventory is either a foreclosure or short sale and 27% of that inventory is vacant. 35% of the condominium inventory is either a foreclosure or short sale and 34% of that inventory is vacant.
Is the foreclosure market as bad as reported? Foreclosures and short sales are a significant part of the current Orange County real estate market. Currently, they account for 32% of the active inventory. The flip side of that coin leaves 68% of non-distressed homeowners marketing their homes. But, that percentage has climbed from 27% one month ago, a trend to continue to watch. Of all of the distressed homes on the market, currently 4,859 of the 15,392 total inventory, bank owned foreclosures make up only about 26% of that total. The remaining 74% are short sales, homeowners who are attempting to sell their homes for less than their total outstanding loan balance subject to the lenders’ acceptance. The good news is that most lenders do NOT want to foreclose on a home and WANT to work it out with the homeowner. Lenders are a lot more organized than they were just six months ago, able to handle the increased volume and bring about an amicable solution. Sellers in this situation should only work with a professional Realtor® well versed in the short sale process.
How is the recent passage of the stimulus package going to effect the market? First, the smart buyer will use the tax rebates to buy down their interest rates for the life of the loan. More importantly, the increasing of the conventional and FHA loan limits will provide a much needed boost to demand in the higher ranges, which have slowed dramatically since the drying up of the financial markets since August. For conventional loans, we can expect rates to be slightly higher than the current conventional rate, but much less than the current jumbo rate. There has been little talk about the importance of the new FHA limits, but they are an important replacement to the demise of the subprime loan. Actually, FHA loans were extremely common just a decade ago; that is until they went out of vogue with the refusal of the Federal Government to change the limits in rapidly appreciating markets. The limit had been $367,000; thus, the subprime was born to fill the need to finance borrowers with damaged credit and little down payments. Unfortunately, without much regulation, the lending industry established a product that paled in comparison to the strength of FHA financing. FHA requires documentation of income and does not allow “payment shock” where a buyer jumps from a low rental payment to a high mortgage payment. FHA has all of the safety gaps and education in place so that buyers do not get in over their heads like they did with subprime financing. The end result: the stimulus package will provide a much needed resource for many to obtain financing, which will ultimately translate to an increase in demand. With the signing of the bill into law last week, we can expect the change to take hold sometime next month.
What can we expect in 2008? With all of the attention at the federal level to righting the housing ship, the Orange County resale market will probably not follow the normal cyclical patterns of the best demand in Spring, followed by a little less demand in the Summer, followed by another drop in the Autumn, followed by the lowest levels of the year during the Holiday market. Instead, we can probably expect stronger traction with the increased liquidity due to the new loan limits throughout the Spring and Summer. We very likely can see higher demand numbers at the end of Summer compared to Spring. This could create a catalyst of “bargain hunters” who will want to feed on the distressed inventory at the end of the year and through the beginning of next year. Stay tuned, there is more to come!
Buyers, what to do? Quite simply, do NOT wait for the bottom of the market. Nobody is going to ring a bell to signal the point at which we reach that bottom. We will not know the precise bottom until months after it has already occurred. Take solace in the fact that the conditions are perfect. It reminds me of my days in my youth at the beach. I would sit on the sand and wait for the perfect set of waves to unfold in front of me while I basked in the warmth of the summer sun. Often, I got so comfortable sitting in my warm chair that I would see a pretty decent set of waves, only to talk myself out of jumping and paddling out to enjoy the thrill of the surf. Instead, I greedily enjoyed my warm chair and decided to wait for the next set, after all, it had to get better. The lifeguards, the most experienced observers of the surf, never signaled the best moment to enter the water. At the end of the day, I would come to the realization that I should have already been out in the water, ready for a great ride. The moral to my flashback: the conditions are perfect with low interest rates, hungry, motivated sellers, and plenty of choices, so jump into the water now and go find the best home for your family. Please understand that these historically low interest rates will NOT last. Just this week, the economic reports are pointing towards inflation, which is not good for interest rates. The Federal Reserve released their “minutes” from their last meeting; policymakers said that when prospects for economic growth improved, “A reversal of a portion of the recent easing actions, possibly even a rapid reversal, might be appropriate.” These low interest rates that the entire nation has grown so accustomed to will increase to levels not seen in a while. In 2000, they were at 8%, and in 1990 they were at 10%. A change in interest rates to more historical norms will seriously erode a buyer’s purchasing power and will result in much higher payments. Any advantage gained by waiting for prices to reach a “bottom” will be lost in much higher long term monthly payments. Take tremendous comfort in the fact that Southern California real estate has always been a historically wonderful long term investment.
