How Much of the Seattle-Area Market Will be Affected by New Conforming Loan Limits?

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.


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

37 comments:

  1. 1
    WestSeattleDave says:

    Declining prices at the top should push down prices down the property ladder, just as rising prices on entry level properties will elevate prices up the ladder. It’s all interconnected to some extent. I think this is one more reason that prices will continue to fall. Along with declining GDP, rising unemployment, and European banks (and governments) imploding. It’s hard for me to find anything out there that can positively impact prices.

  2. 2
    Grant says:

    Whether it’s considered a “big” disruption or not, doesn’t make sense to me to make that big of a change overnight, if it even makes sense at all–why have % down requirements that aren’t across-the-board, why should I need 20% with a mortgage greater than X, but be able to put down less below that? While not all price ranges may be subject to the same conditions, is a $750K house at risk for greater depreciation than a $350K one?

    Does the “risk” offset the negative impact to even 4-13% of the market? Why not ratchet it down gradually to avoid the rush that probably is happening as we approach Oct 1?

  3. 3
    No Name Guy says:

    Note Grant that its for a conforming loan, as in “hey, we the Government, via Fannie, Freddie and whoever else, might be interested in buying this loan” if it meets these specifications.

    And note what The Tim points out, the LOAN limit is changing from 567,500 to 506,000. It appears to be that limit, not a % down limit. The Tim just runs the numbers, given said old and new loan limits, and certain down payment assumptions, what would the price of a place be that would conform.

  4. 4
    Grant says:

    RE: No Name Guy @ 3

    Believe Tim’s point is that he doesn’t think 4-13% of the market being impacted by the reduction is significant–that’s debatable, but my point is that I don’t think it makes sense to reduce it from a risk perspective (gov’t basically saying anything above $506K requires more equity–why?) and that negatively impacting even 4-13% of the market (with little if any risk reduction) overnight doesn’t make sense either.

  5. 5
    ARDELL says:

    I’m not too focused on the 10/1 to 12/31 limit taking effect. Personally I think they are going to do away with “high balance conforming” altogether in the not too distant future. Remember, high balance conforming didn’t even exist until 2008. What possible justification is there for “high balance conforming” these days?

    Don’t be surprised if you see it knocked out entirely, which would take us from $417,000 conforming straight to jumbo.

    Remember, only Pierce, King and Snohomish have “high balance conforming” at all in the State of Washington.

    Well…maybe not “only”. Here are the WA Loan Limits effective 10/1 to 12/31.

    http://www.mortgageporter.com/reportingfromseattle/2010/12/2011-fha-loan-limits-for-washington.html

    I don’t see much justification for it at all in Pierce or Snohomish these days…and how likely are we to see King being the only County in WA with a “high balance conforming”.

    Is that type of preferential treatment even warranted? I think not.

  6. 6
    No Name Guy says:

    By Grant @ 4:

    RE: No Name Guy @ 3

    Believe Tim’s point is that he doesn’t think 4-13% of the market being impacted by the reduction is significant–that’s debatable, but my point is that I don’t think it makes sense to reduce it from a risk perspective (gov’t basically saying anything above $506K requires more equity–why?) and that negatively impacting even 4-13% of the market (with little if any risk reduction) overnight doesn’t make sense either.

    Agree he doesn’t think 4-13% will make a hill of beans. Neither do I. But you seem to miss that the whole conforming thing makes mtg rates cheaper due to the implied subsidy from the Fed Govt backstop / guarantee of said conforming mortgages being sold to Fannie / Freddie. The lender can lend cheaper knowing they can’t lose.

    All they’re doing is lowering the limit on who gets the subsidy.

    I’d suggest it’s less about risk than about who is getting the subsidy. I’m sure a knowledgeable person who’s in the business day to day can chime in with estimates on what the interest rate differences are / would be between a loan just under the conforming limit versus one just over with otherwise very similar risk profiles (e.g. same % down payment, borrower credit, etc).

  7. 7

    I think you could argue it affects sales all the way up because even $2,000,000+ sales may only get a loan within the limit. The impact is less as a percentage the higher you go up, but it’s still some impact.

    This though is yet another good example of government stupidity when it comes to the timing. If you’ll remember, I mainly favored the extension of the first time buyer credit because the original expiration date was at a stupid time of year. This is another example of that. If they want to do things that will have a possible negative price impact on the market, do it in April, not October.

    That said, I don’t expect this to necessarily be a big impact.

