I don’t always blame the MSM for not asking hard questions from “experts” in the housing industry. After all, if they don’t specialize in housing, they might not recognize baloney when they hear it. Often though, you have to wonder how they missed the obvious.
If conforming loan limits drop in October, more than 30,000 families in California will have to deal with higher down payments and mortgage rates and tougher loan qualification rules, the California Association of Realtors said today..Unless Congress steps in, the limit will drop to $625,500 from $729,950 for most places on Oct. 1. The limit establishes the maximum mortgage amount the Federal Housing Administration, Fannie Mae and Freddie Mac can buy or guarantee.
I’m already puzzled here about those 30,000 families. Are they under contract, hypothetical, estimated? A little detail would be useful here. Down a couple of paragraphs though, it gets even more puzzling. According to the CAR’s president Beth L. Peerce:
“By reducing the conforming loan limit, thousands of California homebuyers will be shut out of homeownership. The higher mortgage loan limits are critical to providing liquidity in today’s housing market and are essential to our housing recovery. We urge Congress to maintain the current limits and make them permanent to provide homeowners and homebuyers with affordable financing and help stabilize local housing markets.”
How are these potential homebuyers shut out of homeownership? If they can’t buy a house between $625K-$730K, they can’t buy a house? I could see it if somehow they raised the minimum mortgage for a conforming loan, but the top end?
According to the press release, San Francisco would be hardest hit by a reduction in the conforming limit, as more than 14% of sales fall in the threatened range. However, the median home price in the San Francisco metro area is $372K, so it’s not the bottom 14% that is threatened. I looked up a few listings, and it’s not like everything below $625K is a crack house. You also can’t help but wonder if everyone who is interested in buying in the $625K to $730K absolutely only qualifies for a conforming loan. NONE of them would qualify for a jumbo if they had their heart set on something in this range?
The reporter could have asked Peerce that question, but she apparently never spoke to her. This piece is just an abridged version of the press release.
So much for hard-nosed reporting.
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The logical fallacy exhibited in the article regarding FHA loan limit changes is laughable. If nobody can afford it, guess what happens to prices?
I enjoy your web site, but this post confuses the City and County of San Francisco (one and the same) with the San Francisco Bay Area (which includes the East Bay, an area of less expensive homes which has been hard hit in this housing crash). As a 30 year resident of Silicon Valley currently renting a house worth about $1.4 million, I can assure you that $600K will not get you anything close to a decent house in the city of San Francisco.
See
http://www.dqnews.com/Charts/Monthly-Charts/CA-City-Charts/ZIPCAR.aspx
for the monthly median price for SF, which is about $660,000. The median for Silicon Valley as a whole is about $500,000, and that will not get you into an excellent school district. Plan on paying $550 a square foot for that privilege.
Now, I agree that none of the foregoing means that the taxpayers throughout the nation should subsidize San Francisco, but the problem for potential home buyers in Silicon Valley is real.
As for me, I’m moving to Arizona.
ken,
We paid $250/sqft here in the south bay and have access to a school which rates 9/10 on Greatschools and over 900 API (2010).
Of course, we did buy a duplex and are renting out the other half (effectively paying about 2/3 our former house rent for our mortgage not including tax deductions).
In reality the conforming rules were changing on a weekly basis in 2009/2010 according to our mortgage broker, and I don’t really see the formal downgrade of conforming limits to be surprising, not do I think they’ll really make a huge difference.
The problem has and will continue to be jobs (or lack thereof).
Keeping the conforming loan limit at over $700k is doing just what the banks and realtors want, at the expense of the rest of us – artificially inflating home prices with subsidized credit at the expense of the taxpayer.
Bay Area prices should be allowed to fall to the level at which people can actually afford to live here without not only already record low interest rates but a subsidized/guaranteed loan on top of that. Here on the Peninsula, in my area, prices are still running at 6x or more local incomes, and need to adjust to something banks will finance – the biggest thing holding them back is the fact that the government is deliberately holding prices higher with its credit policies.
Jim-
I concur that if no one can get financing in that range, prices will fall to where people can afford to buy them. One of the reasons that credit is so tight is the risk of lending at an inflated price. It is less risky to loan when there is minimal risk of prices falling.
“By reducing the conforming loan limit, thousands of California homebuyers will be shut out of homeownership. The higher mortgage loan limits are critical to providing liquidity in today’s housing market and are essential to our housing recovery. We urge Congress to maintain the current limits and make them permanent to provide homeowners and homebuyers with affordable financing and help stabilize local housing markets.”