The California Association of REALTOR(S) (C.A.R.) released a news article last month about conforming loan limits being reduced, effective October 1, 2011. This would affect loans backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac.
Currently conforming loan limits are at a maximum of $729,950 here in Orange County and Los Angeles County. Effective October 1, 2011, this limit is set to drop to $625,500. Some other counties in California will see an even lower limit. The current limit at $729,950 was due to a temporary increase from $417,000 in 2008, as we were deep into the “mortgage meltdown” facing our nation that year.
REALTORS(R) like myself have been receiving several calls and emails recently from C.A.R. and other groups advocating to keep the conforming loan limit where it stands now. Much of the debate includes that a decrease in this limit means that less people will be able to afford to purchase homes since they will be capped at the $625,500 (or lower) limit when trying to obtain financing. This may result in less liquidity in our market and more difficulty for our housing market to recover.
While this may not directly affect a family who is purchasing a house for $500,000, there are many people out there purchasing homes above the current conforming loan limit right now. If there’s anything that I can remember from my Economics classes back in the day at UC Berkeley, it’s that any change in policies like this one will have an effect on a long chain of other aspects of our economy. In other words, losing the ability to purchase may affect demand for housing, which may affect home prices, which may affect the supply of homes on the market, which may affect the number of distressed homes on the market, and so on. You get the picture.
So once again, more change is coming in our housing market. Throw in changes in interest rates, changes in our job market, and changes that may result from the “debt meetings” that are going right now with our government, and we have yet another recipe for “who knows where our economy is going.” The best we can do is continue to deal with what we currently have and embrace the opportunities that do come along, even if they aren’t exactly what we envisioned before.
For the article regarding this change in conforming loan limits by C.A.R., click on this link HERE.
For more info about how this may affect your ability to buy, sell, rent, etc. in today’s market, feel free to contact me.