  8. 8

    It might not affect King County in general, but I’d think it would have an effect in those places where houses sell for 625-725 thousand. Some of the more desired Seattle neighborhoods ( Ravenna, Phinney, Greenlake, Wallingford, etc , and places like Kirkland, Sammamish, and Bellevue should see slower sales, as buyers will be less willing or able to pay that interest rate premium that they’d now have to pay.

  9. 9
    ARDELL says:

    RE: Ira Sacharoff @ 8

    I agree. It will impact all of the areas where I work. That is why it is important that I focus on what may happen next vs what is happening “between 9/1 and 12/31”.

    There’s no way that special treatment for high balance pricing would get passed today on its merits. The only reason we have it at all is because it is hard to take something away. Not a good enough reason to keep it around.

    Anyway…my call is we are going to see Conforming and Jumbo before long…with high balance conforming being eradicated altogether. Maybe not ON Jan. 1, 2012…but before long. Time to start thinking what the impact will be of $417,000…not $506,000.

  10. 10
    tomtom says:

    THIS IS ANOTHER EXAMPLE OF *CLASS WARFARE*, PUNISHING THE JOB CREATORS!

    Ooops. Watching too much Fox News.

    WHICH IS FAIR AND BALANCED.

  11. 11
    WestSeattleDave says:

    By Grant @ 4:

    RE: No Name Guy @ 3

    “gov’t basically saying anything above $506K requires more equity–why?” —

    The government is not saying that at all. They are saying that under $506K, they will give you a government subsidized loan, and over that amount you will need to turn to the private mortgage market. The private sector has higher underwriting standards and down payment requirements, resulting in higher interest rates to offset the added risk.

  12. 12
    Grant says:

    RE: WestSeattleDave @ 11

    The government is saying exactly that by lowering the threshold–“we were comfortable enough not requiring 20% below $560K and now we’re only comfortable below $506K”–the question is, why lower it? Are mortgages greater than $506K that much more risky all other things equal? And why lower it by that much this fast when the market is still crap?

  13. 13

    Fannie Mae has warned that loan limits may drop more in 2012.

    This also impacts FHA buyers/borrowers too. Many of my clients have gone FHA, with excellent credit and great jobs, just shy on 20% down payment…

    The difference between the loan amounts is also the qualifying. In order to qualify for a jumbo/non-conforming, you need a mid-credit score of 720 or higher and be prepared to be EXTRA scrutinized and to have at least 20% down payment. It’s a different ballgame. People buying (or refinancing) thru the end of 2011 with loan amounts over $506,000 in King-Pierce-Snohomish will have to be “extra qualified”. There are a few lenders offering second mortgages – the guidelines fall into the same as “jumbo” (720+ credit and a near perfect borrower).

    Rates for a jumbo loan are about 0.75-1.00 higher in rate too (depending on the day).

    This also impacts refinances, unless the mortgage is an FHA which will allow an FHA streamline refi at the “expired” higher loan limits.

  14. 14
  15. 15
    ARDELL says:

    RE: Rhonda Porter @ 14

    Thanks Rhonda! The amount the lender wants at closing in cash as monthly reserves is sometimes different as well. 2 months for conforming, I think. I’ve seen as high as 10 of the loan amount on a jumbo. In addition to 20% down they needed another 10% or 30% total. I’ve heard high balance can be anywhere from 2 mos to 6 mos in cash reserves at closing, depending on the lender.

  16. 16
    Macro Investor says:

    Does this just affect rates, or does it affect loan availability as well? Because I’m wondering if fannie/freddie won’t buy the loan, will anybody out there make it at all?

    Most people see this as downward pressure on the top end. But it also might put upward pressure on the low to mid tier as buyers get forced to downsize their dream house.

  17. 17
    Jonness says:

    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…

    I agree with Dave @1, when you touch one piece of the market, you touch it all.

    I also agree with Rhonda @13.

    The world is on the edge of an economic double dip having just seen the worst week in U.S. stocks since 2008. Nobody is silly enough to believe Greece won’t default. The best case scenario is to kick the can down the road a few more months. Once Greece goes, it’s going to set off a horrible chain reaction around the world.

    Now let’s say you have your house out there on this horrific economic climate where nobody wants to buy it anyways. Then the govt. makes it harder to get loans and lowers the amount they’ll lend to 10% of the market. Are you saying the affect will be insignificant on prices? If so, I’m having a very difficult time agreeing with you. IMO, events that occur together have synergistic affects on the established trends.

