Aside from the fact that the additional interest rate bump is tax deductible, and that the money difference you state needs to be adjusted for inflation over the life of the loan, there is less of a difference than you might imagine.

Say you want a 600K house and you have the 20% down-payment. (let’s not get into the debate about how many people have this much money. I do, and I’m sure there are others).

In today’s market you would do the following:

First: 417K conforming GSE loan (5.5%, say)
Second: 63K HELOC (6.5% ish, and decreasing by the month, for now)
Down-payment: 120K

If the conforming limits are raised, then you would instead do:

Loan: 480K at 5.5% (assuming the rates are the same)
Down-payment: 120K

So the interest rate difference is only on the 63K HELOC, and the rate difference is less than it seems because it’s deductible. PLUS, every time the fed cuts rates this HELOC rate goes down. So if you’re sensible, you pay it off like crazy before the rates start to go back up again in a year or so.

Therefore, I don’t think that raising the limits is going to make much difference regarding affordability. I could be wrong of course…

Solidly covering your legal bases and paying well for good inspections that’ll sniff out problems is worth every flippin’ penny.

Agreed, esp. since the legal/advice paperwork can be as little as $900.

I believe that License2Sell is correct in saying the NWMLS has revised its rules to discourage manipulating listings to reset the DOM (part of that change involved creation of a “Combined” Days On Market (CDOM) to add up total days). However, I understand from reliable sources that it remains easy for an unscrupulous agent to still accomplish this result. For example, changing a single digit in the tax parcel number or dropping the street direction (e.g., from xxx 45th Ave. NW to xxx 45th Ave.). The agent is at risk of being sanctioned or disciplined by the NWMLS if found out, but I don’t know that the NWMLS aggressively seeks out these violations.

Like Jake, I also follow the Magnolia/Queen Anne area religiously and it seems to me that this practice continues virtually unabated.

This is happening with many of the homes so I am sure this totally skews the numbers.”

That’s why I just have a spreadsheet for a particular zip code I was following. It has the original date it hit the market and calculates DOM according to whatever date I put in the “Today” cell. It’s been interesting seeing short sales and price drops starting at the low end of the market migrate into the mid-range houses over the last 2 weeks. The highest priced short sale listing I’ve seen up through last weekend was in the ~550K range. Who knows what this weekend will bring.

The thing that’s surprised me though is that for the two sales I’ve caught over the last 45 days (by searching addresses that fall off the listings and looking at last sale date in Redfin) is that there really doesn’t seem to be a whole lot of negotiation going on right now.

This problem is real, huge, structural, and no place is immune.

Isn’t that like 100k+ over the life of the loan on a 500k house (30yr fixed). Big Deal Indeed.

http://farm3.static.flickr.com/2282/2217317457_ae8f443e06_b.jpg

Footnote two verifies what I posted above… they used December’s supply but the 2007 average pending sales to get month’s supply. New, post-bubble math.

Hey, what’s this with “Employment Outlook” being Average? We’ve got MSFT and BA and pink ponies!

I just got back from the San Diego yesterday. The headline news was Foreclosures up 353% in S.D. county. I was attending a seminar (One-On-One Retreat for those in Coaching with Mike Ferry the top real estate trainer.) with all the top agents in North America on how to sell more in this declining market. The top agents are making more money in the declining market because sellers need their skills more than ever. On the other hand, we’re seeing many real estate offices close and agents leaving the business in numbers because the gold rush mentality (bye bye part-time low-skilled agents & the discount brokers) is now over & it now requires good, skilled, experienced agents that have the courage and can explain that price & motivation are the only issues when pricing a home to sell.

A home/object is only worth what a buyer will pay for it. The buyers are the market or they make the market. No buyers, no market. Interest rates don’t mean a thing. In the 70’s to early 80’s there was double-digit interest rates, yet people still bought and sold houses.

Real estate is a long-term 15-year investment, if you got burned, too bad so sad. You shouldn’t have been playing housing like the stock market, because there is always a cycle.

