There’s been a bit of talk in some circles about how new, lower “high balance conforming loan limits” that go into effect on October 1st going to somehow dramatically affect the local housing market (presumably in a bad way).
In order to get a sense of scope on how many sales might be affected by this new change, I did a few quick searches on Redfin.
Under the current limit of $567,500, a buyer with 20% down could buy a home priced up to $709,375. Under the new limit of $506,000, the 20%-down buyer can now only go up to $632,000. According to Redfin, 4.1% of homes on the market (SFH, condo, & townhouse) in King County right now fall between those prices (426 out of 10,490 listings). 4.5% of sales in the last six months have fallen in that range (601 out of 13,350 sales).
If we assume the worst-case scenario of just 3.5% down under the existing limit a buyer could purchase a home of up to $588,083, while under the new limit that drops to $524,352. 4.8% of current listings fall between those ranges (502 out of 10,490), and 5.4% of sales (724 out of 13,350).
If you take the broadest possible range of $524,352 at the low end under the new limits, down from $709,375 at the high end under the existing limits, you’re talking about 11.7% of listings (1,228 out of 10,490) and 12.9% of sales (1,725 out of 13,350).
So the new conforming loan limits will affect between 4% and 13% of the Seattle-area market. Doesn’t seem like such a massive disruption to me…
Full disclosure: The Tim is employed by Redfin.