If the government limits its “quantitative easing” to purchasing agency debt (as they have suggested), wouldn’t this have the net result of creating two mortgage markets with very different interest rates?
Furthermore, my understanding is that the cap on government loans is 115% of MSA median. For SD County, that will be around 550K next year and even lower in 2010.
To me, all this says that overpriced coastal real estate is toast. 4.5% will stabilize the bottom end and do next to nothing for high end (excluding the the truly high-end which operates under entirely different dynamics altogether).
There will be great wailing from coasts at this but there will be almost zero political will to extend gov efforts to the high end. How could fly-over state representatives ever be convinced that bailing out rich coastal homeowners is in the best interests of their constituents?
Maybe I’m dreaming, but I think this is the end for the coast. Give it a year or two and coastal declines will match or exceed inland declines. Yay!