Sellers, what to do? I will stick to my simple message for over a year now: do not place your home on the market unless you undeniably have to sell. It is all about location, price, condition and patience. Price is based upon a home’s location and condition. As a homeowner, you only have control over condition. The homes that are priced well and in great condition sell. That means aggressively pricing according to the comparable sales. Be ready to pack your patience; depending upon the area, it may take six months or more to sell. Given last month’s demand, there are still 13,572 sellers who will not be successful in selling their homes over the course of the next month. For sellers, the competition is fierce, which includes emotionless banks that have to purge their assets from their books.
Steven Thomas President RE/MAX Real Estate Services
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/
Monday, February 25, 2008
Monday, February 11, 2008
Market Time Report: Highest Demand Since Before the Crunch
The official start to the Spring market was marked by the New York Giants stunning victory. Along with their victory came a sharp increase in demand for Orange County housing. The best barometer of future activity for local real estate continues to be our office coffee rooms. It is from there that we have come to expect increased demand. The conversations continue to center around buyers climbing back into cars to isolate their next “home” and much more open house activity. Based upon the coffee rooms, we can expect demand to increase through March. Demand, the number of homes placed into escrow within the prior month, increased 29% over the past two weeks from 1,219 escrows to 1,568 escrows. In the past month, demand has increased by 570 homes or 57%. The current active inventory was almost unchanged in the prior two weeks, increasing by only 14 homes to 15,259 homes. It appears that home owners are reluctant to place their homes on the market for now. With the active inventory virtually unchanged, coupled with a sharp increase in demand, it is no wonder that the expected market time has dropped substantially from 12.51 two weeks ago to 9.73 months today. Just four weeks ago the market time was at 14.97 months. There are now many cities with expected market times well below 10 months and approaching equilibrium versus a buyer’s market; equilibrium exists with a market time between five and six months and there are 10 areas knocking on that door. The only caveat is if a throng of homeowners place their homes on the market in the coming weeks with the expectations of cashing in on the Spring market, resulting in increased market times. Last year at this time there were 11,983 homes on the market, demand was at 2,463 escrows and the market time was at 4.87 months. Two years ago, there were 8,569 homes on the market, demand was at 2,647 escrows and the market time was at 3.24 months.
How about some FANTASTIC NEWS for the real estate market? Congress passed the economic stimulus package this week and it is now on President Bush’s desk for his signature. Of course it is great news for most of the population who will be receiving a tax rebate sometime in the next two to three months, but the news is even better for real estate. The stimulus package increases the conforming loan limit to 125% of the median price for a region. For Orange County, that would put the limit somewhere around $700,000. Raising the limit was specifically designed to help high cost markets like California and New York who were hit the hardest by the financial crunch. Currently jumbo loans, loans above the $417,000 mark, are hovering around a whole percentage point higher than conventional loans. Back in July, a month prior to the beginning of the crunch, jumbo loans were just two tenths of a percent higher. Only major national lenders have been offering jumbo loans and most require the borrower to have a minimum down payment of 20%. The new limit will open up financing to a large pool of buyers and will enable many homeowners to refinance. Another provision of the stimulus package is to raise the FHA loan limit permanently. FHA loans allow borrowers with damaged credit and little down payments to obtain financing. With the current Orange County limit of $362,790, very few homes qualify. Borrowers with damaged credit and low down payments flocked to the subprime arena to obtain their financing. The big difference between FHA and subprime is that FHA requires a ton of documentation. FHA financing will replace the void left by the absence of subprime, but will do a much better job of properly qualifying a borrower’s ability to pay. These fixes will give the financial markets time to heal and restore liquidity to the markets in time. It will also allow thousands of homeowners to refinance their loans to more favorable rates and terms. It will take a few weeks before the change will take effect. As a direct result of the stimulus package, expect demand to increase in Orange County along with a huge refinance boom.