#
jake said,

on January 25th, 2008 at 9:18 am

I have been following Magnolia and Queen Anne and have seen homes sitting on the market for months. Then they disappear and then the reappear as 1 day on the market.

This is happening with many of the homes so I am sure this totally skews the numbers.

Also MSFT is up ~4% on their earnings announcement.

Spoke too soon. Now hovering around yesterday’s close. A single stock going up 4% for a few seconds before dropping is not going to prop up an entire real estate market.

This is happening with many of the homes so I am sure this totally skews the numbers.

http://deflationland.blogspot.com/

Ha ha.

NOT a realtor, but I’ve seen and heard horrifying things. Solidly covering your legal bases and paying well for good inspections that’ll sniff out problems is worth every flippin’ penny.

Also MSFT is up ~4% on their earnings announcement.

http://afp.google.com/article/ALeqM5j7Ss0dIMIYoyojDLRRXU0hZ9YRvA

When everywhere else is way down and we are coming in even or a little positive, with super low numbers for overdue loan payments, and Microsoft reporting fantastic numbers the persistant scoffing by bubbleheads at the idea seattle is different seems kind of silly.

Here is the chart from the journal today, there are notations at the bottom about the source of the data.

Looks like far and away the most special city on the list by to me.

Seems like your “months of supply” would always jump like crazy in December if you used December’s “pending sales” as the denominator.

Not really. Check out 2000-2007:

Click to enlarge

Looks like it goes up slightly near the end of each year, but 2007 is definitely out of the ordinary. The reason it doesn’t spike is because while it is true that sales are always sluggish, it is also the case that there are always few homes on the market as well, so they balance out.

You bring up an interesting and exceptionally controversial topic. Worthy of a post. I’ll put something together.

That is exactly how I purchased a second home in my neighborhood. The seller offered a price significantly less than the appraisal; no realtor was involved. We used an escrow company in Kirkland to close the deal and I downloaded a standard WA purchase and sale agreement from the web. However, there will always be a need for full-service realtors/brokers. Cheers!

Not so sure about that. My belief is that most folks will need more advice and hand holding than ever before. The internet and RE sites are a tool for most to supplement their search.

I’m not sure where the WSJ got their months of supply figures from though, because the numbers they quote don’t match any that I’ve seen from the NWMLS. They’re correct when they say inventory across King, Pierce, and Snohomish is up 50%, and prices in King are down 2.6%, as that data matches the “res + condo” figures from the NWMLS. However, when you divide the total inventory at the end of December by the number of pending sales (the traditional method for determining “months of supply”), you get 8.4 months of supply in December 2007 (not 4.9), and 3.8 in December 2006 (not 2.7). If anyone can figure out where those numbers came from, let me know. The NWMLS data can be found in the December 2007 Recaps linked here.

Tim, using some mix and matching of data, I was able to get close to those numbers by comparing the Dec ‘07 (or ‘06) inventory with the average pending sales for all of ‘07 (or ‘06). I think I had 5.1 for ‘07 and 3.2 for ‘06. This was using King County’s house-only numbers from the spreadsheet. I assume you have links to more data so you can quickly put together 3-county sums and find the pending sales from the last 24 months… might be worth a check?

Some serious hand waving, if that’s the case.

I was wondering about the same thing. I think it will certainly help to unlock the jumbo market a little, but jumbo mortgages *are* available, they’re just 1% or so higher. So instead of getting 5.5% you’ll get 6.5%. Big deal…

Actually, it would be good to get someone from the mortgage industry to comment on this. Question I have:

Will this open the doors to enable more borrowers to get a jumbo mortgage, or will this keep the number of prospective borrowers the same, but decrease the rate they could get? Will it lower or raise the standards for those mortgages?

My own (unqualified) opinion on this is that this move will certainly lower the rate about 1% for mortgages now under this umbrella, but that the raising of the FHA limit will have the perverse effect of reducing the number of qualified borrowers. Why? Because as the GSEs take over the 417K to 650ishK market, everyone else will drop out and the market will end up with higher standards, not lower standards. The concept of “conformance” does not just apply to price, after all…