  18. 18

    By Grant @ 12:

    RE: WestSeattleDave @ 11

    The government is saying exactly that by lowering the threshold–“we were comfortable enough not requiring 20% below $560K and now we’re only comfortable below $506K”–the question is, why lower it? Are mortgages greater than $506K that much more risky all other things equal? And why lower it by that much this fast when the market is still crap?

    I think it’s based on some calculation off of average market price, or some such thing. King, Pierce and Snohomish counties have much higher prices than other counties in Washington, so the higher limits allow loans to be made on a larger number of properties.

    Back when they first raised the limits I thought they should have also lowered the limits in a lot of other places. Which is more risky? A $560,000 loan on a house in Medina, or a $410,000 loan on a house in rural Kansas?

  19. 19

    RE: Macro Investor @ 16
    That’s a good possibility. The high end buyers who will be now “forced” to buy something less expensive, like a 400-600 thousand dollar house, will be competing with others looking in that price range. There’s not a lot of inventory, and in Seattle and the eastside, a lot of the stuff that is selling is in that price range. Doesn’t make it a good deal, just may puff up that 400-600k range for a while.

  20. 20
    Scotsman says:

    RE: Jonness @ 17

    Exactly. Perspective, people! Will reduced loan limits have some impact on the market- sure. Will that impact get lost in the greater noise of an on-going economic collapse? You betcha!

    Don’t get me started- there’s way too much going on in the greater economic picture to give this issue more than a passing glance. As for the impact on home prices, suffice it so say in a deteriorating deflationary environment higher down payments and reserves will be the new norm, and fewer and fewer people will qualify. The government is out of bullets, B. B. is lookin to orchestrate an orderly collapse/retraction, and there really aren’t any options left.

  21. 21
    ivan says:

    The limit for Kitsap is dropping to $307,050, down from $475,000. That’s probably fine for Bremerton, but on Bainbridge only about 20% of the homes for sale there fall under the new limit. 40% came in under the old limit.

    The new 3.5% down purchase price limit is $318,187 and 20% is $383,813. Redfin shows 356 listings and 200 sold in the last six months for 98110. Using the three scenarios above (rounded conservatively to fit the Redfin price limit drop down menu) :

    1. (20% down) 71/356 listings is 20%. 58/200 sold is 29%.
    2. (3.5% down) 82/356 listings is 23%. 62/200 sold is 31%.
    3. (3.5% new to 20% old) 119/356 is 33%. 94/200 is 47%.

    It looks like the new limits would have affected about a third of the recent sales.

  22. 22

    RE: Kary L. Krismer @ 18 – loan limits are based on median home prices.

    For giggles, here’s a historical list of conforming loan balances: https://www.efanniemae.com/sf/refmaterials/loanlimits/pdf/historicalloanlimits.pdf

    If we’re back to 2005 home values, I wonder if loan limits will drop below $417k?

    Jumbo loans do require more reserves (typically 6 months) and income is picked apart. If you or your co-borrower/spouse has a middle credit score of 719 or lower, hope that a rapid-rescore can be done to bring that middle score up. Most require 20% down payment but there are some portfolio lenders that will go higher – we’re in the process of signing up Kinecta Credit Union which will allow us to go up to 90% (I beleive) w/a jumbo loan amount…programs like this are not “common”.

    I think this will impact homes priced at $700-$600k the most in the tri-county area. And agree that this will either cause some to buy a lesser priced home or rent their “dream home”.

  23. 23

    for the homeowners who are “in the gap” between the temporary high balance of $567,500 and the “new” (technically it’s not new) loan limit of $506,000 – refinancing probably doesn’t make sense… refinancing often translates into a home owner reducing their mortgage payment — the loan limits rolling back may indirectly impact money flowing back into the economy and/or possibly preventing a foreclosure, short sale or bankruptcy down the road.

  24. 24
    ARDELL says:

    RE: Jonness @ 17

    While “4% to 13%” might fall into this value range as to “asking price”, not all of those will be impacted by this change. Did some checking on mortgage amounts using sold property vs actively for sale property.

    Of the tiny % of those in Pierce and Snohomish that fall into this price category vs King, most were cash purchases or loan amounts well under $417,000. So a miniscule amount of impact in either Pierce or Snohomish as to the drop to $506,000, or even eradicating the “high balance conforming” altogether.