The stimulus package will help our local market with increased demand; however, the market still has to digest the large number of foreclosures and short sales currently on the market and more to come. 29% of the current active inventory is either a foreclosure or a short sale, where a seller tries to sell for less than the total loans against the home, subject to the lender’s approval. Most of the troubled home activity, 69%, is below the $500,000 mark. 94% is below $750,000. The areas hardest hit, with over 40% of the active inventory either a foreclosure or short sale, are Santa Ana, Anaheim, Lake Forest, Garden Grove and Rancho Santa Margarita. They account for 46% of ALL troubled home activity. The areas with the lowest percentage of troubled homes, with 2% or less, are Laguna Woods, Seal Beach, Newport Coast and Corona Del Mar.
The recent run-up in demand had a pronounced effect on both the detached home market and the condominium market, with detached homes continuing to fare a bit better. The detached home market’s supply dropped from 11.96 months two weeks ago to 9.37 months today. In comparison, the condominium market dropped from 13.47 months to 10.37 months today.
What can we expect in 2008? Now that the Super Bowl is behind us, the Spring market has officially begun. The stimulus package will take effect sometime in March; cyclically the highest demand is in the Spring. As a result, demand may continue to increase through April or May, rather than reaching a plateau in March. This is great news for the real estate market. Demand should start to mirror year over year comparisons by the end of March. Expect the active inventory to continue to grow throughout the Spring as more homeowners enter the game. Unfortunately, inventory is already standing tall, above the 15,000 mark, so more homeowners coming on the market will only push the inventory towards the 20,000 mark, which could be reached during the Summer market. With the inventory climbing along with demand, we can anticipate the expected market time to hover around the 10 month mark. During the Summer market, June through the first half of August, we can expect demand to drop slightly and the inventory to continue its slow climb. As a result, the expected market time will increase. During the Autumn market, the end of August through Halloween, we can expect the inventory to drop as sellers begin to pull their homes off of the market if they were unable to sell their homes during the Spring or Summer markets. Demand will drop slightly again as the expected market time remains relatively unchanged. Cyclically the slowest time of the year for the real estate market, the Holiday season, Halloween through the first couple of weeks of the New Year, we can expect demand to fall to the lowest levels of the year as a larger number of sellers throw in the proverbial towel and pull their homes off of the market. The expected market time would then increase slightly.
Buyers, what to do? With the Federal Reserve, the White House, Congress, our governor, Arnold Schwarzenegger, and the California legislature working to repair the ailing housing market, and the passing of the economic stimulus bill, a bottom to this market is on the horizon. But, as a buyer, understand that nobody is going to ring a bell to signal the bottom of the current housing cycle, just as nobody signaled the end of the housing boom in 2005. To wait for the bottom is foolish. Instead, cash in on the fact that it is a buyer’s market that has already erased some of the boom’s appreciation. Currently, rates are near historical lows, loan limits are increasing for both conventional and FHA loans, there is very little competition among a sea of housing choices and sellers are eager for an offer. So, if you are a buyer, sit down with a lender and ascertain your affordability limits and payment comfort levels and then go find the home the best fits the needs of your family. Avoid writing lowball offers and, instead, consider that the current sales to list price ratio for the county is 94%. Rather than just take a percentage off of the asking price, research the fair market value based upon the most recent sales and current escrow activity. There are still homes that receive multiple offers and obtain their full asking price. Most buyers forget to consider the importance that the current historically low interest rates will undeniably NOT last forever. Unfortunately, that is an unmistakable fact that very few consider because everybody has grown accustomed to low rates and expect them to continue. As soon as the market starts to turn around, be completely assured that Bernanke and the Federal Reserve will continue their long term plans to thwart the risk of inflation and increase rates. For perspective, let’s compare a $600,000 mortgage at 5.5% today (soon possible with the increase in the conventional limit), $3,407, to past benchmarks. With an 8% interest rate in 2000, the monthly payment would be $4,403, almost a $1,000 per month increase. With a 10% interest rate in 1990, the monthly payment would be $5,265, an increase of $1,858 per month. As a buyer, it is simply foolish to just watch prices to gauge the “perfect time to buy.” Even another 10% drop in prices will hardly make up for a change in interest rates. With rates low and selection high, this IS the year to buy. You can take comfort in the statistical fact that Southern California real estate has always been a historically wonderful long term investment.
