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ocrenter.
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September 19, 2011 at 12:11 PM #19145September 19, 2011 at 1:41 PM #729431
DomoArigato
ParticipantWith the government backing 95%+ of all new mortgages I believe this is actually a much bigger deal than the various foreclosure tsunamis that may or may not be coming down the pipe. Keep in mind also that the government is looking to charge higher fees and require bigger down payments for loans underneath the conforming limits, so that will affect house prices as well.
The conforming loan limits are scheduled to come down on October 1, but most banks started working under the new limits some time last month. Some lawmakers are pushing to keep the current conforming limits, but it’s unclear if that push is getting any traction.
The WSJ answered a reader question about this the other day:
http://online.wsj.com/article/SB10001424053111904060604576574722172610628.html
With buyers in that price range being asked to put down $100K+ more than they would have to just a month ago, there is no way this won’t put extreme negative pressure on prices.
September 19, 2011 at 5:33 PM #729448ParticipantI just noticed this article.
http://www.housingwire.com/2011/09/16/extension-of-conforming-loan-limits-fails-in-house
So it looks like the high conforming loan limits will expire and go back to the old lower loan limits. There is some chance that the high limits could be reinstated in a bill expected to be introduced late this year. This quote from the article is spot on IMO:
“We expect to see significant negative consequences for the struggling housing market as a result of the limit drop after Oct. 1,” Campbell’s office said.
Combine the end of high loan limits with the fact that California foreclosures are set to surge and we should be seeing much lower prices shortly.
http://www.housingwire.com/2011/09/19/california-foreclosures-set-to-surge
This probably isn’t being discussed very much on this board because most have already bought and there are only a few holdouts like myself left.
September 19, 2011 at 6:01 PM #729449ParticipantMore good news for those of us who have been waiting to buy in SD.
So in some pricey places, the new limits will really pinch borrowers. Those limits vary from market to market and are determined in part by local housing prices. In expensive housing markets where prices have fallen, the limits will drop the most. Hardest to be hit, according to a new analysis by Move.com, will be San Diego, where loans up until $697,500 qualify for Fannie and Freddie until Sept. 30. On Oct. 1, that limit drops to $546,250, a $151,250 difference.
It finally feels like those of us who have been responsible and patient are about to be rewarded.
September 19, 2011 at 8:40 PM #729470Racer5
ParticipantNice links, thanks.
It certainly seems like this should have some kind of impact above ~$750K. $682K and below purchase prices are not affected, assuming 20% down. I mean, if I was trying to sell a house for $800K, I would definitely want to consider the dynamics.
Not being on the front lines of the business like some, I was trying to imagine what the impact to areas like NCC could be. I could see some potential factors that could minimize the effects, like:
– Dont worry, FHA loans will cover the bases (I dont understand FHA, is this possible?)
– Private jumbos will come in line. (yeah, maybe after storm blows over, 2014)
– The Fed troops will ride in before 2012 and bump the high balance back. (seem like it would be mid 2012 at the earliest, once all hell continues to break loose)
– Given the _extremely_ limited number of quality properties in this range today, there will still be plenty of people that are packing $250K-$500K downs for any properties that you actually care about. (my limited experience does suggest this could be true to some degree)
-Racer5
September 19, 2011 at 9:27 PM #729474ParticipantFHA loan limits are also going down to $546K.
http://portal.hud.gov/hudportal/documents/huddoc?id=fhaloanlmhera.pdf
If you’re saying that NCC buyers can afford the extra down payment, then there may not be much impact. I’ve been looking in the PB area and prices already seem to be coming down a bit.
According to one of the HousingWire articles, once the higher conforming loan limits expire, they are unlikely to be reinstated.
September 20, 2011 at 12:13 AM #729489KIBU
ParticipantFinally this is going to speed up price softening in north county.
You guys can buy in 6-12 months from now and see a difference (but where are you going to get the down payment?)
September 20, 2011 at 12:14 AM #729490CA renter
Participant[quote=DomoArigato]More good news for those of us who have been waiting to buy in SD.
So in some pricey places, the new limits will really pinch borrowers. Those limits vary from market to market and are determined in part by local housing prices. In expensive housing markets where prices have fallen, the limits will drop the most. Hardest to be hit, according to a new analysis by Move.com, will be San Diego, where loans up until $697,500 qualify for Fannie and Freddie until Sept. 30. On Oct. 1, that limit drops to $546,250, a $151,250 difference.