    Only 84 of the 2,357 homes sold in Pierce County in the last 90 days sold for more than $500,000. Hardly a basis for keeping any kind of “high balance conforming”, unless they drop the conforming loan amount to median price of $190,000…then maybe a “high balance conforming” of $250,000, not $506,000, may be warranted. Right now there is zero basis for $417,000 being the conforming loan limit, let alone a high balance conforming limit of $506,000 in Pierce County.

    98 of the 1,980 homes sold in Snohomish County in the last 90 days sold for more than $500,000. Of that 5% of homes sold falling over $500,000, I can’t check every mortgage but it looks like at least half of those did not have loans over $417,000, and many had loans of less than $417,000. So max impact might be more like 2.5% of the overall market…if that. Add to that the fact that median price is only $240,000, again, really no basis for a $417,000 conforming loan amount OR a $506,000 “high balance conforming” loan amount in Snohomish as in Pierce.

    That leaves us with only King County of the 3 counties being impacted…pretty much at all. In fact it appears that having Pierce and Snohomish in the mix is merely camouflage for not saying “benefits for King County only”. Even in King County, North King benefits twice as much as South King, and in North King likely only half of the zip codes benefit at all, if that.

    When you drill it down…the only basis for $417,000 as the conforming limit and $506,000 for a high balance limit would be to “certain zip codes”. While as Rhonda pointed out to me some time in the past “by zip code would be a nightmare” for lenders…it would be more honest. Benefits to a few are hiding in “Pierce, King and Snohomish” equal loan limits. The median price of property (including condos now but not earlier) on a combined basis for Pierce, King and Snohomish is about $230,000…no where near $417,000. If you strip out the condos, you are still only looking at a median of $243,000…a far cry from $417,000.

    While I agree with Rhonda that this only covers “purchase money loans” vs refinances, with median sold price that far away from the conforming loan limit, how many of those would even appraise in order to refinance?

    So maybe we should have a “high balance conforming” IF the conforming limit drops substantially from $417,000, which appears to be warranted on all counts. That’s a scarier thought than this whole, who cares, $506,000 debacle. $417,000 as the “conforming limit” makes very little sense right now based on the stats above, and the impact of taking THAT down to “median home price” is a lot more to worry about than $567,500 dropping to $506,000.

    If the system merely follows its own guidelines as to conforming limits being even loosely connected to median home price…this change is a spit in the bucket.

    (required disclosure – stats in this post are not compiled, verified or posted by The Northwest MLS Listing Service but are hand calculated in real time by Ardell while writing the comment.)

  25. 25

    RE: ARDELL @ 24 – re: how many of those would even appraise in order to refinance?

    I can only speak of my clients and many of them have lower loan to values so if an appraisal comes in lower than expected with a refi, some aren’t impacted… others bring cash to table to pay for the difference (if needed) and some opt for mortgage insurance if the LTV isn’t that far above the 80% mark, or opt for a small second mortgage…but once your mortgage becomes a “jumbo” you have less of these options… cash and second mortgage are still possible.

  26. 26
    MichaelB says:

    By Scotsman @ 20:

    RE: Jonness @ 17

    Exactly. Perspective, people! Will reduced loan limits have some impact on the market- sure. Will that impact get lost in the greater noise of an on-going economic collapse? You betcha!

    Don’t get me started- there’s way too much going on in the greater economic picture to give this issue more than a passing glance. As for the impact on home prices, suffice it so say in a deteriorating deflationary environment higher down payments and reserves will be the new norm, and fewer and fewer people will qualify. The government is out of bullets, B. B. is lookin to orchestrate an orderly collapse/retraction, and there really aren’t any options left.

    Ben Bernanke may be out of bullets, but the US Government certainly isn’t. See “How to Avoid a Depression” by N. Roubini.
    “… The risks of an economic and financial crisis even worse than the previous one – now involving not just the private sector, but also near-insolvent sovereigns – are significant. So, what can be done to minimize the fallout of another economic contraction and prevent a deeper depression and financial meltdown?

    First, we must accept that austerity measures, necessary to avoid a fiscal train wreck, have recessionary effects on output. So, if countries in the eurozone’s periphery are forced to undertake fiscal austerity, countries able to provide short-term stimulus should do so and postpone their own austerity efforts. These countries include the United States, the United Kingdom, Germany, the core of the eurozone, and Japan. Infrastructure banks that finance needed public infrastructure should be created as well….”