Sellers, what to do? The message is simple: do not place your home on the market unless you unequivocally have to sell. It will take a great price, great condition and plenty of time to sell. So, price according to the market and the comparable sales and escrow data. Make every attempt to offer a home in nothing less than excellent condition. Be ready for the sales process to take six months or more, or price it accordingly for a quicker sale if necessary. The stimulus package will help demand, but we will remain in a buyer’s market. Given last month’s demand, there are still 13,691 sellers who will not be successful in selling their homes over the course of the next month. There is a lot of competition, which includes sellers who are upside down on their loans and bank foreclosures who don’t have a choice and MUST sell.
Steven Thomas RE/MAX Real Estate Services President
f you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/
How about some FANTASTIC NEWS for the real estate market? Congress passed the economic stimulus package this week and it is now on President Bush’s desk for his signature. Of course it is great news for most of the population who will be receiving a tax rebate sometime in the next two to three months, but the news is even better for real estate. The stimulus package increases the conforming loan limit to 125% of the median price for a region. For Orange County, that would put the limit somewhere around $700,000. Raising the limit was specifically designed to help high cost markets like California and New York who were hit the hardest by the financial crunch. Currently jumbo loans, loans above the $417,000 mark, are hovering around a whole percentage point higher than conventional loans. Back in July, a month prior to the beginning of the crunch, jumbo loans were just two tenths of a percent higher. Only major national lenders have been offering jumbo loans and most require the borrower to have a minimum down payment of 20%. The new limit will open up financing to a large pool of buyers and will enable many homeowners to refinance. Another provision of the stimulus package is to raise the FHA loan limit permanently. FHA loans allow borrowers with damaged credit and little down payments to obtain financing. With the current Orange County limit of $362,790, very few homes qualify. Borrowers with damaged credit and low down payments flocked to the subprime arena to obtain their financing. The big difference between FHA and subprime is that FHA requires a ton of documentation. FHA financing will replace the void left by the absence of subprime, but will do a much better job of properly qualifying a borrower’s ability to pay. These fixes will give the financial markets time to heal and restore liquidity to the markets in time. It will also allow thousands of homeowners to refinance their loans to more favorable rates and terms. It will take a few weeks before the change will take effect. As a direct result of the stimulus package, expect demand to increase in Orange County along with a huge refinance boom.
The stimulus package will help our local market with increased demand; however, the market still has to digest the large number of foreclosures and short sales currently on the market and more to come. 29% of the current active inventory is either a foreclosure or a short sale, where a seller tries to sell for less than the total loans against the home, subject to the lender’s approval. Most of the troubled home activity, 69%, is below the $500,000 mark. 94% is below $750,000. The areas hardest hit, with over 40% of the active inventory either a foreclosure or short sale, are Santa Ana, Anaheim, Lake Forest, Garden Grove and Rancho Santa Margarita. They account for 46% of ALL troubled home activity. The areas with the lowest percentage of troubled homes, with 2% or less, are Laguna Woods, Seal Beach, Newport Coast and Corona Del Mar.
