There are definitely a lot of dark clouds on the horizon for lending:
1. FHA wants to reduce it’s footprint in the mortgage market so it continues to raise monthly mortgage insurance (it’s twice what it was 6 mos ago)
2. Fannie Mae is making loans really expensive for everyone except 20% down and perfect credit
3. Rates have risen
4. If they ever get private label lending to come back (and that’s what the Gov wants to do), it ain’t going be at 4.5%
5. Fannie is looking to lower the max loan from $729k to $625k…that means super tough lending guidelines and big down payments for over $625k loans
6. The Gov is going to make banks have more skin in the game so they are more on the hook to buy back bad loans…this will make the banks even more conservative on lending
All this will result in making it a lot more expensive to own real estate and reduce the buyer pool. And it has to hit prices hard.
Starting in the late 1990’s California real estate was pushed up by the “tailwind” of easy lending. It will NOT have that same “tailwind” pushing up prices this go around. Appreciation will have to be driven by *income growth*. Which is the way it should be.