    The US, UK, Germany and Japan need to provide short-term stimulus, not austerity measures. Austerity will lead to a depression. The US needs job creation around infrastructure, etc…

  27. 27
    Jonness says:

    By ARDELL @ 24:

    So maybe we should have a “high balance conforming” IF the conforming limit drops substantially from $417,000, which appears to be warranted on all counts. That’s a scarier thought than this whole, who cares, $506,000 debacle. $417,000 as the “conforming limit” makes very little sense right now based on the stats above, and the impact of taking THAT down to “median home price” is a lot more to worry about than $567,500 dropping to $506,000.

    If the system merely follows its own guidelines as to conforming limits being even loosely connected to median home price…this change is a spit in the bucket.

    Interesting thought. I was thinking something similar when I saw the chart Rhonda linked. Then I was surfing around and saw this chart of real U.S. incomes and thought, “hmmm…”:

    http://housingcorrection.com/images/RealMedianIncomeUSHistorical.bmp

    I’m seeing some really crazy things occurring right now. Top notch electricians who have not worked in two years and are on the verge of losing their homes. Top notch builders who haven’t worked (over the table) in three years and have lost their homes. Middle managers who have worked for the (supposedly secure) State for 20+ years getting RIFFed out the door. Neighbors leaving their 4500 sq ft homes vacant and jamming their families into crammed apartments while the homes rot on the bank’s books.

    I interviewed a guy for an IT position last week. He was getting on toward the end of his career, had not worked on any modern applications to speak of, and told me he was on the verge of running out of money because he had not worked in 3 years. It was heart breaking.

    We are experiencing a nightmare scenario, and I don’t foresee it getting better anytime soon. The best people can do is tighten their wallets and hold on for dear life. But the problem with that is, it leads to even more economic contraction, which leads to further misery. We are in a horrendous mess, and I have very little faith that the government can hatch a plan to not make things worse. The current conditions show that merely kicking the can down the road is not a viable or ethical solution.

    The Fed and government have thrown in the kitchen sink to recapitalize the banks, who now have $1.57 trillion in excess reserves on deposit earning interest with the Fed compared to the typical $200 billion in a typical healthy economy. Yet, they have worked the opposite magic on the American consumer by tricking them to borrow and spend more money right up until they have nowhere to turn but the local mission and soup line.

    Mr. Bush and Mr. Obama, where are the jobs?

  28. 28
    Jonness says:

    By MichaelB @ 26:

    Ben Bernanke may be out of bullets, but the US Government certainly isn’t. See “How to Avoid a Depression” by N. Roubini.

    Haven’t you been paying attention to the mess in Washington these days? They are the clowns who caused this problem in the first place. If you want to trust and believe in your government while putting more of your hard earned money into their hands that’s your thing. But don’t expect me to see Washington as anything other than a poorly orchestrated propaganda machine aimed at brainwashing the slave masses into obedience without questions while the campaign contributors loot what’s left of the country. The politicians want to get elected at all costs, and those who pay for their campaigns want free and easy tax dollars. Never mind if there are no tax dollars left in the kitty. You can always borrow more right up until the country defaults on its debt. And all we have to do to make it happen is repeat that magic word “Keynes.” Never mind that Keynes is rolling over in his grave right now screaming about how his teachings are being abused at the expense of us all.

    Tell me again what Keynes said happens to a country that hits a debt equal to 90% of GDP or greater…

  29. 29
    Jonness says:

    Sorry, that should be “Tell me again what Rogart and Rhinhoff said happens to a country that hits a debt equal to 90% of GDP or greater…”

  30. 30
    MichaelB says:

    RE: Jonness @ 29

    As Roubini correctly points out, enacting austerity measures worldwide will cause a great depression. That’s why it is important to delay austerity measures in the USA. Government plays a critical role in the economy, for example driving infrastructure projects. However, most likely you will get your wish and the right wingers will win the day. So we shall see what happens…

  31. 31
    MichaelB says:

    RE: Jonness @ 29

    In the long run you may be correct…however in the long run we will all be dead.

    Reducing government spending in the short term will actually significantly decrease GDP, increasing the ratio of debt to GDP and resulting in a self fulfilling prophesy and leading to a Great Depression. The economy needs middle class jobs and middle class growth to grow its way out of the current crisis. Money and investment needs to be redistributed to the poor and middle class, otherwise there will be no consumers left to grow GDP.