The recent run-up in demand had a pronounced effect on both the detached home market and the condominium market, with detached homes continuing to fare a bit better. The detached home market’s supply dropped from 11.96 months two weeks ago to 9.37 months today. In comparison, the condominium market dropped from 13.47 months to 10.37 months today.
What can we expect in 2008? Now that the Super Bowl is behind us, the Spring market has officially begun. The stimulus package will take effect sometime in March; cyclically the highest demand is in the Spring. As a result, demand may continue to increase through April or May, rather than reaching a plateau in March. This is great news for the real estate market. Demand should start to mirror year over year comparisons by the end of March. Expect the active inventory to continue to grow throughout the Spring as more homeowners enter the game. Unfortunately, inventory is already standing tall, above the 15,000 mark, so more homeowners coming on the market will only push the inventory towards the 20,000 mark, which could be reached during the Summer market. With the inventory climbing along with demand, we can anticipate the expected market time to hover around the 10 month mark. During the Summer market, June through the first half of August, we can expect demand to drop slightly and the inventory to continue its slow climb. As a result, the expected market time will increase. During the Autumn market, the end of August through Halloween, we can expect the inventory to drop as sellers begin to pull their homes off of the market if they were unable to sell their homes during the Spring or Summer markets. Demand will drop slightly again as the expected market time remains relatively unchanged. Cyclically the slowest time of the year for the real estate market, the Holiday season, Halloween through the first couple of weeks of the New Year, we can expect demand to fall to the lowest levels of the year as a larger number of sellers throw in the proverbial towel and pull their homes off of the market. The expected market time would then increase slightly.
Buyers, what to do? With the Federal Reserve, the White House, Congress, our governor, Arnold Schwarzenegger, and the California legislature working to repair the ailing housing market, and the passing of the economic stimulus bill, a bottom to this market is on the horizon. But, as a buyer, understand that nobody is going to ring a bell to signal the bottom of the current housing cycle, just as nobody signaled the end of the housing boom in 2005. To wait for the bottom is foolish. Instead, cash in on the fact that it is a buyer’s market that has already erased some of the boom’s appreciation. Currently, rates are near historical lows, loan limits are increasing for both conventional and FHA loans, there is very little competition among a sea of housing choices and sellers are eager for an offer. So, if you are a buyer, sit down with a lender and ascertain your affordability limits and payment comfort levels and then go find the home the best fits the needs of your family. Avoid writing lowball offers and, instead, consider that the current sales to list price ratio for the county is 94%. Rather than just take a percentage off of the asking price, research the fair market value based upon the most recent sales and current escrow activity. There are still homes that receive multiple offers and obtain their full asking price. Most buyers forget to consider the importance that the current historically low interest rates will undeniably NOT last forever. Unfortunately, that is an unmistakable fact that very few consider because everybody has grown accustomed to low rates and expect them to continue. As soon as the market starts to turn around, be completely assured that Bernanke and the Federal Reserve will continue their long term plans to thwart the risk of inflation and increase rates. For perspective, let’s compare a $600,000 mortgage at 5.5% today (soon possible with the increase in the conventional limit), $3,407, to past benchmarks. With an 8% interest rate in 2000, the monthly payment would be $4,403, almost a $1,000 per month increase. With a 10% interest rate in 1990, the monthly payment would be $5,265, an increase of $1,858 per month. As a buyer, it is simply foolish to just watch prices to gauge the “perfect time to buy.” Even another 10% drop in prices will hardly make up for a change in interest rates. With rates low and selection high, this IS the year to buy. You can take comfort in the statistical fact that Southern California real estate has always been a historically wonderful long term investment.
Sellers, what to do? The message is simple: do not place your home on the market unless you unequivocally have to sell. It will take a great price, great condition and plenty of time to sell. So, price according to the market and the comparable sales and escrow data. Make every attempt to offer a home in nothing less than excellent condition. Be ready for the sales process to take six months or more, or price it accordingly for a quicker sale if necessary. The stimulus package will help demand, but we will remain in a buyer’s market. Given last month’s demand, there are still 13,691 sellers who will not be successful in selling their homes over the course of the next month. There is a lot of competition, which includes sellers who are upside down on their loans and bank foreclosures who don’t have a choice and MUST sell.