It finally feels like those of us who have been responsible and patient are about to be rewarded.[/quote]
Not getting the champagne out just yet (too many false starts), but this definitely looks to be one of the things so many of us have been waiting for…for way too many years. It’s high time sanity returns to the market. I’m just bummed that they sucked in a bunch of other bubble-sitting buyers in the meantime. Many people just got tired of waiting and paying rent year after year. I can certainly understand the frustration.
September 20, 2011 at 6:56 AM #729495ocrenter
ParticipantI hate to pour cold water on the party. But did anyone look at the jumbo rate recently? Citibank rate is freaking 4.5%! So is wells fargo. At price points north of $700k, most folks are not sinking in their life savings to come up with that 20% down. They might not like adding that additional 10% of their savings into their non-liquid bucket of assets, but they’ll have that ability if they chose. Especially since CD rates are 0.5% and the market? Much better to sink that extra cash into the 30% down required.
I think JtR has routinely shown that even in the days of confirming jumbo, people were overwhelmingly putting down large down payments. Typical 20% down were the minority.
September 20, 2011 at 7:40 AM #729499ParticipantExpiration of the high conforming loan limits will still have some effect even in places like NCC. Here’s some recent data from June:
12.5% of buyers used less than 20% down while 56% of buyers used less than 30% down, so the expiration of the high conforming loan limits is definitely going to knock some potential buyers out of the NCC pool.
September 20, 2011 at 9:15 AM #729517an
ParticipantCurrent jumbo loans at SDCCU (loans between $625,501 – $1,500,000) is 4.75% with 0 point. Their conforming 0 point loan is 4.375%. Their high balance loans (loans between $417,001 – $625,50) is at 4.625% with 0 point. So, if the if the high balance loans drop, those with loans between $546k and $625k will be paying an extra 1/8th of a %. Daily rate swing can be greater than 1/8th of a %. So, I don’t see why this decrease in limit would make much difference.
September 20, 2011 at 9:58 AM #729523Participant[quote=DomoArigato]Expiration of the high conforming loan limits will still have some effect even in places like NCC. Here’s some recent data from June:
12.5% of buyers used less than 20% down while 56% of buyers used less than 30% down, so the expiration of the high conforming loan limits is definitely going to knock some potential buyers out of the NCC pool.[/quote]
the problem is you are assuming they didn’t put down 30% because they could not.
at that income level, one main way to maximize tax breaks is to push up the mortgage on the place of residence.
so if people are allowed to just put down 20%, that’s what a lot of folks will do. remember, the money in will be non-liquid, that is one incentive to not put down more than the 20% required. the second incentive is the mortgage deduction is one thing that very much favors higher income brackets, and their accountants really push that point. and certainly we had discussions on piggington with others wondering if they should minimize down payments.
September 20, 2011 at 10:01 AM #729524UCGal
Participant[quote=AN]Current jumbo loans at SDCCU (loans between $625,501 – $1,500,000) is 4.75% with 0 point. Their conforming 0 point loan is 4.375%. Their high balance loans (loans between $417,001 – $625,50) is at 4.625% with 0 point. So, if the if the high balance loans drop, those with loans between $546k and $625k will be paying an extra 1/8th of a %. Daily rate swing can be greater than 1/8th of a %. So, I don’t see why this decrease in limit would make much difference.[/quote]
The jumbo (above 625,500) at sdccu require 25% down. That is going to be a barrier to some folks. 70% LTV if it’s a cash out refi.The conforming “high balance”(625,500 to 417,001) goes up to a LTV of 95%.
I think the down payment requirements are going to have a much bigger effect than the rates. The rates are super low across the board.
September 20, 2011 at 1:53 PM #729545Participant[quote=UCGal]
The jumbo (above 625,500) at sdccu require 25% down. That is going to be a barrier to some folks. 70% LTV if it’s a cash out refi.The conforming “high balance”(625,500 to 417,001) goes up to a LTV of 95%.
I think the down payment requirements are going to have a much bigger effect than the rates. The rates are super low across the board.[/quote]
But, according to DomoArigato, only 12.5% of buyers in NCC have < 20% down. Which I would have to guess the other 87.5% have at least 20% down. How many only have 20% down and how many only put down 20% because that's how much the bank wants to get the best rate? I have no data behind this, but I suspect most of the 87% have 25%+ but only put down 20% and keep the cash for other investments.September 20, 2011 at 5:44 PM #729567sdrealtor
ParticipantI beleive it has to have some impact just not the pizza party some of you are hoping for. Time and again I have seen the impacts of various changes being muted to a very high degree. Lower prices at some some price points? Sure. Much lower? Think again.
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