    We shall see what happens…

  32. 32
    Jonness says:

    By MichaelB @ 30:

    RE: Jonness @ 29

    As Roubini correctly points out, enacting austerity measures worldwide will cause a great depression. That’s why it is important to delay austerity measures in the USA. Government plays a critical role in the economy, for example driving infrastructure projects. However, most likely you will get your wish and the right wingers will win the day. So we shall see what happens…

    It isn’t my wish that we reduce the spending. My wish would be to have hung all the political left and right wing crooks with piano wire 30 years ago and proceeded down a pathway of a nation that lives within its means.

    IMO, we are screwed. The only answer people can seem to come up with is to give more money to Washington so that they can continue to spend with reckless abandon. But this solution makes absolutely no sense to me because it’s what got us here in the first place. It’s like going into a boxing arena with Mohamed Ali and having him beat your face into a giant purple swollen bruise. You manage to make it to the bell in round 1 and retreat into your corner where you ask your trainer what you should do next. He says, “do exactly as you did in the first round.”

    IMO, giving more money to the mindless political con artists we all worship as gods brings as much risk of causing a stagflationary or inflationary depression as taking the money away from them risks causing a deflationary depression. So, at the end of the day, the question becomes, do you want to take your spanking now, learn from it, and move on to live a healthier life? Or do you want to put the spanking off for a few more years while you are told Santa will soon show up with presents and gifts, and eventually get whacked instead, and then be forced to move on and learn to live a healthier life?

    I would truly hope that people learned something from having increased the nations debt 40% in the last three years and, as soon as the money ran out, having found our selves on the precipice of a worse default than the first time around.

    Heroin junkie 1: “Let’s say we start to wean ourselves off of the junk after we take this one last hit? I just need to feel good one more time. After that, I’ll only use half as much.”

    Heroin junkie 2: “Nah, that would cause terrible hardship and turmoil in my life. I’m just going to keep hitting the junk forever. In the long run, I’ll live a much better life this way.”

    Drug counselor: “Guys, once you do heroine, there is no easy way out.”

  33. 33
    Jonness says:

    By MichaelB @ 31:

    RE: Jonness @ 29

    In the long run you may be correct…however in the long run we will all be dead.

    We are already dead. Time will only become of consequence once we get to the other side of the correction and are awoken from the dead. I’d assume see that occur sooner rather than later.

    What ever happened to Bowles-Simpson? At least it was a plan, which is more than I can say about anything else going on in Washington other than the main plan to protect the interests of the status quo.

  34. 34
    Sarah says:

    I found this story via Google News. Things in San Francisco have already been severely impacted. Nothing is moving as all buyers, even those who can qualify for the jumbos, are sitting on the sidelines. Who wants to buy now when prices are going to have to drop?

    The banks have already implemented the new mortgage rules (a few weeks ago).

    This isn’t just about borrowing amounts or interest rates, this is about down payments and qualifying terms. It’s going to hit everywhere much harder than people realize. The effect will be 30% reality and 70% perception. Perception is reality.

    I know al this well because I had to back out of a home during a counter offer. The loan I’d be pre-approved for vanished overnight. The property had three other offers. Now they have none. I had one option for a loan, but the terms sucked and I said no.

    So no one wins with this change. The market can’t yet support this program’s loss (it will at some point, but not yet), meaning any investment the government has made thus far will be wasted.

  35. 35
    huruta says:

    For us, it does suck since we are impacted by the drop. There are homes now out of reach that did not used to be. Of course, many of these homes will drop in price since they are now out of reach for many others like us but that will take time. Patience is the key and in the long run I’m certain we can find something that will suit our needs even with the lower limits.

  36. 36
    David Losh says:

    RE: Sarah @ 34RE: huruta @ 35

    What you are looking at is a banking problem that won’t go away until the price of property comes in line with value.

    You dodged a bullet by not being able to buy, and banks dodged the bullet of having a loan on it’s books that was under securitized.

    This legislation is another way to prop up banks, and the financial markets. You are saying you were impacted, when the reality is those people who are sitting on equity are impacted.

    Those millions of people who have properties owned since before 2003, or even 1998, have lost all appreciation. They have lost all of the equity, false equity, they thought they had accumulated.

    This is the real redistribution of wealth, where millions, many millions of Americans just paid billions of dollars to banks for a no equity position in property.

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    […] How Much of the Seattle-Area Market Will be Affected by New Conforming Loan Limits? […]

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