Steven Thomas RE/MAX Real Estate Services President
f you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/
Friday, February 8, 2008
Senate Passes Stimulus Package -- Final Bill Includes Increased Loan Limits
Thanks in part to the lobbying by C.A.R. and NAR members; the Senate passed their version of an economic stimulus package on Thursday, February 07, 2008. The Senate version expands rebate checks for seniors and disabled veterans and includes the same increases to the conforming loan limits for both GSE and FHA found in the House stimulus package. The House has already announced that they plan to vote on the Senate version of the stimulus package and expect to quickly pass the stimulus package with a bipartisan vote. The President is expected to sign the legislation early next week, ahead of the Congressional self-appointed deadline of February 15th. The increase in the conforming loan limits will last through 2008, but C.A.R. and NAR continue to lobby for FHA and GSE reform, making these increases permanent.
The U.S. House of Representatives passed a stimulus package last week that raised the FHA and conforming loan limits to as high as $729,750 in high-cost areas. By increasing the loan limits, borrowers will see immediate relief with new liquidity in the mortgage market and the nation will see an additional 300,000 home sales. Research shows that an increase in the FHA limit would enable an additional 138,000 Americans to purchase homes, and 200,000 families to refinance their homes safely and affordably.
Increasing the FHA loan limits is critical to bolstering California’s housing market. Current law restricts FHA loans to levels well below the median home price in many areas of the country and caps loans in high cost states at $363,790. These limits are preventing many homebuyers from using FHA to purchase or refinance their loan. The proposed provision will increase FHA loan limits nationwide by raising the floor to $271,050 and the limit to 125% of local median home prices.
Additionally, raising Fannie Mae and Freddie Mac’s (GSEs) conforming loan limit will provide immediate relief to borrowers and alleviate downward pressure on current housing markets. For instance, increasing the GSE loan limit could result in more than 300,000 additional home sales and strengthen current home prices by 2-3%.
The critical role that GSEs play in providing liquidity to the mortgage market has never been more evident than it is today. The national subprime meltdown has had a dramatic impact on both the cost and availability of mortgages in many markets. Since August 2007, the interest rates for jumbo borrowers have been more than 1 percentage point higher than conforming loans, which can cost homeowners up to $400 month in higher interest payments.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/
The U.S. House of Representatives passed a stimulus package last week that raised the FHA and conforming loan limits to as high as $729,750 in high-cost areas. By increasing the loan limits, borrowers will see immediate relief with new liquidity in the mortgage market and the nation will see an additional 300,000 home sales. Research shows that an increase in the FHA limit would enable an additional 138,000 Americans to purchase homes, and 200,000 families to refinance their homes safely and affordably.
Increasing the FHA loan limits is critical to bolstering California’s housing market. Current law restricts FHA loans to levels well below the median home price in many areas of the country and caps loans in high cost states at $363,790. These limits are preventing many homebuyers from using FHA to purchase or refinance their loan. The proposed provision will increase FHA loan limits nationwide by raising the floor to $271,050 and the limit to 125% of local median home prices.
Additionally, raising Fannie Mae and Freddie Mac’s (GSEs) conforming loan limit will provide immediate relief to borrowers and alleviate downward pressure on current housing markets. For instance, increasing the GSE loan limit could result in more than 300,000 additional home sales and strengthen current home prices by 2-3%.
The critical role that GSEs play in providing liquidity to the mortgage market has never been more evident than it is today. The national subprime meltdown has had a dramatic impact on both the cost and availability of mortgages in many markets. Since August 2007, the interest rates for jumbo borrowers have been more than 1 percentage point higher than conforming loans, which can cost homeowners up to $400 month in higher interest payments.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/
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